2006 (12) TMI 36 - AT - Central Excise

Penalty under Central Excise Act overturned for zinc concentrate export due to transportation losses

HINDUSTAN ZINC LTD. Versus COMMISSIONER OF C. EX., JAIPUR

The Tribunal set aside the penalty imposed under Section 11 AC of the Central Excise Act on the Appellant for exporting zinc concentrate without paying ... Demand – Alleged that the goods which were not exported by appellant are liable for duty – After undertaking all the facts authority decided that it can’t be held that duty was short paid or not paid due to fraud, collusion or suppression – Appeal is allowed Issues:1. Challenge against penalty under Section 11 AC of Central Excise Act for alleged shortage of goods exported without duty payment.2. Appellant's contention of transportation losses causing the shortage and no mens rea for exporting less quantity.3. Revenue's argument of appellant's awareness of shortage and liability for penalty.Analysis:1. The appellant challenged the penalty imposed under Section 11 AC of the Central Excise Act for exporting zinc concentrate without paying duty. The appellant did not contest the duty demand and paid it along with interest. However, they argued that there was no diversion of goods or mens rea to export less quantity. The shortage of 4% and 8% in the consignments was attributed to transportation losses as the zinc concentrate was transported in open trucks from the factory to the port. The appellant contended that since there was no allegation of fraud, collusion, or suppression, the penalty should not be imposed.2. The Revenue contended that the appellant was aware of the shortage when the custom authorities endorsed the ARE-I, but the appellant did not inform the Revenue about the shortage. Therefore, the Revenue argued that the appellant should be held liable for the penalty. However, the appellant maintained that the shortage was due to transportation losses during the journey from Udaipur to Kandla port, and appropriate deductions were made from the transporter's payment after the shortage was identified by the custom authorities.3. The appellant exported zinc concentrate under ARE-I, with quantities of 9525.29 DMT and 6132.750 DMT. The custom authorities found shortages of 45.220 DMT and 52.340 DMT in the consignments, amounting to 4% and 8% respectively. The appellant paid the duty and interest without any allegation of diversion. The Tribunal found merit in the appellant's argument that the nominal shortages were due to transportation losses, not fraud or collusion. Therefore, the Tribunal set aside the imposition of the penalty, ruling in favor of the appellant.