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of <h1>Tribunal overturns penalties on director due to staff negligence, deletes duty on deemed production</h1> The Tribunal set aside the penalty imposed on the appellant-director under Rule 26, overturning the penalties confirmed by the Revenue authorities. The ... Clandestine removal - shortages/excesses found in the stock - demand along with penalty - confiscation of goods - HELD THAT:- The demand on the company is based on presumptions of clandestine removal without there being any instance of clandestine activity detected and/or found - It is further held that demand based on apparent shortage and excess of goods does not lead to the inevitable conclusion of clandestine removal even though the appellant company and its personnel have admitted the shortage and deposited the duty along with interest and penalty as applicable. The penalty on the appellant - director under Rule 26 is set aside. Appeal allowed - decided in favor of appellant. Issues:1. Detection of shortage in stock of finished goods/raw materials during search by Revenue officers.2. Proposing personal penalty under Rule 26 on the appellant director based on discrepancies in stock and negligence of staff.3. Adjudication of show cause notice confirming proposed demands, confiscation of goods found in excess, and imposition of penalty on the director.4. Rejection of appeal by Commissioner (appeals) leading to appeal before the Tribunal.5. Deletion of duty on deemed production of finished goods for alleged shortage of raw material in the appeal of the company.6. Challenge to penalty on the appellant-director based on lack of evidence of clandestine removal.Analysis:1. The appellant, a Director of a manufacturing company, faced a search resulting in the detection of shortage in stock of finished goods/raw materials. The discrepancies were noted, and duty demands were confirmed by the Revenue officers.2. The authorized signatory admitted the shortage and agreed to deposit the duty. Statements of key personnel revealed negligence in stock management, leading to a show cause notice proposing personal penalty on the director under Rule 26.3. The appellant contended that discrepancies were due to staff negligence and not clandestine removal. Despite this, the Assistant Commissioner confirmed demands, confiscation, and imposed penalty on the director based on his knowledge of the manufacturing process.4. The appeal before the Commissioner (appeals) was rejected, prompting an appeal to the Tribunal. The company's appeal resulted in the deletion of duty on deemed production but confirmed confiscation. The appellant sought deletion of penalty based on lack of evidence of clandestine activity.5. The Revenue authorities defended the penalties, emphasizing the director's oversight and knowledge of the company's operations.6. The Tribunal found the demands based on presumptions of clandestine removal unjustified, especially in the absence of concrete evidence. The admitted shortages, deposit of duty, and lack of active clandestine removal led to setting aside the penalty on the appellant-director under Rule 26. The appeal was allowed, overturning the penalties imposed.This comprehensive analysis covers the issues, arguments, and final decision outlined in the legal judgment by the Appellate Tribunal CESTAT ALLAHABAD.
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