Per M. Veeraiyan:
This is an appeal by the Department against the order of the Commissioner (Appeals) No. 31-CE/APPL/KNP/2008 dated 29.1.2008 by which the order of the original authority imposing an amount of Rs.2,50,409/- as penalty equal to the duty under Section 11AC was set aside.
2. Heard both sides.
3. On 10.3.06, the officers visited the factory premises of the respondents and found substantial shortages of finished goods valued over Rs.15 lakhs. The details of shortages found are as follows:-
Sl.No.
Description of goods
Shortage (in pairs)
Rate per hour
Value (Rs.)
Excise Duty (Rs.)
Edu. Cess (Rs)
Total duty (Rs.)
01
PU Sole
5500
115.00
6,32,500
1,01,200
2,024
1,03,224
02
PU Sole
8500
75.00
6,37,500
1,02,000
2,024
1,04,040
03
PUSole
4100
64.48
2,64,368
42,299
846
43,145
TOTAL
18,100
15,34,368
2,45,499
4,910
2,50,409
The partner Shri Rohit, in his statement under Section 14 of the Central Excise Act, 1944 given on 10.3.06 admitted that the finished goods would have been cleared from the factory by his staff in his absence for payment in cash, without issuing any invoice and without payment of Central Excise duty. The statement has not been retracted. It has been followed up by payment of duty involved on 13.3.06. The original authority, apart from confirming the duty demand and appropriating the duty already paid, imposed equal amount as penalty. On appeal by the party, the Commissioner (Appeals) holding that there was no corroborative evidence, set aside the penalty.
4. Learned SDR reiterating the grounds of appeal, submits that this is a clear case of clandestine removal and therefore, setting aside the penalty is not justified. He seeks restoration of the order of the original authority.
5. Learned Advocate for the respondents strongly supports the order of the Commissioner (Appeals). He submits that there are no corroborative evidence of clandestine removal except the statement of the partner.
6.1 I have carefully considered the submissions from both sides and perused the records. The shortage found was substantial . The partner of the respondent s firm clearly admitted the clearances without payment of duty and without issue of Central Excise invoices. The statement of the partner, was undisputedly not retracted. On the other hand, the statement has been acted upon and the duty involved stands paid. It is not expected from the Department to waste time and resources trying to prove the admitted facts. Under these circumstances, the finding by the Commissioner (Appeals) that there is no corroborative evidence is not sustainable. Further, he based his conclusion on certain general phenomena relating to stock verification and the conduct of the trade which are reproduced below:-
“Coming to the cases where shortage have been detected in the stock of finished goods/raw materials at the time of stock verification in the factory, it has generally been observed that the person in-charge on the spot admits the shortage and pays up the duty. Very rarely, subsequent investigation brings out corroborative evidences to conclude that eh shortage found was on account of definite clandestine removal. While dealing with such a case, the Punjab and Haryana High Court in the case of M/s Sigma Steel Tubes [2007 (218) ELT 657 (P and H)], while following the Apex Court judgment in Rasthriya Ispat Nigam Ld. has also observed that in absence of any corroborative evidence in cases of shortages in the stocks of goods found in a factory, it is not clear whether the same was on account of clandestine removal or on account of wrong accounting or the clerical mistake etc. Hence, no penalty is imposable , once a duty has been paid before the issue of show cause notice.”
6.2 No case of shortage or clandestine removal can be decided by certain general opinion as recorded by the Commissioner (Appeals). The facts of the present case clearly confirm the clandestine removal by the respondents. Therefore, the order of the original authority in imposing equal penalty is justified.
6.3 However, the learned Advocate, alternatively submits that they have paid the entire duty due before issue of show cause notice. That being the case, the original authority should have given an option to them to pay concessional amount of penalty as provided in the first proviso to Section 11AC of the Central Excise Act. Since the option has not been granted the same may be granted in the light of the judgment of Hon ble High Court of Delhi in the case of K.P. Pouches (P) Ltd. vs. UOI reported in 2008 (228) ELT 31 (Del.) and also the decision of the Hon ble Punjab and Haryana High Court in the case of C.C.E. vs. Shipley Hosiery Industries reported in 2010 (97) RLTONLINE 285 (P and H). This alternative submission of the respondent deserves to be accepted.
7. In view of the above, the appeal is disposed of as follows:-
a) The order of the Commissioner (Appeals) in so far as the same relates to setting aside the penalty of Rs.2,50,409/- is set aside and the order of the original authority in this regard is restored.
b) However, the respondent is given an option to pay 25% of the penalty that is Rs.62,602.25 within 30 days from today.
c) In the event of respondent not paying the above amount within the specified time limit, the penalty of Rs.2,50,409/-will be payable.