2000 (7) TMI 556 - AT - Central Excise

Summary

Issues: Allegations of clandestine removal of goods and duty evasion, liability of Managing Director for penalty, justification of penalties imposed on the appellants.

In this case, both appeals were directed against the same Order-in-Original, involving allegations of clandestine removal of goods and duty evasion following a stock taking carried out in the appellant's factory. The appellant, a manufacturer of Springs & Spring Leaves, promptly paid the duty due after a shortage of over 177 tons was discovered during the stock taking. However, a show cause notice was later issued alleging clandestine removal of goods and duty evasion. The appellant argued that the stock taking was based on estimation and calculation, with no evidence of intent to evade duty. The appellant's manager stated they were unaware of the reason for the shortage, emphasizing that the production was fully entered in the books of accounts, indicating no clandestine activity. The appellant contended that Rule 223 of Central Excise Rules, which related to stock taking, should apply, and penalties imposed were unjustified as there was no evidence of clandestine activity or evasion.

Regarding the penalty on the Managing Director, the appellant argued that there was no evidence of personal involvement in duty evasion, and the responsibility for duty payment lay with the manufacturing company, not the Managing Director. The appellant maintained that the penalties imposed were not justified, as there was no evidence of clearance or sale of goods without payment of duty. The appellant also highlighted that the investigation did not reveal any instance of clandestine manufacture or removal without duty payment. The Tribunal, after considering the submissions and records, concluded that the liability under Rule 223A was limited to payment of duty due on deficient goods and a penalty of Rs. 2,000, which the appellant had promptly paid. The Tribunal found no evidence of clandestine manufacture or removal without duty payment, setting aside the penalties imposed on the appellants and allowing the appeals in their entirety. The pre-deposit made by the appellant was ordered to be returned immediately.