By TIOL News Service

ALLAHABAD, DEC 16, 2014: THE appellant, in Central Excise appeal, has placed the following substantial question of law before the High Court -

"Whether on the facts and circumstances of the case, the Tribunal was justified in restoring the penalty?"

Facts:

The assessee is engaged in the manufacturing of Organic Composite Solvent chargeable to Central Excise Duty. On 01.08.2006, the preventive officers of the Central Excise Division, Kanpur visited the factory premises of the assessee. They verified the stocks and accounts of the assessee's company. After verification, they detected a shortage of 25,781 liters in the stock of finished goods. The assessee could not explain the shortage so the duty demand was raised and a penalty was imposed under Section-11AC of the Central Excise Act, 1944. The duty was upheld by the AC, C.Ex but the penalty was cancelled by the first appellate authority.

However, in Revenue appeal, the Tribunal has restored the penalty.

Being aggrieved, the assessee has filed the present appeal.

It is submitted that there was no shortage inasmuch as the so called shortage was due to verification by dip method which is not very authentic and there always can be variations; that they had already paid the duty much prior to the issuance of show cause notice, so the levy of the penalty is not desirable and the same is against the law.

The High Court inter alia observed -

++ From the record, it appears that there was a huge shortage of finished goods for which no explanation was offered by the appellant at the time of stock checking. It means that the appellant had admitted the shortage and paid the duty accordingly. Thus, the appellant was unable to give any suitable explanation for the shortage of the finished goods. This is an admission by the appellant that the goods found short had been removed without payment of the duty. The method for clandestinely removal of the goods is not required to be explained. Since, it is a case of the shortage of the finished goods for which the appellant has no explanation, so the provision of Section-11AC for levy of the penalty and rule - 26 for levy of the penalty on the authorized signatory would be attracted.

Holding that there is no reason to interfere with the order of the Tribunal, the substantial question of law was answered in the affirmative and against the appellant-assessee.

The appeal was dismissed.

(See 2014-TIOL-2254-HC-ALL-CX)