2000 (12) TMI 339 - AT - Central Excise

Summary

Issues:
1. Duty demand on short received High Speed Diesel Oil.
2. Penalty imposition under Section 11AC and Rule 173Q.
3. Liability for duty on goods not reaching the factory.
4. Duty on High Speed Diesel Oil diverted for other purposes.
5. Justification of penalty under Section 11AC.
6. Imposition of penalty under Rule 173Q.

Analysis:

1. Duty demand on short received High Speed Diesel Oil:
The Department found 1,980 liters of High Speed Diesel Oil to be short received by the appellant. The appellant argued that demanding duty for the short delivery is against the law. However, the liability to pay duty is governed by Rule 196, which states that duty must be paid on excisable goods not properly accounted for, even if lost during transport. As the appellant did not report any loss in transit and received the oil without paying duty, the duty demand on the 1,980 liters of oil stands valid.

2. Penalty imposition under Section 11AC and Rule 173Q:
The appellant contended that since duty was deposited for the High Speed Diesel Oil diverted for other purposes, further penalties under Section 11AC and Rule 173Q should not have been imposed. The Tribunal held that while the penalty under Section 11AC was not justified as the situation did not fall under Section 11A(2) of the Act, the penalty under Rule 173Q of Rs. 20,000 was confirmed. The appellant's attempt to use the oil for unauthorized purposes warranted the penalty under Rule 173Q.

3. Liability for duty on goods not reaching the factory:
The argument that the appellant should not be liable for duty on High Speed Diesel Oil that did not reach the factory was rejected. The appellant's receipt of the oil without paying duty and failure to report any loss in transit led to the conclusion that duty must be paid on the entire quantity, including the 1,980 liters not reaching the factory.

4. Duty on High Speed Diesel Oil diverted for other purposes:
It was undisputed that 62,983 liters of High Speed Diesel Oil were used by the appellant for purposes other than manufacturing goods for export. Therefore, the duty levied on this quantity of oil was deemed valid by the Tribunal.

5. Justification of penalty under Section 11AC:
The Tribunal ruled that the penalty imposed under Section 11AC was not proper as the situation did not align with the provisions of Section 11A(2) of the Act. Therefore, the penalty of Rs. 73,971 under Section 11AC was vacated.

6. Imposition of penalty under Rule 173Q:
The penalty of Rs. 20,000 imposed under Rule 173Q was upheld by the Tribunal. The appellant's attempt to use the High Speed Diesel Oil for unauthorized purposes and subsequent payment of duty upon detection justified the imposition of this penalty.

In conclusion, the Tribunal confirmed the duty demand of Rs. 73,971 and the penalty of Rs. 20,000 under Rule 173Q, while vacating the penalty under Section 11AC.