2013 (10) TMI 666 - AT - Central Excise

Authorization by the committee of commissioners Held that - One of the Commissioners has not put the date and only signed - it cannot be inferred that both the Commissioners had not signed on the same date Following COMMISSIONER OF CENTRAL EXCISE, KANPUR Versus UFAN CHEMICALS 2013 (5) TMI 703 - ALLAHABAD HIGH COURT - there are no statutory rules prescribing that Commissioners will sit on same day at same time and take the decision about authorization - the preliminary objection raised by the respondent is without any basis. Penalty u/s 11AC Held that - The first ground that mere shortage of finished product without any cogent evidence of clandestine removal is not sufficient to allege clandestine removal and second ground of setting aside of penalty is that the entire disputed amount of duty was paid before issue of show cause notice - As regards the first ground that the evidence on record is not sufficient to prove clandestine removal - stock taking had been done in presence of the Authorised Signatory of the Assessee and at that time, no objection has been raised about manner of stock taking and on the contrary, the Authorised Singatory had accepted the shortage and had accepted that the goods might have been removed from the factory by the staff of factory without issue of invoices and without payment of duty. The respondent at this stage, cannot allege that there was no shortage - looking to the quantum of shortage the only conclusion which can be drawn, is that the goods found short have been removed without payment of duty and without invoices and as such no other evidence is required - Following Union of India Vs. Rajasthan Spinning & Weaving Mills Ltd. 2009 (5) TMI 15 - SUPREME COURT OF INDIA - penalty u/s 11AC would be mandatory even if the disputed amount of duty had been paid prior to the issue of show cause notice - the order setting aside the penalty u/s 11AC on the company is not sustainable and has to be set aside -the order-in-original passed by the Asstt . Commissioner is required to be restored Decided in favour of Revenue. Penalty u/s 26 of CE Rules - Penalty u/s 26 of the Central Excise Rules, 2002 on authorized signatory of the respondent company, there is no evidence on record to prove that he was knowingly involved in removal of the goods without payment of duty and, therefore, penalty on him under Rule 26 is not called for - Decided in favour of Assessee.

Summary

Issues:
1. Duty demand and penalty imposition on the respondent for alleged clandestine removal of goods without payment.
2. Appeal against the order-in-appeal setting aside the penalty imposed on the respondent company and its authorized signatory.

Analysis:
1. The case involved the central excise duty demand and penalty imposition on the respondent company for alleged clandestine removal of Acid Slurry and Spent Acid. During a stock check, a significant shortage of finished products was found, leading to a duty demand of Rs. 1,17,878. The authorized signatory of the company admitted the shortage, attributing it to goods being removed without payment of duty. The Asstt. Commissioner confirmed the duty demand and imposed penalties. The Commissioner (Appeals) set aside the penalty based on precedents stating that payment of duty before a show cause notice exempts from penalty and insufficient evidence of clandestine removal without invoices.

2. The Revenue appealed against the order-in-appeal, arguing that penalties should be imposed regardless of duty payment timing, citing Supreme Court judgments. The Departmental Representative highlighted the substantial shortage and lack of explanation, asserting penalties should not have been set aside. The respondent's counsel defended the order, claiming the shortage was not real and challenging the validity of the review order due to signing discrepancies.

3. The Tribunal considered both arguments and found the shortage was acknowledged by the company's authorized signatory during stock taking, indicating possible clandestine removal. The Tribunal emphasized that the duty payment before the notice does not absolve from penalty if clandestine removal is proven, as per Supreme Court rulings. Thus, the penalty under Section 11AC was reinstated on the respondent company, overturning the order-in-appeal.

4. However, regarding the penalty under Rule 26 on the authorized signatory, there was insufficient evidence of his knowing involvement in the alleged removal, leading to the upholding of the order-in-appeal setting aside the penalty on him. Consequently, the Revenue's appeal was partially allowed, restoring the penalty on the respondent company but upholding the setting aside of the penalty on the authorized signatory. The judgment concluded by disposing of the appeal accordingly.