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TMI Blog2014 (9) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... ctively, was held to be in excess of the adjusted recorded stock in form IV/RG.23 Part-I, was ordered to be confiscated under Rule 173Q(1) of the Rules, 1944 with option to be redeemed on redemption was passed. On the basis of shortage of 12.12 MT vis-a-vis excess stock of Pig Iron and C.I. Skull Scrap a notice was issued on 15th February, 2001 for confiscation of alleged excess stock under Rule 173Q(1) of Rules, 1944 and for imposition of penalty on them under the same Rule. The show cause notice includes the demand of notice and, as such, finding of the Commissioner (Appeals) was rightly not upheld by the CESTAT and the CESTAT was justified in holding that the payment in respect of shortage of 12.12 MT of cenvated Pig Iron and 153.36 MT of cenvated C.I. Skull Scrap must be re-determined after adjusting the shortage detected in respect of this item on 25th June, 1999. Penalty u/s 11AC - Mens rea - Held that:- On bare reading of Section 11AC of the Act, 1944, it is crystal clear that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful misstatement or suppression of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h 9 and therefore held that no duty is payable under the present proceedings. (b) Whether the imposition of penalty under Section 11AC of the Central Excise Act, 1944 is automatic when it has been held by the Supreme Court in Commissioner of Central Excise, Chandigarh v. Pepsi Foods Ltd. reported in (2001) 1 SCC 601 = 2010 (260) E.L.T. 481 (S.C.) that criminal intent or mens rea is a necessary constituent in order to attract the penalty provision under Section 11AC. 3. The facts, in brief, are that the appellant is a business concern and engaged in the manufacture of C.I. Socket B, C.I. Socket C, C.I. Sole Plate and C.I. Brake Block falling under Chapter Heading No. 7307 and 8607 of the Schedule to the Central Excise Tariff Act, 1985. The officers of the Central Excise visited the factory premises of the appellant on 25th June, 1999. On visit they found that the finished goods were in excess as against its recorded balance in RG-I register maintained by the appellant. The details are as under : S. No. Item AS per RG 1 Register As per Panchnama Weight Difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 65.120 MT 63 12.120 (-) CI Scull Scrap 245.995 MT 92.635 153.360 (-) 5. First show cause notice was issued on 24th December, 1999. Thereafter, another show cause notice was issued on 15th February, 2001 (Annexure - A/4) stating the reconciliation as under : Material As per Record Shortage to be adjusted Position after adjustment Stock as per physical verification Remarks Pig Iron 65.120 28 37.120 53 15.880 (+) CI Scull 245.995 128.580 117.415 92.635 24.780 (-) 6. It was found that there was excess of Pig Iron and shortage of C.I. Scull Scrap. The Deputy Commissioner, Customs Central Excise, Division-II, Bhilai, by order dated 31st August, 2006 (Annexure-A/6) held that the following finished goods were found in excess on 25th June, 1999 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso imposed. However, on account of non-payment of Excise Duty on 153.360 MT of C.I. Skull Scrap, a duty to the tune of ₹ 1,22,688/- and penalty to the same extent was imposed. 10. In respect of Back Plates Clips :- Shortage of 416 Nos. of Back Plates Clips valued at ₹ 3,744/- involving duty of ₹ 599/- was also found. Thus, a duty and penalty to the same extent was imposed. 11. It was further found that the appellant has contravened the provisions of Rules 9 (1), 52A, 53, 173F, 173G of the Rules, 1944. Thus, the appellant was liable to pay penalty under Rule 173Q of the Rules, 1944. Accordingly, the following order was passed : 1 (a) The goods CI Sockets B - 2780 Nos.; CI Sockets C - 635 Nos.; CI Brake Blocks 1829 Nos.; CI Brake Blocks (97022) - 50 Nos.; CI Brake Block (TPL202) - 37 Nos.; and CI Brake Blocks (289) - 1709 Nos. and CI Runner risers - valued at ₹ 14,93,809/- involving Central Excise duty of ₹ 2,22,687/- which was seized under panchnama on 25-6-1999 at the factory premises of Noticee No. 1 is confiscated under Rule 173Q of the erstwhile Central Excise Rules, 1944. However, I give an option to notice No. 1 to redeem the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 1 on 153.360 MT of CI Skull Scrap valued at ₹ 7,66,800/- found short as detailed in the Panchnama dated 18-8-2000 amounting to ₹ 1,22,688/- is confirmed and is ordered to be recovered from Noticee No. 1 under Section 11A of the Central Excise Act, 1944. (b) Mandatory penalty equal to the amount of duty confirmed above i.e. ₹ 1,22,688/- is imposed against Noticee No. 1 under Section 11AC of the Central Excise Act. 7 (a) The demand of duty amounting to ₹ 599/- on Back plates and clips valued at ₹ 3744/- as per panchanama dated 25-6-1999 which was found short during physical verification is confirmed against Noticee No. 1 and ordered to be recovered from them under Section 11A of the Central Excise Act, 1944. (b) Mandatory penalty equal to the amount of duty confirmed as (a) above i.e. ₹ 599/- is also imposed against Noticee No. 1 under Section 11AC of the Central Excise Act, 1944. 