2010 (8) TMI 893 - AT - Central Excise

Interpreting Penal Consequences: Burden of Proof on Revenue for Stock Shortage Cases

VICTORY IMPEX Versus COMMISSIONER OF C. EX., CHANDIGARH

The case involved the interpretation of penal consequences for non-issuance of invoices in the absence of physically found goods, focusing on the ... - Issues involved: Interpretation of penal consequences for non-issuance of invoice when goods are not physically found, applicability of Rule 15 and Section 11AC of Central Excise Act, 1944, burden of proof on Revenue in cases of stock shortage.Interpretation of penal consequences for non-issuance of invoice: The appeal considered whether the absence of physical presence of goods along with non-issuance of invoice by the dealer could lead to penal consequences. The Ld. Commissioner (Appeals) concluded it as a clandestine removal, but the appellant argued that penalization should not occur without evidence of wilful act or fraud, as required under Rule 15 and Section 11AC of the Central Excise Act, 1944.Applicability of Rule 15 and Section 11AC: The appellant contended that penal consequences, including a penalty of &8377; 1,90,925/-, should not be imposed without establishing elements of mens rea under Section 11AC. The absence of an invoice raised doubts about the facilitation of cenvat credit, and the appellant emphasized the necessity of proving wilful act or fraud by the Revenue to justify the penalty.Burden of proof on Revenue in cases of stock shortage: The physical inventory on 12-4-2006 revealed a shortage of stock with the dealer-appellant, who was not a manufacturer. Despite no evidence of invoice issuance for the goods in question, the Revenue failed to establish guilty intent or fraudulent design by the appellant. The absence of proof regarding the destination of goods or loss of revenue indicated a lack of evidence to support penal consequences. The burden of proof was deemed not discharged by the Revenue, leading to the setting aside of the order imposing the penalty.Conclusion: The absence of clear evidence of evasion or intention to cause evasion through fraudulent means led to the decision in favor of the appellant, emphasizing the quasi-criminal nature of penal proceedings and the necessity of proving intent to evade duty or cause revenue loss. The order of the authority below was overturned due to the lack of conclusive proof against the appellant.