2016 (11) TMI 473

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....aling in plastic granules and also as have manufacturing unit for manufacturing PP bags. During the course of audit, it was noted that there were some discrepancies in the stock account with the actual quantity of granules stored. Thereafter physical stock of material was taken and during the stock taking there were certain grades of materials for which the stock book had no balance and for certain grades, there were stocks in stock book but no material. On questioning the same, the appellant s officials informed that they were not maintaining the stock on the basis of grades, since all the material were plastic granules and for all the materials removed, they were issuing the invoices and in regard to the shortage, it was mentioned that so....

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....sed the material on record. 3. The learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without following the mandatory provisions of the Central Excise Act. He further submitted that with regard to the allegations in the show-cause notice, no investigation was conducted by the Department to prove that the appellant had passed CENVAT credit fraudulently. He further submitted that there is no iota of evidence as to who were the beneficiaries of the fraudulent CENVAT credit alleged to have been passed on by the appellant. He further submitted that the impugned order is based on assumptions and conjectures and surmises without having concrete evidence to prove the allegation....

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....sition of penalty of the equal amount of duty under the order-in-original cannot be sustained. 22. It is well settled that when the statutes create an offence and an ingredient of the offence is a deliberate attempt to evade duty either by fraud or misrepresentation, the statute requires mens rea as a necessary constituent of such an offence. But when factually no fraud or suppression or misstatement is alleged by the revenue against the respondent in the show cause notice the imposition of penalty under Section 11AC is wholly impermissible. Further, the Hon'ble High Court in Para 29 has held: "29. Thus, the law on this issue is well settled, as laid down by the Supreme Court in the above referred cases, that necessary ingredients for....

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....ant was issuing cenvatable invoices without the supply of material. The present case is not a case of non-payment, short-payment or non-levy or short-levy of duty, therefore the imposition of penalty under Rule 25 read with Section 11AC of Central Excise Act is not warranted. No doubt Shri A. P. Venkateshwaran who is the Director of Finance and Accounts has admitted in his statement that there is mixing of various grades and also admitted the shortage of quantity but has stated that the same was not with intent to evade payment of duty. Therefore, keeping in view the facts, I am of the opinion that the imposition of penalty under Rule 25 read with Section 11AC is not imposable in the absence of determination of duty. Therefore I set aside t....