TaxTMI 
TaxTMI 
2007 (5) TMI 121
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....enalty under Section 11AC of the Central Excise Act 1944. It was also alleged that the appellant was liable to pay interest under Section 11AB. These allegations were confirmed in adjudication and the appellant filed an appeal before Commissioner (Appeals). 4. Appellant's contentions were as under "No suppression or mis-statement with an intent to evade payment of duty The appellants submit that the non-payment of duty was on ac count of two reasons namely (i) incorrect accountal of the in house parts transferred to spare parts division leading to discrepancy and (ii) difference in book balance as compared to the physical stock. The appellant submits that consequent to the transfer of the modvat cell to the finance division in January 1999, the appellants undertook a physical stock verification as compared to the RG 23A Part I. On verification discrepancies were noticed and a detailed verification was undertaken by the appellants to reconcile the discrepancies. The departmental officers also joined in the verification/reconciliation undertaken by the appellants, to arrive at the exact discrepancy. During such verification it was also noticed that there existed some mismatch on t....
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.... determined." 5. The above contentions did not find favour with the adjudicating authority. That authority held against the appellant with the following observations :- "To begin with it is brought on record that M/s, MUL has paid the duty amount as demanded in the SCN. What is required to be seen whether there was an intention to evade payment of duty and whether penalty can be imposed and interest can be demanded or not. In para 9 of the SCN it has been made clear that M/s. MUL was conducting physical stock taking at the end of each financial year to fulfill the requirement of the Companies Act. M/s. MUL was aware of the fact that (IN HOUSE parts) there were shortages. The opening balance of next year were shifted to physical inventories every year without discharging the duty liability on the shortages noticed. These shortages were of Rs. 17,32,375.28 on 31-3-97, Rs. 9,68,280.51 on 31-3-98, Rs. 16,94,042.63 on 31-3-99 and Rs. 18,15,240.45 on 31-3-00. These facts were never reported to the Central Excise Authorities. M/s. MUL is now taking the plea that they have voluntarily paid duty before the issuance of SCN. Then contention is not acceptable as the shortages were known to t....
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....Supreme Court judgment that the appellant's contention regarding non-imposition of penalty when duty was deposited before issue of show cause notice cannot be accepted. In view of the same, the ratio of various cases cited by the appellant against imposition of penalty and demand of interest would not apply to the appeal filed before me. In the appeal filed before me, it has been cleanly held in the impugned order that the appellant was conducting physical stock taking at the end of each financial year to fulfill the requirement of the Companies Act. Thus, the appellant was aware of the fact that in some In House parts, there was shortages. The stock of In House parts which was forwarded to the next year was not the stock as per records but was the physical stock in hand at the end of each financial year. These facts were never reported to the departmental authorities. The duty liability was never discharged on the shortages observed by the appellant from year to year until the same were discovered during the course of investigation by the departmental authorities. These facts were not controverted by the appellant at any stage of the appeal proceedings. Respectfully following the ....
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....fore issue of show cause notice and remand the case back to the Tribunal for fresh decision on merits and in accordance with law." 9. The appeal is required to be decided in the light of the ruling of the Hon'ble High Court on the scope of penalty under Section 11AC of the Central Excise Act. Observation of the Hon'ble High Court may be read "7. A perusal of the above provision, shows that the said provision incorporates liability to pay penalty in the situations mentioned therein. Once a case is covered by the situation mentioned in the Section, mere deposit prior to issuance of show cause notice under Section 11A of the Act will not necessarily negate the situation mentioned in the said Section." 10. The submission of the learned Counsel for the assessee is that the shortages and excesses noticed during stock taking are not the result of any mis- declaration misstatement or fraud. The submission of the learned counsel is that the appellant's explanation before the adjudicating authority was a bona fide statement of the factual situation. He would also point out that such discrepancies had been occurring from year to year and the issue came up before this Tribunal in the appell....
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.... account the excesses noticed. Since there is no evidence, that the excesses are not the result of clandestine receipt of inputs, the same view is required to be taken in regard to shortages also, that the shortages are not the result of any clandestine or unauthorized utilization of the inputs. The shortages thrown up also do not account for much. The appellants' Management as well as its auditor have accepted the differences between the physical stocks and the procurement as normal and something to be put up with. It is a very small (0.24%) fraction of the inputs received. It is well settled that Tax Authorities also should go by the normal commercial and professional practice. If the shortages are within the tolerance limits fixed by an efficient Manage and certified to as within the norms by qualified accounting professionals, it would be unreasonable and unfair for Tax authorities to take a different view. In these circumstances, we are of the view that there is no evidence to sustain a finding that this is a case of irregular or incorrect taking or utilization of credit. In such a situation, no demand can be raised under Rule 57-I. The demand is accordingly, set aside and app....