2005 (7) TMI 207 - AT - Central Excise

Summary

Issues:
1. Shortage of finished goods found during physical verification.
2. Confirmation of demand of duty and imposition of penalties.
3. Evidence of clandestine removal and imposition of penalty.
4. Applicability of duty clement benefit and penalty imposition timing.

Issue 1: Shortage of finished goods found during physical verification
The appellants, engaged in manufacturing Organic Chemicals, were found with a shortage of 13,805 Kgs of finished goods during a physical verification by Central Excise Officers, which were cleared without payment of duty. The authorized signatory admitted to the shortage and agreed to pay the duty amount immediately.

Issue 2: Confirmation of demand of duty and imposition of penalties
A show cause notice was issued proposing confirmation of duty demand, personal penalty, and confiscation of assets. The Additional Commissioner confirmed the demand and imposed a penalty of Rs. 3.00 lakhs under Central Excise Rules. The appeal against this order was unsuccessful before the Commissioner (Appeals), leading to the present appeal.

Issue 3: Evidence of clandestine removal and penalty imposition
The appellant's advocate argued lack of evidence corroborating clandestine removal and absence of explanations from other directors. The appellant sought the benefit of duty clement as per a Supreme Court decision and contended that penalty cannot be imposed if duty is deposited before the show cause notice. The revenue representative argued for penalty imposition despite duty payment.

Issue 4: Applicability of duty clement benefit and penalty imposition timing
The Tribunal upheld the findings of clandestine removal based on the admission by the company's representative. The matter was remanded for re-quantification of duty with the benefit of cum duty price. The Tribunal imposed a reduced penalty of Rs. 75,000, citing precedents that duty payment before the show cause notice does not absolve penalty liability in cases of clandestine removal. Confiscation of assets was set aside, and the appeal was rejected except for the penalty modification.

This judgment highlights the importance of evidence in cases of clandestine removal, the applicability of duty clement benefits, and the imposition of penalties even if duty is paid before a show cause notice. The Tribunal emphasized the need for thorough investigations and upheld penalties while reducing the quantum based on mitigating factors.