Penalty under Section 11AC of CEA, 1944

PJ/Case Laws/2011-12/1536

Case: Commissioner of Central Excise Commissionerate V/s M/s S K Sacks (P) Ltd.

Citation: 2012-TIOL-90-HC-P&H-CX

Issue:- Shortage of finished goods – Duty and interest paid at the Adjudicating Stage – whether equal penalty can be imposed under Section 11 AC?

Brief Facts:- On the first visit of Revenue officer at premises of assessee-respondent, they found a shortage of 40,187 kgs inputs, namely, plastic granules on which credit has been taken. On acceptance of shortage of inputs by the assessee-respondent, the credit amounting to Rs.3 134,356 /- was paid voluntarily.

There are separate proceedings pending in respect of the aforesaid transaction. In another visit by the officers of the Revenue, a shortage of 32,249.4 Kgs of finished goods, namely, plastic woven fabrics was found which was valued at Rs.14,51,223/-, and 2298.3 Kgs of plastic sacks were valued at Rs. 1,10,318/-. This resulted into issuance of a show cause notice demanding a sum of Rs. 2,49,847/- as amount of duty along with interest and penalty leviable under Rule 25 of the Central Excise Rules, 2002 (for brevity 'the Rules') read with Section 11AC of the Act. The assessee-respondent deposited a sum of Rs. 1 150,000 /- on 04.11.2001 and another sum of Rs. 1,00,000/- on 05.06.2003.

The original authority vide order dated 28.03.2004 confirmed the demand of duty as proposed in the show cause notice and also imposed penalty equivalent to the amount of duty.

In appeal, the Commissioner (A) upheld the demand of duty with interest but reduced the penalty amount to Rs. 60, 000/-. Revenue and respondent-assessee both filed appeal before the Tribunal.

The Tribunal dismissed both the appeals by holding that before the Original Authority entire duty involved was paid and there was no link between shortage of finished goods found on 03.11.2001 with shortage of inputs found on 10.05.2001. It was was further held that it was a clear case of non-accounted shortage and penalty was warranted under Rule 25(1)(b) of the Rules and that there was no evidence relied upon by the Revenue justifying in invoking Section 11AC of the Act. Accordingly, the Tribunal held that the demand of amount of duty and interest by the original authority was wholly justified. The Tribunal also upheld the penalty upto Rs. 60,000/- as it was found to be justified.

Revenue is in appeal before the High Court.

Reasoning of Judgement:- The High Court held that the discretion exercised by the Tribunal does not suffer from any jurisdictional error nor it violates any provision of law. Appellant has not been able to point out anything from the record for taking a view different than the one taken by the Tribunal and the Commissioner (Appeals). The amount of duty has been paid along with admissible interest. It has come on record that the matter with regard to shortage of inputs is being separately proceeded. Accordingly, any question of law much less the substantive question of law warranting admission of the appeal was not found.

Decision:- Appeal dismissed.

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PJ/Case Laws/2011-12/1536

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