2004 (1) TMI 450 - AT - Central Excise

Tribunal upholds duty demand and penalty for raw material shortage, rejects procedural challenge.

AGGARWAL ENTERPRISES Versus COMMISSIONER OF CENTRAL EXCISE, DELHI-IV

The Tribunal affirmed the duty demand and penalty imposed on the appellants due to a shortage of raw materials/inputs detected during a stock check. The ... Demand - Clandestine removal - Penalty Issues: Challenge to validity of duty demand and penalty affirmed by Commissioner (Appeals); Proper procedure for determining shortage of raw materials/inputs; Invocation of Section 11AC for penalty; Validity of show cause notice.Challenge to Validity of Duty Demand and Penalty:The appeal challenged the validity of the impugned order-in-appeal where the Commissioner (Appeals) upheld duty demand and penalty on the appellants. The duty was affirmed due to a shortage of raw materials/inputs detected during a stock check. The appellants argued that the officers did not follow proper procedure for determining the shortage, as no weighment of goods was conducted, and the shortage was calculated based on presumptions. The appellants also contended that penalty under Section 11AC could not be imposed since it was not invoked in the show cause notice. Reference was made to the legal precedent set in Sanket Food Products P Ltd. v. C.C.E., Aurangabad [2003 (162) E.L.T. 231 (T) = 2003 (58) RLT 869].Proper Procedure for Determining Shortage of Raw Materials/Inputs:The Tribunal noted that the appellants were engaged in manufacturing polythene bags and other plastic products. Records revealed a discrepancy between purchased raw materials and finished products, resulting in a shortage of inputs. Despite claiming a burning loss of 2% on inputs, a shortage of 6,078.600 Kgs was identified. The partner of the appellants accepted the shortage, and the Tribunal found no objection raised during the stock verification process. It was determined that the appellants were liable to pay duty on the short raw materials, rejecting the argument that physical verification was not properly conducted.Invocation of Section 11AC for Penalty:Regarding the invocation of Section 11AC for penalty, the Tribunal observed that the show cause notice proposed a penalty equal to the duty amount, albeit with a typographical error mentioning Section 11A instead of 11AC. The Tribunal held that this error did not invalidate the notice, as the appellants were aware of the penalty sought. The argument that penalty under Section 11AC could not be imposed was dismissed, emphasizing that the notice adequately communicated the penalty amount.Validity of Show Cause Notice:The Tribunal upheld the impugned order, finding no illegality in the decision. It was determined that the appellants were not taken by surprise regarding the penalty imposition, as the notice clearly indicated the penalty amount sought. The appeal challenging the duty demand and penalty was ultimately dismissed, affirming the validity of the impugned order-in-appeal.