- (1.) This appeal has been preferred by the Assessee under Section 35G of the Central Excise Act, 1944 (for short, "the Act") against the order of the Customs, Excise & Service Tax Appellate Tribunal, New Delhi dated 24.11.2010, Annexure A-6, proposing to raise following substantial questions of law: (a) Whether the impugned order is contrary to the facts involved and the ld. Tribunal has failed to appreciate the legal position and issues involved? (b) Whether the duty, interest and penalty can be imposed when Commissioner of Appeals prima-facie found that there is no clandestinely C. E. A. No. 63 of 2011 removal of the finished goods, therefore, thee was a correlation with the shortage of inputs? (c) Whether in the absence of removal of goods, the duty is payable on behalf of the applicant?
(2.) Show Cause Notice was given to the Assessee alleging clandestine removal of goods and evasion of duty. The Assessee contested the allegations but the adjudicating authority vide Order-in-original dated 27.7.2005 confirmed the demand. On appeal, the said demand was set aside but on further appeal, the Tribunal restored the Order-in-original as follows: I have carefully considered the submissions from both sides. When the officers visited, on 10.5.01, the premises of the factory, a huge shortage of 40,187 Kgs of granules which are inputs has been noticed. The shortage was not explained and the duty involved stands paid. Apparently, there are separate proceedings relating to shortage of inputs noticed on 10.5.01. On 3.11.01, when the officers visited the factory again, this time, for a change, they noticed shortage of finished goods. The director of the Company made a feeble attempt to link the goods found short on 10.5.01 to the shortage of finished goods found on 3.11.01. The investigating officers however, did not deem it necessary to continue further investigation, perhaps as duty of Rs. 1,50,000/-was paid on 4.11.01 towards duty liability on finished goods found short. Without further investigation, a cryptic, show cause notice has been issued of course, invoking the provisions of Section 11AC as well. The C. E. A. No. 63 of 2011 party has chosen to pay a further amount of Rs. 1 lakh on 5.6.03. In other words, before the adjudication by the original authority, entire amount of duty involved on short found finished goods stands paid. I do not find any justification whatsoever to link the shortage of finished goods found on 3.11.01 with the shortage of inputs found on 10.5.01. Shortage of inputs can explain excess of finished goods. Shortage of inputs cannot explain shortage of finished goods. Having said that, I notice that there is no evidence relied upon by the department to substantiate that the goods short found by the department were clandestinely removed. The manufacturer's obligation to account for the goods manufactured is a strict obligation, failure to do so clearly attracts the provisions of Rule 25(1)(b) of Central Excise Rules, 2002. Thus it is a clear case of non-accounted shortage and penalty is warranted under Rule 25(1)(b). However, no evidence has been relied upon by the department justifying invocation of provisions of Section 11AC. In view of the above, upholding of demand and interest ordered by the original authority by the Commissioner (Appeals) is justified. The challenge of the party seeking setting aside the demand of duty and interest does not deserves to be accepted. Having held that it is not a case for invoking the provisions of Section 11AC, sustaining the imposition of penalty up to Rs. 60,000/-as ordered by the Commissioner (Appeals) is justified in the facts and circumstances of the case. The challenge of the party for setting aside the penalty does not deserve acceptance. At the same time, the prayer of the department seeking enhancement of penalty also does not deserve to be accepted.
(3.) We have heard learned Counsel for the Appellant.;