Custom, Excise & Service Tax Tribunal
M/S. B.R.Industries Ltd vs Cce, Delhi-I on 29 June, 2010
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
Single Member Bench
Excise Appeal No.1258 of 2008-SM
(Arising out of Order-in-Appeal No.24/CE/2008 dated 14.03.2008 passed by the Commissioner of Central Excise(Appeals),Delhi-I)
Date of Hearing/Decision: 29.06.2010
For approval and signature:
Honble Mr.Rakesh Kumar, Member (Technical)
1 Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2 Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3 Whether Their Lordships wish to see the fair copy of the Order?
4 Whether Order is to be circulated to the Departmental authorities?
M/s. B.R.Industries Ltd. Appellant
Vs.
CCE, Delhi-I Respondent
Present for the Appellant : Shri V.R.Sethi, Advocate
Present for the Respondent: Shri S.N.Singh, JCDR
Coram:
Honble Mr.Rakesh Kumar, Member (Technical)
ORAL ORDER No.____________/
PER: RAKESH KUMAR The facts leading to this appeal are in brief as under:
1.1 The appellants are engaged in the manufacture of electrical stamping and lamination falling under chapter heading 8504,9010 of Central Excise Tariff. The appellants factory premises were visited by the jurisdictional central excise officers on 28.12.2005 when the stock of finished goods was checked in the presence of two panch witnesses. On checking the stock of finished goods, namely stamping lamination, shortage of 7271.30 kg involving central excise duty of Rs.2,07,666/- was found. Enquiry was made with the Managing Director of the appellants, who accepted the shortage but stated that the shortage may be due to accumulated shortage/differences as they have never conducted physical stock taking. However, they paid the entire amount of duty on 2/1/06 earlier. Thereafter a SCN was issued to the appellants for confirming duty demand on quantity of 7271.30 kg of stamping lamination found short and also for imposition of penalty on the appellants under Section 11AC, as SCN alleged that the finished goods found short had been clandestinely removed without payment of duty.
1.2 SCN was adjudicated by the Assistant Commissioner vide Order in Original dated 31.8.2008 by which the duty demand of Rs.2,07,666/- was confirmed against the appellants and the amount already paid was appropriated towards duty demand. besides this, penalty of equal amount Rs.2,07,666/- was imposed under Rule 25 of the Rules read with Section 11AC on the appellants and penalty of Rs.50,000/- was imposed on the managing director under Rule 26 of the Central Excise Rules. On appeal to the Commissioner (Appeals), the Commissioner (Appeals) vide Order in Appeal dated 14.3.2008 upheld the Assistant Commissioners order. It is against this order of the Commissioner (Appeals) that the present appeal has been filed by the appellant company.
2. Heard both sides.
3. Shri V.R.Sethi, Advocate, the learned Counsel representing the appellants, pleaded that at the time of visit of central excise officers to the factory on 28.12.2005, on physical verification of the stock of finished goods, shortage of 7271.30 kg of electrical lamination was found as against the recorded balance in the RG-1 register, that this shortage is not the real shortage as the same may be due to wrong recording of weight and the fact that there was no stock taking conducted for the finished goods lying in the factory, that the appellants still had paid the entire duty even prior to the issuance of SCN, that there is no clandestine removal as merely on the basis of shortage it cannot be alleged that the goods found short had been removed clandestinely, that clandestine removal has not been admitted by the managing director of the appellant company and that in any case, if it is held that the shortage was due to clandestine removal, the first proviso to Section 11AC would become applicable since the entire duty had been paid prior to issue of SCN, but still the Assistant Commissioner in accordance with first proviso to Section 11AC did not give an option to the appellants to pay reduced penalty within stipulated period and in view of this, in accordance with judgements of Honble Delhi High Court in the case of K.P.Pauches (P) Ltd. vs. UOI & Anr reported in 2008 (85) RLT 483 (Del.) and in the case of CCE vs. Malbro Appliances P.Ltd. reported in 2007 (79) RLT 109 (Del.) only penalty equal to 25% of the duty amount would be imposable as the benefit of 1st proviso to Section 11AC cannot be denied when the entire duty had been paid prior to issue of SCN.
