2024 (9) TMI 111 - AT - Central Excise

Clandestine removal - shortage found in the raw material and the finished goods under Section 11A/11A(4) read with Section 174 of the CGST Act, 2017 - retraction of statements - mandatory penalty - HELD THAT - The Adjudicating Authority has categorically concluded that the appellant had contravened the provisions of Rule 4, 6, 8,10, 11 and 12 of Central Excise Rules, 2002 by not recording its production of finished goods found short during the physical verification and not determining the central excise duty on the goods found short. Had the investigation not been taken up by the Department, the shortage in the stocks would not have come to light causing loss to the Government exchequer. In the circumstances, the imposition of mandatory penalty on the shortage detected, the appellant has been rightly held liable for penal action under Section 11 AC(1)(a) of the Act. Reliance has been placed on the decision of the Apex Court in the case of Punjab Tractors Ltd. Vs. CCE, Chandigarh 2005 (2) TMI 141 - SUPREME COURT , where the Court has held that for violation of the Rules, the appellant is undoubtedly liable to pay the penalty as prescribed under the said Rules. The Tribunal also in the case of Amtek Auto Ltd. Vs. CCE, New Delhi 2000 (11) TMI 177 - CEGAT, NEW DELHI has also held that the penalty is warranted for contravention of the Rules. Hence, no interference is called for in the imposition of penalty on the appellant. Thus no interference is called for in the impugned decision and hence the same is affirmed - appeal dismissed.

Issues Involved:

1. Authorization and procedure of factory search.
2. Methodology of stock verification.
3. Evidence of clandestine transportation or sale.
4. Coercion in duty payment.
5. Assumption of shortages as clandestine removal.
6. Comprehensive investigation of discrepancies.
7. Reliance on initial statements.
8. Double demand for short-found inputs and finished goods.
9. Timeliness of the show cause notice.
10. Penalty imposition.

Issue-wise Detailed Analysis:

1. Authorization and Procedure of Factory Search:
The appellant contended that the factory search lacked proper authorization. However, the Tribunal found that the search was conducted in the presence of the company's Director and independent witnesses, and the stock verification was based on the declaration provided by the appellant.

2. Methodology of Stock Verification:
The appellant argued that the stock verification was based on estimation rather than physical verification and was conducted hastily. The Tribunal noted that no such objections were raised during the stock verification process, and the Panchnama was accepted and signed by the appellant.

3. Evidence of Clandestine Transportation or Sale:
The appellant claimed there was no evidence of clandestine transportation or sale of goods. The Tribunal emphasized that the present case was limited to the shortage in stock, not clandestine removal, and the Director admitted the shortage during the investigation.

4. Coercion in Duty Payment:
The appellant alleged that the payment of duty before the issuance of the show cause notice was made under coercion. The Tribunal dismissed this claim, stating that the proceedings were conducted in a calm and cordial atmosphere, and there was no retraction of the statement made under Section 14 of the Act.

5. Assumption of Shortages as Clandestine Removal:
The appellant argued that shortages cannot be assumed as clandestine removal without corroborative evidence. The Tribunal clarified that the demand was based solely on the shortage in stock, which was admitted by the Director, and not on clandestine removal.

6. Comprehensive Investigation of Discrepancies:
The appellant contended that no comprehensive investigation was conducted to determine the nature of the discrepancies. The Tribunal referred to the decision in Principal Commissioner of CGST & C.Excise Vs. Shah Foils Ltd., emphasizing that the onus to prove clandestine removal must be discharged by sufficient evidence, which was not the issue in the present case.

7. Reliance on Initial Statements:
The appellant argued that reliance solely on the initial statement of the Director was insufficient as evidence. The Tribunal upheld the evidentiary value of the statement recorded under Section 14 of the Act, which was not retracted and was made voluntarily.

8. Double Demand for Short-found Inputs and Finished Goods:
The appellant claimed that the demand for short-found inputs and finished goods amounted to a double demand. The Tribunal found no merit in this argument, as the demand was based on the admitted shortage in stock.

9. Timeliness of the Show Cause Notice:
The appellant argued that the show cause notice was time-barred. The Tribunal did not find this argument compelling, as the demand was based on the shortage detected during the investigation, which was within the permissible period.

10. Penalty Imposition:
The Tribunal upheld the imposition of an equivalent amount of penalty under Section 11AC(1)(a) of the Central Excise Act, 1944, as the appellant had contravened the provisions of the Central Excise Rules, 2002, by not recording the production of finished goods found short during the physical verification.

Conclusion:
The Tribunal affirmed the impugned decision, rejecting the appellant's claims on all counts, and dismissed the appeal. The demand of central excise duty towards the shortage in raw material and finished goods was confirmed, along with the imposition of the penalty.

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