8. I impose a penalty of ₹ 50,000/-, against Noticee No. 1 under Rule 173Q 226 of the Central Excise Rules, 1944 for contravention of various Rules as discussed above. 9. Personal Penalty of ₹ 50,000/- is imposed on Shri Vinod Kumar Jaiswal, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4/- to ₹ 50,000/- from ₹ 1,20,865/-, to ₹ 50,000/- from ₹ 1,22,688/-, to ₹ 200/- from ₹ 599/-. The penalty imposed under Rule 173Q for excess quantities found and penalty for non-accountal of records under Rule 226 is upheld but the penalty is reduced to ₹ 20,000/-. Further the redemption fine is reduced ₹ 3,50,000/- to ₹ 50,000/-. Apart from this, the confiscation of 15.880 MT of pig iron is set aside. As regards the penalty of ₹ 50,000/- imposed on the second appellant, it is observed that the second appellant has not acted Independent of the appellants in this case. When that is the case, there is no question of imposition of separate penalty under Rule 209A. This penalty of ₹ 50,000/- on the second appellant is set aside. 13. The CESTAT after having considered all the aspects of the matter re-examined the entire issue and came to the conclusion that in respect of shortage of goods there was no satisfactory explanation. Thus, upheld the finding recorded by the appellate authority for payment of duty along with interest in respect of shortage. 14. In regard to shortage of 12.12 MT of cenvated Pig Iron and 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) of Rules, 1944 and for imposition of penalty on them under the same Rule. 20. The show cause notice dated 15th February, 2001 is a part of the record. In the said notice it is observed as under : 7. Now, therefore, M/s. Jaiswal Steel Processing Pvt. Ltd., 178B, Light Industrial Area, Bhilai (noticee) are hereby called upon to show cause to the Additional Commissioner, Customs Central Excise, Civil Lines, Raipur, Chhattisgarh, as to why : (a) 15.88 0 MT of Pig Iron (input) seized under panchnama dated 15-1-2001 should not be confiscated under Rule 173Q of the Central Excise Rules, 1944. xxx xxx xxx xxx xxx xxx xxx xxx xxx (c) The Central Excise Duty of ₹ 1,22,688/- (Rupees One Lac Twenty Two Thousand Six Hundred Eighty Eight Only) equal to the amount of Cenvat credit availed on 153.36 MT C.I. Skull (input), found short during physical verification of stock on 18-8-2000 and appeared to have been removed without payment of duty in contravention of provision of Rule 57AB of Central Excise Rules, 1944 should not be confirmed and recovered under Rule 57AH of Central Excise Rules, 1944 read with Section 11A of Central Excise Act, 1944. (d) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed also that in case where the duty determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the first proviso shall be available, if the amount of duty so increased, the interest payable thereon and twenty-five per cent of the consequential increase of penalty have also been paid within thirty days of the communication of the order by which such increase in the duty takes effect. Explanation.- For the removal of doubts, it is hereby declared that - (1) the provisions of this section shall also apply to cases in which the order determining the duty under sub-section (2) of Section 11A relates to notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President; (2) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person. 24. On bare reading of Section 11AC of the Act, 1944, it is crystal clear that where any duty of excise has not been levied or paid o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t-payment of duty regardless of the conditions expressly mentioned in the section for its application. There is another very strong reason for holding that Dharamendra Textile could not have interpreted Section 11AC in the manner as suggested because in that case that was not even the stand of the Revenue. 34. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the Authority concerned would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textile decides. It must, however, be made clear that what is stated above in regard to the decision in Dharamendra Textile is only insofar as Section 11AC is concerned. We make no observations (as a matter of fact there is no occasion for it!) with regard to the several other statutory provisions that came up for consideration in that decision. 28. In Commissioner of Central Excise, Chandigarh v. Pepsi Foods Ltd. -(2011) 1 SC ..... X X X X Extracts X X X X X X X X Extracts X X X X
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