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2024 (5) TMI 1057 - AT - Central ExciseClandestine removal - shortage of stock found during joint stock taking conducted by the officers in the presence of the Director of the company - demand of duty and disallowance of credit - demand of duty confirmed on the alleged clandestine removal of goods on the basis of the data recovered from the CPU - Penalties imposed on the Managing Director and Director. Demand of Central Excise duty and the disallowance of CENVAT credit on the basis of the shortages noticed during the joint stock verification done - HELD THAT - The verification of stock was done in the presence of the Director. The weighment sheet is prepared on the basis of weight of each article as provided by the Director multiplied by number of such articles. Counting numbers of the articles was noted down in the rough sheets at the time of stock taking which has been authenticated by the Director on the spot and he has confirmed the shortage in his statement dated 23.08.2008. Subsequent retraction of the statement and alleging that the stock taking was not done properly seems to be an afterthought - the stock verification has been done properly and there is no reason to suspect the findings arrived at during the course of the stock verification by the officers - there are no infirmity in the findings of the Ld. Commissioner insofar as the demand based on the shortage of stock is concerned. Demand on the alleged clandestine clearances - HELD THAT - The demand has been confirmed for the financial years 2004-2005 and 2005-2006 whereas the search was conducted on 23.08.2008. The demand is confirmed based on the print out retrieved from the computer CPUs that was admittedly in the official use of the appellant-assessee - The pen drives recovered from the office premises of the appellant-assessee are floating devices. Many staff from the office would have used the pen drive to store data. Thus it is required to identify the person who entered the data in the computer. It is also observed that the author of the computer printout recovered from the Appellant s office has not been established in this case. Without identifying the author who entered the data the information available in the pen drive cannot be relied upon to demand duty - the investigation has not brought in any corroborative evidence to substantiate the allegation of clandestine removal - the charges of clandestine removal against the appellant assessee M/s. Mittal Iron Foundry Pvt. Ltd. in the impugned order is not sustainable. Penalties imposed on the Managing Director Shri Ramjilal Agarwal and the Director Shri Vijay Kumar Agarwal under Rule 26 of the Central Excise Rules, 2002 read with Rule 15 of the CENVAT Credit Rules 2004 - HELD THAT - It is observed that they were in charge of the day-to-day affairs of the company. They admitted the shortage noticed during the joint stock verification. Thus they are liable for penalty for the shortages noticed during joint stock verification. However the demand raised on clandestine removal is not substantiated. Accordingly we hold that they are liable for penalty but the penalty can be reduced commensurating with the offence. Since the demand is confirmed only relating to the shortages found it is observed that the penalty of Rs. 10, 00, 000/- imposed on each can be reduced to Rs. 1, 00, 000/- each to meet the ends of justice. Appeal disposed off.
Issues Involved:
1. Demand of Central Excise duty and disallowance of CENVAT Credit based on stock shortages. 2. Demand of duty on alleged clandestine removals. 3. Penalties imposed on the Managing Director and Director. Summary: 1. Demand of Central Excise duty and disallowance of CENVAT Credit based on stock shortages: The appellants contested the demand of Rs.48,41,515/- and disallowance of CENVAT Credit amounting to Rs.7,86,930/- on the grounds that the stock verification was not conducted properly and the confirmation of shortages was obtained under coercion. However, the Tribunal observed that the stock verification was done in the presence of the Director, who authenticated the findings on the spot. The Tribunal upheld the demand and disallowance, along with interest and penalties, stating that the suppression of facts with the intention to evade duty was established. 2. Demand of duty on alleged clandestine removals: The demand for the financial years 2004-2005 and 2005-2006 was based on printouts retrieved from the appellant's computer CPUs. The appellants argued that these computerized documents were not admissible as evidence since the mandate u/s 36B of the Central Excise Act, 1944 was not followed. The Tribunal found merit in this argument, noting that the author of the data was not identified and no corroborative evidence was provided. Consequently, the demand based on alleged clandestine removals was set aside. 3. Penalties imposed on the Managing Director and Director: Penalties of Rs.10,00,000/- each were imposed on the Managing Director and the Director u/r 26 of the Central Excise Rules, 2002 read with Rule 15 of the CENVAT Credit Rules, 2004. The Tribunal observed that while they admitted the shortages during joint stock verification, the demand related to clandestine removals was not substantiated. Therefore, the penalties were reduced to Rs.1,00,000/- each. Order: (i) The demand of Central Excise duty of Rs.48,41,515/- and disallowance of CENVAT credit amounting to Rs.7,86,930/-, along with interest and penalties, was upheld. (ii) The demand of duty on alleged clandestine clearances was set aside. (iii) Penalties on the Managing Director and Director were reduced to Rs.1,00,000/- each. (iv) The appeals were disposed of on these terms.
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