2013 (12) TMI 696 - AT - Central Excise

Penalty under Section 11AC overturned as Tribunal finds insufficient evidence of clandestine removal.

M/s ZENITH FIBRES LTD Versus COMMISSIONER OF CENTRAL EXCISE

M/s ZENITH FIBRES LTD Versus COMMISSIONER OF CENTRAL EXCISE - 2014 (302) E.L.T. 423 (Tri. - Ahmd.) Issues:1. Applicability of Section 11AC of the Central Excise Act, 1944 to the case.2. Imposition of penalty under Section 11AC based on shortages found in the factory premises.3. Interpretation of directions given by the High Court in remand orders.4. Examination of evidence and confessional statements regarding clandestine removal of goods.Analysis:Issue 1: Applicability of Section 11ACThe case involved determining whether Section 11AC of the Central Excise Act, 1944 applied to the appellant's situation. The Hon'ble Supreme Court's judgments in the cases of UoI Vs. Dharmendra Textile Processors and UoI Vs. Rajasthan Spinning & Weaving Mills were crucial in establishing that once Section 11AC is found applicable, there is no discretion in quantifying the penalty. The Tribunal had to assess if the facts of the case satisfied the conditions of Section 11AC.Issue 2: Imposition of PenaltyThe appellant argued that shortages found in their factory were not due to clandestine removal of goods but could be attributed to other reasons. They contended that the penalties under Section 11AC were imposed based on presumptions and assumptions rather than concrete evidence. The Revenue, however, asserted that unexplained shortages indicated clandestine removal, justifying the penalty under Section 11AC.Issue 3: Interpretation of High Court DirectionsThe High Court's remand orders directed the CESTAT to consider the applicability of Section 11AC in light of specific judgments. The Tribunal was instructed to base its decision on the law laid down by the Apex Court in the mentioned cases. The appellant's case was to be re-evaluated in accordance with these directions.Issue 4: Examination of EvidenceThe Tribunal analyzed the evidence presented, including the appellant's defense and statements made before the adjudicating authority. The absence of concrete proof of clandestine removal, such as confessional statements or seized goods, led the Tribunal to conclude that the penalties imposed under Section 11AC were not warranted. The Tribunal emphasized that mere shortages without evidence of evasion could not justify the imposition of penalties.In conclusion, the Tribunal found that the ingredients of Section 11AC were not applicable to the appellant's case based on the evidence, legal interpretations, and precedents cited. Consequently, the penalty imposed under Section 11AC of the Central Excise Act, 1944 was set aside, and the appellant's appeal was allowed.