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2009 (8) TMI 1057

..... by the department but before issuance of show cause notice in view of the facts and circumstances mentioned above?

Held that:- The demand was based merely on the shortage detected during physical tallying. The dealer had not taken any account of the excess use of inputs for which no credit was claimed. Accordingly, the Tribunal found that once the excesses were not clandestine receipt of input, then the same view was required to be taken with regard to shortage also, namely that the shortages are not a result of any clandestine or unauthorized utilization. The shortage has been found to be very small namely 0.24 per cent. which is fraction of the input receipt. The shortages have been found within the tolerable limits expected by an efficient management. It was, therefore, rightly held that no demand could be raised under Rule 57-I of the Rules. Accordingly, Section 11AC and Section 11AB of the Act would have no application to the facts of the present case. Appeal dismissed. - C.E.A. No. 24 of 2008 and C.E.A. No. 122 of 2005 - 12-8-2009 - M.M. Kumar and Jaswant Singh, JJ. Shri Sanjeev Kaushik, Sr. Standing Counsel, for Indirect Taxes, for the Appellant. Shri M.P. Devnath .....

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..... ion 11A, by extending limitation period to 5 years which had already been paid. Accordingly the amount was appropriated to the Revenue; (b) interest under Section 11AB and (c) a penalty equal to the amount of duty was also demanded from the dealer under Section 11AC. It is, however, worth while to mention that the Assessing Authority did not anywhere record a finding that the dealer had committed any fraud or had suppressed facts with an intention to evade duty. 3. The dealer preferred an appeal against the order dated 15-3-2002 (P-1) passed by the Assessing Authority only to the limited extent of imposition of penalty and interest under Section 11AC and Section 11AB of the Act respectively. The dealer claimed that it has discovered the discrepancies during the stock checking and has paid the duty on its own much before the issuance of show cause notice. It is significant to notice in the process of stock checking and verification, the officers of the department were also joined. On finding of discrepancy the dealer had paid an amount of Rs. 5,78,737/- in October, 2000 and Rs. 10,74,274/- on 5-6-2001. In that regard intimation to the departmental authority was also sent. It is thus .....

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..... bunal in Rashtriya Ispat Nigam Ltd. v. CCE reported in 2003 (161) E.L.T. 285 (T)=2003 (54) RLT 317 against which the appeal filed by the Revenue was dismissed by Hon ble Supreme Court and the decision of this Tribunal in Karnataka High Court in the case of CCE, Mangalore v. Shree Krishna Pipe Industries reported in 2004 (165) E.L.T. 508 (Kal.) = 2004 (61) RLT 17 where the particular matter on this issue is answered in favour of the assessee by the Hon ble High Court. In view of the above decision of the Hon ble Supreme Court in the case of Rashtriya Ispat Nigam Ltd., we respectfully followed the ratio of the law laid down in the Larger Bench of the Tribunal in the case of Machino Montell (I) Ltd. (supra). The appellant had deposited whole of the duty prior to issuance of show cause notice; therefore, the imposition of penalty and interest is not sustainable and is set aside. The appeal is allowed as indicated above. 5. The aforesaid order of the Tribunal was challenged before this Court in a writ petition. This Court has already preferred the view that merely because duty stood paid before issuance of show cause notice would not constitute a basis to conclude that no penalty or int .....

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..... uts 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 appellant 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 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 Management 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 these circumstances, we are of the view that there is no evidence to sustain a finding that this is .....

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..... ate Authority including Tribunal to reduce the amount of penalty, which as per language of statute has to be equal to the amount of duty. He has maintained that the aforesaid judgment of the Hon ble Supreme Court is not an authority for the proposition that intention to evade duty would not be an essential ingredient of Section 11AC of the Act as has been convassed by the revenue. 10. In order to buttress his stand, learned counsel has placed reliance on a latest judgment of Hon ble the Supreme Court rendered in the case of Unions of India & ors. v. Rajasthan Spinning & Weaving Mills 2009 (238) E.L.T. 3 (S.C.). He has drawn our attention to paras 18, 19, 20, 21 and 22 of the judgment and argued that the judgment of the Hon ble Supreme court in Dharamendra Textiles case (supra) did not hold that Section 11AC was applicable to every case of non­payment or short payment of duty regardless of the conditions expressly mentioned in that provision for its application. 11. Having heard learned counsel at some length, we are of the view that the controversy raised in the instant appeals stand resolved by the judgment of Hon ble Supreme Court in Rajasthan Spinning and Weaving Mil .....

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..... ly true, is that in the absence of such an allegation in the notice the period for which the escaped duty may be reclaimed would be confined to one year and in the absence of such a finding in the order passed under Section 11A(2) there would be no application of the penalty provision in Section 11AC of the Act. On behalf of the assessee it was also submitted that Section 11A and 11 AC not only operate in different fields but the two provisions are also separated by time. The penalty provision of Section 11AC would come into play only after an order is passed under Section 11A(2) with the finding that the escaped duty was the result of deception by the assessee by adopting a means as indicated in Section 11AC. 19. From the aforesaid discussion, it is clear that penalty under Section 11AC, as the word suggests, is punishment for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the Section. 13. A perusal of the aforesaid paras from the Hon ble Supreme Court makes it clear that if the notice under Section 11A(1) alleges that escaped duty was the result of any conscious and deliberate wrong doing and in the order pas .....

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..... ised by the Revenue are thus liable to be rejected. The Tribunal has recorded categoric findings that in the establishment of the dealer, full reconciliation of transactions concerning use of inputs was not possible. The shortages and excesses had been found to be normal. It was further found that that the establishment of the dealer is huge and complex which involved a complicated accounting problem. It cannot be controlled manually and they have put in place sophisticated computer based accounting system in order to ensure accuracy and efficiency. The findings further are that there was diversion of inputs in contravention of Rules relating to utilization thereof. The demand was based merely on the shortage detected during physical tallying. The dealer had not taken any account of the excess use of inputs for which no credit was claimed. Accordingly, the Tribunal found that once the excesses were not clandestine receipt of input, then the same view was required to be taken with regard to shortage also, namely that the shortages are not a result of any clandestine or unauthorized utilization. The shortage has been found to be very small namely 0.24 per cent. which is fraction of t .....

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