2005 (7) TMI 273 - AT - Central Excise

Summary

Issues:
Detection of shortages of sugar, payment of Central Excise duty under protest, initiation of proceedings by Central Excise department, imposition of penalty, appeal against penalty, irregularities in recording production by chief chemist, confirmation of demand of duty, justification of demand.

Analysis:

The case involved a Co-operative Society registered under the Maharashtra Co-operative Act, engaged in sugar manufacturing, where shortages of 5193 bags of sugar were detected during physical verification. The society agreed to pay Central Excise duty of Rs. 4,41,405/- under protest as they could not explain the shortages. Subsequently, they filed an FIR with the police regarding the shortages and investigations revealed that the chief chemist had recorded wrong production entries to claim more production incentives, leading to a charge sheet against the chief chemist for causing loss to the company.

Proceedings were initiated by the Central Excise department through a show cause notice to confirm the demand of duty on the shortages and impose a penalty. The Deputy Commissioner confirmed the demand and imposed a personal penalty of Rs. 3 lakhs. On appeal, the Commissioner (Appeals) upheld the demand but set aside the penalty as the duty was deposited before the show cause notice was issued.

During the proceedings, it was highlighted that the shortages were not real but pseudo, as the chief chemist had manipulated production records for personal gain. The society had already deposited the duty, and there was no evidence of removal of sugar bags without payment of duty, except for the irregularities in recording by the chief chemist. The Tribunal concluded that the confirmation of demand of duty was not justified solely based on the irregularities in record-keeping by the chief chemist. Therefore, the demand was set aside, and the appeal was allowed in favor of the society, providing consequential relief.

In the final judgment pronounced on 21-7-2005, the Tribunal ruled in favor of the society, emphasizing that the irregularities in maintaining records by the chief chemist could not be the sole basis for confirming the demand of duty, especially when there was no concrete evidence of clandestine removal of goods by the society.