Cenvat credit and clandestine removal: certified invoice copy accepted, but stock shortage sustained duty demand and penalty.

A certified Xerox copy of an invoice, when certified by the Range Superintendent, may support Cenvat credit even if the original invoice is not produced. Stock shortages recorded during verification, without contemporaneous protest about the method of verification, can justify an inference of clandestine removal and sustain the duty demand. Where clandestine removal is sustained, penalty under Section 11AC of the Central Excise Act, 1944 may also follow, and the proviso benefit is unavailable if interest is not paid within the prescribed time. Penalty imposed on a deceased director was treated as personal and was set aside.

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Issues: (i) whether the appeal against the director survived after his death and the penalty imposed on him could be sustained; (ii) whether the duty demand based on shortage of finished goods and inputs on the allegation of clandestine removal was sustainable; (iii) whether Cenvat credit could be denied merely because the original invoice was not produced when a Xerox copy certified by the Range Superintendent was available; and (iv) whether penalty equivalent to duty under Section 11AC of the Central Excise Act, 1944 was leviable and the benefit of the proviso was available.

Issue (i): whether the appeal against the director survived after his death and the penalty imposed on him could be sustained.

Analysis: The director had expired during the pendency of the appeal. In such circumstances, penalty being personal in nature could not be fastened upon the legal representatives. The departmental side did not contest this position.

Conclusion: The appeal of the director was allowed and the penalty against him was set aside.

Issue (ii): whether the duty demand based on shortage of finished goods and inputs on the allegation of clandestine removal was sustainable.

Analysis: The shortage was recorded during stock verification and the assessees had not raised any contemporaneous protest that the verification was based only on eye estimation or that actual weighment had not been done. The duty on the shortage had also been paid without protest. On these facts, the allegation of clandestine removal was accepted.

Conclusion: The duty demand on account of clandestine removal was upheld against the assessee.

Issue (iii): whether Cenvat credit could be denied merely because the original invoice was not produced when a Xerox copy certified by the Range Superintendent was available.

Analysis: The certified Xerox copy of the invoice was treated as sufficient for availing credit in the facts of the case, and the absence of the original document alone was not considered fatal where the certified copy issued by the departmental officer was available.

Conclusion: The denial of Cenvat credit was reversed and the credit was allowed in favour of the assessee.

Issue (iv): whether penalty equivalent to duty under Section 11AC of the Central Excise Act, 1944 was leviable and the benefit of the proviso was available.

Analysis: Once the demand for clandestine removal was sustained, the ingredients for imposition of penalty were satisfied. The payment of duty did not extend the benefit of the proviso because interest had not been paid within the prescribed time.

Conclusion: Penalty under Section 11AC was confirmed and the benefit of the proviso was denied.

Final Conclusion: The assessee succeeded only to the limited extent of getting Cenvat credit allowed, while the duty demand and equal penalty on the company were sustained and the appeal of the deceased director was allowed.

Ratio Decidendi: A certified copy of an invoice issued by the department may suffice for Cenvat credit where the original is not produced, but shortage admitted on stock verification can support a demand for clandestine removal and the consequent mandatory penalty.

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