2009 (5) TMI 641 - AT - Central Excise

Summary

Issues:
1. Imposition of penalties under Rule 25 and Rule 26 of Central Excise Rules, 2002.
2. Justification of penalty on the authorized signatory for shortage of finished goods.
3. Interpretation of Section 11AC of the Central Excise Act, 1944 in relation to penalty imposition.
4. Application of mens rea in penalty imposition.
5. Assessment of evidence for clandestine removal of goods.

Analysis:
1. The case involved the imposition of penalties under Rule 25 and Rule 26 of the Central Excise Rules, 2002. The Central Excise Officers detected a shortage of finished goods during a stock verification visit to the respondent's factory, resulting in the imposition of penalties by the original authority. The penalties were later set aside by the Commissioner (Appeals), leading to the Revenue filing appeals challenging this decision.

2. The learned D.R. argued that the penalty was justified under Rule 25 of the Rules due to the authorized signatory's failure to explain the shortage of goods, suggesting deliberate suppression of goods removal. Conversely, the learned Advocate contended that there was no evidence of clandestine removal and referenced a relevant decision by the Hon'ble Punjab and Haryana High Court.

3. The judgment acknowledged the disagreement between the parties regarding the penalty imposition. It highlighted that the duty was indeed deposited before the issuance of the show cause notice, but the presence of mens rea was crucial for penalty imposition. Citing the decision of the Hon'ble Punjab and Haryana High Court, the judgment emphasized that payment of duty before notice issuance does not preclude penalty imposition under Section 11AC if the elements, including mens rea, are satisfied.

4. The analysis delved into the specifics of the case, noting that the shortage was admitted by the authorized signatory, who promptly paid the duty. However, the failure to provide a satisfactory explanation for the shortage raised questions. Importantly, there was a lack of concrete evidence supporting clandestine removal of goods, leading to the conclusion that penalty imposition under Rule 25 of the Rules read with Section 11AC was unwarranted.

5. Ultimately, the judgment rejected the Revenue's appeals, aligning with the Commissioner (Appeals) decision. It emphasized the absence of grounds for interfering with the earlier ruling, as the circumstances did not justify the imposition of penalties under Rule 25 and Rule 26. The decision rested on the interpretation of relevant legal provisions, the presence of mens rea, and the assessment of evidence regarding the alleged clandestine removal of goods.