Tribunal revises penalty but upholds duty demand for non-compliance with Rule 9(2)

The Tribunal partly allowed the appeal, setting aside the penalty under Section 11AC but upholding the duty demand due to the appellant's failure to comply with Rule 9(2) provisions. The Tribunal emphasized credit utilization as duty payment and accepted duty demand for shortages, noting the absence of proven clandestine removal for penalty imposition.

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Issues:
Appeal against Commissioner (Appeals) order upholding duty demand and penalty imposition under Section 11AC of Central Excise Act, 1944.

Analysis:
The appellant, a former Central Excise Law assessee, surrendered registration and started job work. Officers found goods shortage and un-reversed Cenvat credit during a visit. Original authority demanded duty on goods shortage, disallowed Cenvat credit, and imposed penalty under Section 11AC. Commissioner (Appeals) upheld the demand and penalty. The appellant argued that duty should have been demanded within the limitation period. The Department contended recovery for uncomplied Rule 9(2) provisions. The Tribunal noted Rule 9(2) uses "amount" not "duty," emphasizing credit utilization as duty payment. The appellant's failure to comply allowed recovery. Duty demand for shortages was accepted, but penalty under Section 11AC was set aside due to no proven clandestine removal. The appeal was partly allowed, setting aside the penalty and upholding the duty demand.

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