2010 (12) TMI 1138 - AT - Central Excise

Summary

Issues: Appeal against confirmation of duty and penalty imposition for shortage of inputs and finished products.

Analysis:
1. Confirmation of Demand and Penalty Imposition: The appeal was filed against the order of the Commissioner (Appeals) dated 25-2-2009, confirming the demand of duty and penalty imposition. The Central Excise officers found a substantial shortage of inputs and finished products compared to the statutory records. The duty on the shortfall was paid, and a show cause notice was issued proposing confirmation of duty and penalties. The original authority confirmed the duty demand and imposed a penalty under Rule 25 of the Central Excise Rules, 2002, and Rule 15 of Cenvat Credit Rules, 2004. The Commissioner (Appeals) upheld the original authority's decision, although Section 11AC was not invoked despite being mentioned in the show cause notice. No appeal was filed by the department against the original authority's order before the Commissioner (Appeals).

2. Arguments and Submissions: The advocate for the appellants argued that the shortage was merely due to improper maintenance of accounts and not clandestine removal. They acknowledged the duty liability but contested the harshness of the penalty. On the other hand, the SDR reiterated the findings of the lower authorities.

3. Judgment and Reasoning: The Member (T) carefully considered both sides' submissions. The substantial shortage of raw materials and finished products was noted, with unconvincing explanations provided. While there was no evidence of clandestine removal, the failure to account for inputs and final products attracted penalties under Rule 15 of the Cenvat Credit Rules and Rule 25(1)(b) of the Central Excise Rules, 2002. Despite the reduction of penalties due to the absence of evidence of clandestine removal, the impugned order confirming the duty demand and penalties was upheld. The penalty was reduced from Rs. 2,80,198 to Rs. 75,000 based on the facts and circumstances of the case.

In conclusion, the judgment maintained the confirmation of duty demand and penalties for the shortage of inputs and finished products, emphasizing the strict obligation of the appellants to account for such items. The reduction in penalty was granted due to the absence of evidence of clandestine removal, but the overall decision of upholding the original authority's order was affirmed.