Tribunal rejects penalty under Section 11AC for lack of evidence

The Tribunal upheld the decision of the Commissioner (Appeals) to set aside the penalty under Section 11AC of the Central Excise Act due to lack of corroboration for clandestine removal and absence of evidence implicating the authorized signatory in any wrongdoing. The Tribunal rejected the department's appeals, emphasizing that not every shortage can be presumed as clandestine removal without evidence, and since the conditions for invoking Section 11AC were not met, the penalty was rightly set aside.

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Issues: Unexplained shortage of finished goods, payment of duty before show cause notice, penalty under Section 11AC, corroboration for clandestine removal, role of authorised signatory in penalty

In this case, the main issue was the unexplained shortage of finished goods noticed during an officer's visit. The respondent company paid the duty amount promptly after the shortage was detected. The original authority imposed a penalty under Section 11AC of the Central Excise Act, 1944, along with confirming the duty demand. On appeal, the Commissioner (Appeals) set aside the penalty, citing lack of corroboration for the allegation of clandestine removal and the duty payment before the show cause notice as reasons. The Tribunal noted that every shortage cannot be presumed as clandestine removal without evidence. The absence of any confession or supporting evidence led the Commissioner (Appeals) to conclude that the original authority's finding of clandestine removal was not substantiated.

Regarding the penalty under Section 11AC, the Tribunal agreed with the Commissioner (Appeals) that since there was no corroboration for clandestine removal, the conditions for invoking Section 11AC were not met. Therefore, the penalty was rightly set aside. Additionally, the Tribunal found no specific role attributed to the authorised signatory in any misdeed, leading to the justification of setting aside the penalty on the signatory as well.

Ultimately, the Tribunal rejected the appeals filed by the department, upholding the decision of the Commissioner (Appeals) to set aside the penalty under Section 11AC due to lack of corroboration for clandestine removal and the absence of evidence implicating the authorised signatory in any wrongdoing.

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