4. Shri S.N.Singh, learned JCDR, defending the impugned order pleaded that the shortage of the finished goods was 7271.30 kg, which is huge shortage which cannot be due to wrong recording of weight and not conducing regular stock taking, that it is inconceivable that for long time, the appellants would not have conducted stock taking of the finished goods, that looking to the quantum of shortage, no satisfactory explanation was given by the appellants, from which, it is clear that the goods found short had been removed clandestinely, that while the huge shortage has been admitted, the same is attributed to non recording of correct weight, but there is no evidence produced in this regard, that in this regard, he relies upon judgement of the Honble Supreme Court in the case of CCE, Madras vs. Systems & Components Pvt.Ltd. reported in 2004 (165) ELT 136 (SC), that just because the appellants paid the entire duty prior to issue SCN they cannot escape the penal provisions of Section 11AC; that he also relies upon the judgement of the Honble Supreme Court in the case of Union of India vs. Rajasthan Spinning & Weaving Mills reported in 2009 (238) ELT 3 (SC) wherein it was held that once the provisions of Section 11AC are attracted, the penalty has to be imposed, that under Section 11AC, there is no scope to reduce the penalty and in this regard he relies upon the judgement of the Honble Supreme Court in the case of Union of India vs. Dharamendra Textile Processors reported in 2008 (23) ELT 3 (SC) and in view of this notwithstanding the first proviso to Section 11AC and judgement of the of Honble Delhi High Court in the case of K.P.Pauches (P) Ltd. vs. UOI (supra), there is no discretion available to the appellate adjudicating authority to reduce the penalty.
5. I have carefully considered the submissions from both sides and perused the records.
5.1 There is no dispute about the fact of shortage of the finished goods vis-`-vis balance recorded in the RG-1 register and also there is no dispute that the quantum of shortage was 7271.30 kg. Looking to the quantum of shortage, it is inconceivable that the same could be due to mistake in recording the weight. Moreover, when the shortage of this quantum is found vis-`-vis the balance in RG-1 register, the burden of proving that the same is not due clandestine removal would be on the assessee. But no satisfactory explanation for this shortage has been given by the appellants In view of this, I hold that the shortage is due to clandestine removal of the goods without payment of duty and hence duty demand on the goods found short had been rightly upheld. Since the goods had been clandestinely removed by the appellants, the penal provisions of Section 11AC would be attracted irrespective of the fact that the duty had been paid by the appellants prior to the issuance of SCN.
5.2 Further plea of the appellant is that in view of the judgements of Honble Delhi High Court in the case of K.P.Pauches (P) Ltd. and in Malbro Appliances P.Ltd. (supra) only penalty equal to of 25% of the duty amount must be imposed in terms of Section 11AC.
5.3 As per the first proviso to Section 11AC, where such duty as determined under sub-section (2) of Section 11A (1) and the interest payable thereon under Section 11AB, is paid within thirty days from the date of communication of the order, the amount of penalty payable by such person under this section shall be 25% of the duty so determined provided penalty equal to 25% of duty is also paid within 30 days referred to in the proviso. Thus, when on account of clandestine removal or evasion of duty by wilful mis-statement or suppression of facts on the part of an assessee, the duty demand is confirmed under sub-section (2) of section 11A(1) against an assessee and he pays the entire duty alongwith interest and penalty equal to 25% of duty within the period of thirty days from the date of communication of the order, his penalty liability would be only 25% of the duty instead of penalty equal to duty demand confirmed. In the case of K.P.Pauches (P) Ltd a case of duty evasion was booked against them and they paid duty alongwith applicable interst before issuance of SCN. However, when the matter was adjudicated by the original adjudicating authority, no option to pay reduced penalty in terms first proviso to Section 11AC was given and penalty equal to duty demand was imposed. In these circumstances, Honble Delhi High Court held that where the entire duty and interest is paid before issuance of show cause notice, the adjudicating authority has to specifically give an option to the appellant to pay reduced penalty within thirty days and if such an option is not given, the assessee cannot be denied the benefit of the same and would be liable to pay only reduced penalty under the first proviso to section 11Ac. Same view has been taken by the Honble Delhi High Court in the case of Malbro Appliances P.Ltd.(supra). In view of this, the benefit of reduced penalty under first proviso to Section 11AC cannot be denied to the appellants. The learned JCDR has pleaded that in view of the decision of Apex Court in the case of Dharamendra Textile Processors (supra), there is no discretion available to the appellate adjudicating authority to reduce the penalty. However, Honble Supreme Court in this case has held that once the provisions of Section 11AC are attracted there is no scope to reduce the penalty and this judgement has not taken into account the first proviso to section 11AC which itself provides for reduced penalty in a situation where the entire amount of duty alongwith interest if any payable and penalty equal to 25% of duty demand confirmed is paid within thirty days from the date of communication of the order.
5.4 In view above discussion, while the Commissioner (Appeals)s order upholding the duty demand and penalty under Section 11AC is upheld, in view of judgement of Honble Delhi High in the case of K.P.Pauches (P) Ltd and Malbro Appliances P.Ltd. (supra), the penalty on the appellant under Section 11AC is reduced to 25% of the duty amount. The impugned order is modified to this extent.
(RAKESH KUMAR) MEMBER (TECHNICAL) mk .