2016 (2) TMI 328 - AT - Central Excise

Shortages found during the course of physical verification - demanding duty along with interest and imposing penalty - Held that - As the learned Counsel for the appellant has conceded the liability of duty, therefore duty demand is confirmed. With regard to the interest, find that appellant has paid the duty within a month of investigation, no interest is payable by the appellant. Coming to the imposition of penalty on the appellant as gone through the panchnama and submissions recorded by the authorities below at the time of investigation by authorized signatories who admitted that they have cleared the short found goods without payment of duty clandestinely. In these circumstances, the allegation of suppressions under section 11AC of the Central Excise Act, 1944 stand proved. Thus as per the proviso to section 11 AC of the Act, penalty is to be paid 25% if the assessee pays the duty along with interest within 30 days of the adjudication. Admittedly, in this case, the appellant has paid the duty before adjudication and moreover within the same month of investigation and no interest was payable by the appellant. In these circumstances, as per the proviso of Section 11AC of the Act, penalty is reduced to 25% of duty in question. Therefore, appellant is directed to pay 25% of duty as penalty within 30 days of communication of this order failing which the appellant shall be liable to pay duty 100% as penalty.

Summary

Issues:
Appeal against duty demand, interest, and penalty due to shortages found during physical verification.

Analysis:
The appellant, a manufacturer of MS/SS ingots and Flats, was subjected to a search resulting in a shortage of 101.50 MT of SS flats during physical verification. A show cause notice was issued demanding duty, interest, and penalty. The appellant admitted to clearing the goods without payment of duty clandestinely. The duty was paid within a month of investigation, but interest and penalty were imposed. The appellant contested the imposition of interest and penalty.

The appellant's counsel argued that penalty cannot be imposed solely based on an oral statement and cited relevant case laws. The authorized signatory's admission of shortages was the basis for the penalty. The Tribunal found the penalty justified due to the admission of clandestine removal. The appellant's duty liability was confirmed, but no interest was payable as the duty was paid promptly.

The Tribunal analyzed the case laws cited by the appellant's counsel and found them inapplicable as the circumstances differed. The penalty under section 11AC of the Act was imposed at 25% of the duty amount, as the duty was paid before adjudication and within the stipulated timeframe. The appellant was directed to pay the reduced penalty within 30 days, failing which a 100% penalty would be applicable.

In conclusion, the appeal was disposed of with the appellant being directed to pay the reduced penalty within the specified timeframe.