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TMI Blog2007 (5) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... t was made in regard to those excesses. 3. A show cause notice dated 28th June 2001 was issued, alleging that the delay in returning the credit on inputs found short attracted penalty under Section 11AC of the Central Excise Act 1944. It was also alleged that the appellant was liable to pay interest under Section 11AB. These allegations were confirmed in adjudication and the appellant filed an appeal before Commissioner (Appeals). 4. Appellant's contentions were as under "No suppression or mis-statement with an intent to evade payment of duty The appellants submit that the non-payment of duty was on ac count of two reasons namely (i) incorrect accountal of the in house parts transferred to spare parts division leading to discrepancy and (ii) difference in book balance as compared to the physical stock. The appellant submits that consequent to the transfer of the modvat cell to the finance division in January 1999, the appellants undertook a physical stock verification as compared to the RG 23A Part I. On verification discrepancies were noticed and a detailed verification was undertaken by the appellants to reconcile the discrepancies. The departmental officers also jo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or of the rules made there under with intent to evade payment of duty , the person liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to duty so determined." 5. The above contentions did not find favour with the adjudicating authority. That authority held against the appellant with the following observations :- "To begin with it is brought on record that M/s, MUL has paid the duty amount as demanded in the SCN. What is required to be seen whether there was an intention to evade payment of duty and whether penalty can be imposed and interest can be demanded or not. In para 9 of the SCN it has been made clear that M/s. MUL was conducting physical stock taking at the end of each financial year to fulfill the requirement of the Companies Act. M/s. MUL was aware of the fact that (IN HOUSE parts) there were shortages. The opening balance of next year were shifted to physical inventories every year without discharging the duty liability on the shortages noticed. These shortages were of Rs. 17,32,375.28 on 31-3-97, Rs. 9,68,280.51 on 31-3-98, Rs. 16,94,042.63 on 31-3-99 and Rs. 18,15,240.45 on 31-3-00. These facts were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r cited above has been followed by the Tribunal in a recent case of Elephanta Gases Ltd. v. CCE, Pune-I reported at 2003 (155) E.L.T. 42 (Tri. -Mumbai). It has been held in this case by the Tribunal by relying upon the Hon'ble Supreme Court judgment that the appellant's contention regarding non-imposition of penalty when duty was deposited before issue of show cause notice cannot be accepted. In view of the same, the ratio of various cases cited by the appellant against imposition of penalty and demand of interest would not apply to the appeal filed before me. In the appeal filed before me, it has been cleanly held in the impugned order that the appellant was conducting physical stock taking at the end of each financial year to fulfill the requirement of the Companies Act. Thus, the appellant was aware of the fact that in some In House parts, there was shortages. The stock of In House parts which was forwarded to the next year was not the stock as per records but was the physical stock in hand at the end of each financial year. These facts were never reported to the departmental authorities. The duty liability was never discharged on the shortages observed by the appellant from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Excise, Delhi-III v. M/s. Machino Montell (I) Ltd. and another ), we allow this appeal and set aside the order passed by the Tribunal to the extent the penalty and interest levied on the assessee had been set- aside because the duty was deposited before issue of show cause notice and remand the case back to the Tribunal for fresh decision on merits and in accordance with law." 9. The appeal is required to be decided in the light of the ruling of the Hon'ble High Court on the scope of penalty under Section 11AC of the Central Excise Act. Observation of the Hon'ble High Court may be read "7. A perusal of the above provision, shows that the said provision incorporates liability to pay penalty in the situations mentioned therein. Once a case is covered by the situation mentioned in the Section, mere deposit prior to issuance of show cause notice under Section 11A of the Act will not necessarily negate the situation mentioned in the said Section." 10. The submission of the learned Counsel for the assessee is that the shortages and excesses noticed during stock taking are not the result of any mis- declaration misstatement or fraud. The submission of the learned counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to ensure accuracy and efficiency. The evidence on record does not indicate any diversion of inputs in contravention of rules relating to utilization of inputs. The demand is merely based on the shortages detected during physical tallying, that too without taking into account the excesses noticed. Since there is no evidence, that the excesses are not the result of clandestine receipt of inputs, the same view is required to be taken in regard to shortages also, that the shortages are not the result of any clandestine or unauthorized utilization of the inputs. The shortages thrown up also do not account for much. The appellants' Management as well as its auditor have accepted the differences between the physical stocks and the procurement as normal and something to be put up with. It is a very small (0.24%) fraction of the inputs received. It is well settled that Tax Authorities also should go by the normal commercial and professional practice. If the shortages are within the tolerance limits fixed by an efficient Manage and certified to as within the norms by qualified accounting professionals, it would be unreasonable and unfair for Tax authorities to take a different view. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and appeals filed before the Hon'ble Supreme Court are pending. 14. The issue for consideration is whether the non-return of the credit relatable to inputs found short during the relevant years was the result of fraud, suppression of facts etc. as covered by Section 11AC and Section 11AB. As already noted, the finding of the original authority is that there was "mis declaration and mens rea". The finding of the Commissioner is also that the appellant did not disclose the facts to Excise Authorities despite being aware of the shortage. 15. The same issue was dealt with by this Tribunal in its earlier decision of 2004. We have already reproduced the relevant portion of that judgment. The finding was that certain shortages and excesses are normal arid all authorities have to put up with such shortages and excesses. Based on that finding, the Tribunal set aside duty demand as well as penalties. The factual context is the same in the present appeal also, only the period of demand is different. We find no reason to disagree with our earlier view. 16. In view of what is stated above, we hold that interest and penalty under Sections 11AB and 11AC of the Central Excise Act a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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