2014 (3) TMI 633 - AT - Central Excise

Penalty u/s 11AC - Shortage in stock - Clandestine removal of goods - Held that - respondent are engaged in the manufacture of dies, Gen. Set, A.C. Generator, I.C. Diesel Engines and C.F. Water pumps falling under chapter 84 and 85 of the Central Excise Tariff. The factory premises of the respondent were visited by the Revenue Officers and it was found that there was shortage and excess in the stock of finished product. The goods which was in excess were seized and the adjudicating authority confiscated the goods and allowed the same on redemption fine. The goods which were found short, the adjudicating authority confirmed the demand and imposed the penalty under Section 11AC of the Act. During verification 18 units of A.C. Generator, 58 nos. of Diesel Engines, 40 nos. of C.F. Water Pumps and 12 nos. of diesel set found short against the quantity mentioned in the statutory record. The respondent cannot putforth any valid reason behind the shortage of finished goods. The respondent accepted the shortage and deposited the amount of duty. finding of the Commissioner (Appeals) that it is a case of improper accountal of finished goods is not sustainable. As the finished goods were found short and there is no explanation putforth by the respondent, therefore, the impugned order whereby the penalty imposed under Section 11AC is set aside is not sustainable - Decided in favour of Revenue.

Summary

Issues: Appeal against order setting aside penalty under Section 11AC for shortage of excisable goods.

Analysis:
The judgment revolves around an appeal filed by the Revenue against an order setting aside the penalty imposed under Section 11AC of the Central Excise Act for the shortage of excisable goods. The Commissioner (Appeals) had set aside the penalty, stating that the shortage was due to various reasons and not clandestine removal, as alleged by the department, which was not proven. The respondent, engaged in manufacturing various products falling under specific chapters of the Central Excise Tariff, had their factory premises inspected by Revenue Officers. It was discovered that there was both shortage and excess in the stock of finished products. The excess goods were seized and later released upon payment of redemption fine. However, the shortage of 18 units of A.C. Generators, 58 diesel engines, 40 C.F. Water Pumps, and 12 diesel sets against the statutory records remained unexplained by the respondent. The respondent accepted the shortage and paid the duty amount. The authorized signatory failed to provide a valid reason for the shortage during verification. The judge, after reviewing the adjudication order and the Commissioner (Appeals) order, concluded that the shortage of finished goods, without a valid explanation, indicated improper accountal rather than mere oversight. Therefore, the judgment restored the penalty imposed under Section 11AC by the adjudicating authority, as the shortage of excisable goods remained unexplained, and the respondent failed to provide a valid reason for the discrepancies. The appeal was allowed accordingly, and the penalty under Section 11AC was upheld.