Commissioner Of Central Excise, Nashik vs Bhagwati Steel Cost Ltd

(Arising out of Order-in-Appeal No. AKP/192/NSK/2010 dated 09/07/2010 passed by Commissioner of Central Excise (Appeals), Nashik)

For approval and signature:

Honble Mr. M.V. Ravindran, Member (Judicial)

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1. Whether Press Reporters may be allowed to see : No 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 : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

====================================================== Commissioner of Central Excise, Nashik Appellant Vs. Bhagwati Steel Cost Ltd. Respondent

Appearance: Shri H.M. Dixit, Assistant Commissioner (AR), for Appellant Shri Himish Mehta, Advocate, for Respondent

CORAM: Honble Mr. M.V. Ravindran, Member (Judicial)

Date of Hearing : 27/10/2015 Date of Decision : 27/10/2015

ORDER NO

Per: M.V. Ravindran

This appeal is filed by the department against Order-in-Appeal No. AKP/192/NSK/2010 dated 09/07/2010.

2. Heard both sides and perused the records.

3. The relevant fact that arise for consideration are respondents factory was inspected by the officers on 16/17 August 2008 and they noticed shortage of finished goods in the factory premises, panchnama was drawn and the shortage was accepted by the responsible person and the duty liability and interest thereof was discharged. Further statements was recorded and show cause notice was issued for demand of the duty and appropriation of amount paid, interest thereof and also to impose penalty. The adjudicating authority after following the due process of law confirmed the demand raised and appropriated the amount paid by the respondent and imposed equivalent amount of demand, as penalty. Aggrieved by such an order, an appeal was preferred before the first appellate authority. The first appellate authority after considering the submission made by respondents counsel before him, upheld the order-in-original to the extent of confirmation of the demand of the duty liability and also imposition of penalty, but reduced the duty liability and penalty by setting aside the penalty under section 11AC. Aggrieved by such an order of the first appellate authority revenue, being is aggrieved has in come in appeal, contending that provision of section 11AC are applicable and, as per the provision of rules 25 of the Central Excise rules 2002, penalty was imposed correctly. It is the submission that there is shortage of the goods and explanation put forth for shortage was unsatisfactory. Considering the submissions and perused the records, I find from the records that the issue is only regarding the penalty which has been reduced by the first appellate authority. I find that the first appellate authority while reducing the penalty has recorded the following findings.

The adjudicating authority relying upon the judgment of Honorable High Court of Madhya Pradesh has levied equal pqnalty under Rule 25 of the CER, 2002 read with Section 11AC of the CEA, 1944. In the said case, the director of the company admitted to shortages but was not able to give any explanation of such shortage. In the instant appeal, theae is no confession on the part of the director or Shri Sharama. The instant appeal, there is no confession on the part of the director or Shri Sharma. Shri Shrama attributed the shortage to various factors like variations in size/length of ingots, human errors etc. In fact the present case is different to one cited by ADC in as much as the manager Shri Sharma, having accepted the fact of little shortage vis-`-vis total stock available, gave explanation for such shortage. Department has not been able to refute the explanation given by the appellants manager. Here, I would like to draw the attention to the judgment of Honorable High Court of Punjab and Haryana cited by the appellant in the case of CCE, Chandigarh Vs. Nachiketa Paper Ltd. (cited Supra) wherein it is held that;

Demand- clandestine manufacture and removal  Shortage of goods. Demand of duty on raw material found short based merely on presumption of clandestine clearance of finished goods without any evidence of such clandestine removal  Findings of Tribunal unassailable and not open to challenge- Section 11A of Central Excise, Act 1944.  The Tribunal has observed in essence that findings with regard to fraud, collusion or nay willful mis-statement or suppression of fact for the purposes of Section 11AC ibid could not be based on suspicion and presumption, The demand of duty on raw material found short has been found to be based on presumption that short raw material must have been used in the manufacture of final products which must have been cleared without payment of duty. It is undisputed that the demand of duty on the raw material was also based on the quantification of the production calculated on the input and output ratio. The Department did not produce any evidence of clandestine removal and sale of goods which may lead to a conclusion that the duty of excise was paid by reason of fraud, collusion or any willful mis-statement or suppression of fact or contravention of any provisions of the ACT or Rules with the intention to evade payment of duty. It is in these circumstances that the Tribunal disagreed with the view taken by Adjudicating Authority as upheld by the Commissioner (Appeals). Therefore, appeal is liable to be dismissed. [Para 7]

Relevant para 7 is reproduced below:-

7. Having heard learned Counsel we are of the considered view that the findings recorded by the Tribunal in para five of the order as reproduced above are unassailable and same are not open to any challenge. The Tribunal has observed in essence that findings with regard to fraud, collusion or any willful mis-statement or suppression of fact for the purposes of Section 11AC of the Act could nott be based on suspicion and presumption. The demand of duty on raw material found short has been found to be based on presumption that short raw material must have been used in the manufacture of final products which must have been cleared without payment of duty. It is undisputed that the demand of duty on the raw material was also based on the quantification of the production calculated on the input and output ratio. The department did not produce any evidence of clandestine removal and sale of goods which may lead to a conclusion that duty of excise was paid by reason of fraud, collusion or any willful misstatement or suppression of fact or contravention of any provisions of the Act or Rules with the intention to evade payment of duty.

It is in these circumstances that the Tribunal disagreed with the view taken by the Adjudicating Authority as uphel by the Commissioner (Appeals) for imposition of penalty under section 11AC the Act and deleted the penalty. Therefore, we find no legal infirmity in the view taken accordingly the appeal is liable to be dismissed. The department has not been able to provide any substantial evidence to infer that the appellant resorted to clandestine clearance and there is no confessional statement either. For attracting provisions of Section 11AC of the CEA, 1944, it has to be conclusively established that the elements mentioned therein are present in a particular cas. It the present appeal, there is no material or evidence advanced by department ot establish clandestline removal of goods. Moreover, SCN has proposed penalty under Rule 25 of the CER, 2002. Rule 25 contains four clauses i.e. (a), (b), (c) and (d), each containing different provisions. The Scn has not specified which clause of Rule 25 is invokable against the appellant and neither has the OIO done so. The appellant should be put to notice as to exact nature of contravention.

I place my reliance on the judgment of Honorable Supreme Court in the case of Amrit Foods Vs. CCE, U.P- 2005 (190) ELT 433 (SC) wherein it is held that Penalty- Neither show cause notice nor order of Commissioner specified which particular clause of Rule 173Q of erstwhile Central Excise Rules, 1944 had been allegedly contravened by appellant  Assessee to be put on notice as to exact nature of contravention for which assessee was liable under provisions of Rule 173Q ibid  Rule 25 of Central Excise Rules, 2002-Tribunals order upheld.

4. It can seen from the above reproduced findings/reasonings recorded by the first appellate authority that there was no clandestine remoral of the materials and the shortage in factory is explained may be due to variation in sige/length and also due to human error etc. As against such explanation, revenue has not produced any evidence that there was clandestine removal of goods. In the absence of any contrary evidence the findings recorded by the first appellate authority, in my considered view was correct in setting aside the order in original, the impugned order is correct, legal and does not suffer from any infirmity.

5. In view of the forgoing it is held that the impugned order is correct and the appeal filed by the Revenue is rejected.

(Dictated in Court)

(M.V. Ravindran) Member (Judicial)

akp 1 5 APPEAL No.E/1761/10-Mum