2016 (12) TMI 1044 - AT - Central Excise

Demand - clandestine removal - clearance of samples without payment of duty - Held that - It has been correctly indicated by Learned AR that Sr. No. 3 of the Annexure to the show cause notice dt 22/7/09, at page No. 17 of the appeal papers, show the date of short supply under k-series challan as 20/7/05 whereas the date of Central Excise invoice in this case is 22/7/05. It is observed that short supply can not take place before the date of clearance under a Central Excise invoice. Appellant is not able to demonstrate that goods sent out as samples or for demonstration purposes or as short supplied goods are accounted for - demand of duty and interest justified. Imposition of penalty - Held that - appellant did give some explanation for nonpayment of duty by certain co-relation which is not considered adequate - investigation also did not extend the inquiry to the persons to whom the samples were sent either as sale or for demonstration - penalty set aside. Appeal disposed off - decided partly in favor of appellant.

Issues:
1. Confirmation of demand of duty along with interest and penalty under Sec 11AC of the Central Excise Act 2004.
2. Arguments regarding duty liability on sample clearance, goods sent for demonstration, and short supply of finished goods.
3. Imposition of penalty based on duty liability admission.
4. Investigation findings and evidence regarding unaccounted manufactured models, sample clearance, and short supply of goods.
5. Decision on demand, interest, and penalty imposition.
6. Conclusion and relief granted in the appeal.

Analysis:

Issue 1:
The appeal was filed against the confirmation of demand of duty, interest, and imposition of penalty under Sec 11AC of the Central Excise Act 2004 by the first appellate authority. The appellant contested the OIA No. 15/Kol-I/2012 and OIO No. 06/DC/CE/Cen-III/Adjn/09-10. The demand of ?1,41,863/- was upheld by the first appellate authority.

Issue 2:
The appellant's advocate argued that the duty amounts related to sample clearance, goods sent for demonstration, and short supply of finished goods. The samples were cleared without payment of duty, goods sent for demonstration were accounted for, and short-supplied goods were cross-referenced with Central Excise invoices. The advocate contended that no seizure of clandestine clearances occurred, and penalty imposition was unjustified.

Issue 3:
The Revenue's representative argued that the appellant admitted duty liability on samples and goods sent for demonstration. The Revenue contended that the appellant's acceptance of duty liability negated the evidence of sample models in the investigation charts. The Revenue supported the penalty imposition based on the admitted duty liability.

Issue 4:
Upon reviewing the case records and investigation findings, it was noted that certain manufactured models were unaccounted for, samples were sent out without proper documentation, and discrepancies existed in the short supply of finished goods. The appellant failed to convincingly demonstrate the return and proper accounting of samples and goods sent for demonstration purposes.

Issue 5:
The Tribunal held that the demand and interest were correctly decided by the first appellate authority due to the appellant's inability to account for samples, goods sent for demonstration, and short-supplied goods. However, the imposition of penalty was deemed unfit based on inadequate explanations and lack of extended inquiry into the sample recipients.

Issue 6:
The appeal was allowed only to the extent of penalty imposed, granting relief to the appellant in that regard. The operative part of the order was pronounced in the open court, providing consequential relief as applicable.

This detailed analysis covers the legal judgment comprehensively, addressing each issue involved in the appeal before the Appellate Tribunal CESTAT KOLKATA.

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