2010 (5) TMI 213 - AT - Central Excise

Penalty- A show-cause notice was issued proposing to recovery or duty with interest on shortage of grey fabrics. A proposal for confiscation of detained goods was also made and same were confirmed during adjudication. The Commissioner (Appeal) confirmed the demand but drop the penalty and redemption fine on the respondent Aggrieved from the same, revenue filed appeal to Tribunal. Held that- Mere fact that the debit entries in their statutory records were not made by the respondent at the time of clearance does not amount suppression. Moreover, the respondent has explained why these amount were not entered in the statutory records. When there is no allegation of clandestine removal, no penalty can be imposed. Appeal filed by the Revenue is rejected.

Summary

Issues:
Penalty under Section 11AC and redemption fine dropped against the respondent for shortage of finished goods and duty suppression.

Analysis:

1. The case involved a dispute where the penalty under Section 11AC and redemption fine were dropped against the respondent for a shortage of finished goods and alleged duty suppression. The respondent was engaged in the manufacture of grey man-made fabrics and availing CENVAT Credit. During a visit to the factory, a shortage of 23,573.25 L Mtrs of fabric was found, leading to the detention of stock and yarn. The respondent admitted the shortage and paid duty on the same. A show-cause notice was issued for duty recovery and confiscation of goods, which was confirmed during adjudication by the Commissioner (Appeal).

2. The revenue contended that the respondent failed to pay duty in time by not debiting the duty in the RG 23A register at the time of clearance, which amounted to suppression and warranted a penalty. Despite multiple notices, no one appeared on behalf of the respondent. The revenue argued for penalty imposition due to the alleged suppression of facts by the respondent.

3. However, upon hearing the arguments and examining the records, the tribunal found that there was no evidence of clandestine removal or evasion of duty by the respondent. The goods were cleared after payment of Central Excise duty, and the failure to make debit entries in statutory records at the time of clearance did not constitute suppression. The respondent provided explanations for the discrepancies in stock and demonstrated no intention to evade duty. In the absence of intent and clandestine removal, penalties under Section 11AC could not be imposed. Consequently, the tribunal upheld the impugned order, rejecting the appeal filed by the revenue and disposing of the cross-objections accordingly.

4. The judgment highlighted the distinction between duty suppression and clerical errors in maintaining statutory records, emphasizing the necessity of intent for penalty imposition under Section 11AC. The tribunal's decision was based on the absence of evidence supporting the revenue's allegations of deliberate evasion, ultimately leading to the rejection of the appeal and upholding of the impugned order in favor of the respondent.