2016 (3) TMI 195 - AT - Central Excise

Penalty under section 11AC - clearance against the dummy challan - clandestine removal - Held that - The appellant though required to pay the duty/CENVAT Credit which they have already paid, they are not liable to be visited with harsh penalty under section 11AC of Central Excise Act, 1944. In the case of alleged clearance against the dummy challan dated 17.01.2007, find force in the contention of the appellant that in absence of any evidence to the effect that the goods mentioned in the said challan were cleared, the duty mentioned therein cannot be fastened on them. Serious lapse in the investigation undertaken by the officers in making necessary enquiry about the said dummy challan, so as to ascertain whether the goods mentioned in the said challan were in fact cleared to the consignee mentioned in the said challan or otherwise. Also, from the statements recorded, find that nowhere the said question was asked to the Manager or the Director by the investigating officer. In these premises, it is difficult to hold that the goods mentioned in the said challan dated 17.01.2007 were cleared clandestinely without payment of duty. Further, find that penalty was imposed under section 11AC of Central Excise Act, 1944 by the adjudicating authority and confirmed by the Ld. Commissioner (Appeals). Penalty was not confirmed under any other provision nor also invoked in the show cause notice. Accordingly, confirmation of penalty cannot be sustained. The Revenue s Appeal is thus partly allowed to the extent of confirmation of duty on the shortages in the stock of finished goods and raw materials amounting to ₹ 13,38,012/- and the impugned order is modified accordingly. - Decided in favour of revenue in part

Summary

Issues:
- Appeal against Order-in-Appeal No.21/Bol/2012 dated 27.01.2012.
- Discrepancies in stock of finished goods and raw materials.
- Confirmation of demand and penalty imposition.
- Challenge of confirmation of demand and penalty imposition.
- Shortage of goods and alleged clandestine clearance.
- Alleged clearance against dummy challan dated 17.01.2007.
- Investigation lapses and penalty imposition under section 11AC.

Analysis:
1. The appeal was filed by the Revenue against Order-in-Appeal No.21/Bol/2012 dated 27.01.2012, citing discrepancies in the stock of finished goods and raw materials. The respondent had paid the duty/CENVAT Credit amounting to &8377; 13,82,054, except for &8377; 44,042 related to alleged removal against a delivery challan. The ld.Commissioner(Appeals) set aside the demand confirmation and penalty imposition, leading to the Revenue's appeal before the forum.

2. The ld.AR for the Revenue argued that the shortage in goods indicated clandestine clearance without duty payment, emphasizing the unexplained shortages and alleged dummy challan clearance. On the other hand, the respondent's consultant contended that shortages did not prove clandestine clearance and challenged the validity of the alleged clearance against the dummy challan, highlighting the lack of investigation by the department regarding the consignee.

3. Upon review, the tribunal found shortages in finished goods and raw materials during a joint stock verification, with inadequate explanations provided by the respondent's representatives. While confirming the duty/CENVAT Credit payment, the tribunal noted that shortages did not conclusively prove clandestine clearance. Regarding the alleged clearance against the dummy challan, the tribunal criticized the investigation lapses and lack of evidence, leading to the conclusion that duty could not be imposed based solely on the challan.

4. The tribunal ruled that while the duty on shortages was confirmed, harsh penalties under section 11AC of the Central Excise Act, 1944 were deemed unwarranted. Additionally, the confirmation of penalties was deemed unsustainable as they were not invoked in the show cause notice. Consequently, the Revenue's appeal was partially allowed, modifying the order to confirm duty on shortages but overturning the penalty imposition.