Bajrang Petro Chemicals (P) Ltd. vs Commissioner of Central Excise

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We have heard Sri A.P. Mathur on the review application. We find that after hearing the learned counsel for the parties we had passed the operative portion of the order and thereafter a detailed order of the same date was passed. The Review application has been filed against the operative portion of the order and not against the main order. The learned counsel submitted that he was given the certified copy of the operative portion of the order and nothing else and consequently the review application was filed.

Considering the aforesaid and to remove all ambiguity, we allow the review application in the interest of justice. Both the orders dated 16.9.2014 are recalled.

Heard learned counsel for the parties.

The present appeal is filed by the assessee against the impugned order dated 16.03.2010 (issued on 26.04.2010) passed by the Customs Excise & Service Tax Appellate Tribunal, New Delhi in Appeal Nos. 1136/2008 & 1137/2008. On 08.07.2010, the appeal was admitted by a Co-ordinate Bench on the following substantial question of law:--

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

The brief facts of the case are that the assessee''s company 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 litres 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 Assistant Commissioner dated 31.05.2007, but the penalty was cancelled by the first appellate authority. But the Tribunal has restored the levy of the penalty. Being aggrieved, the assessee has filed the present appeal.

With this background, heard Sri A.P. Mathur, learned counsel for the appellant/assessee who submitted that in fact, there was no shortage. So called shortage was due to verification to dip method which is not very authentic and there always can be variations. The shortage was detected in the stock of raw material''s account. Since the appellant has already paid the central excise duty thereon in the year 2006, so no penalty is leviable. For this purpose, he readout Section- 11A of the Central Excise Act, 1944. According to learned counsel, in terms of Section- 11A(2B) where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person chargeable with the duty, may pay the amount of duty on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect to the duty and inform the Central Excise Officer of such payment in writing, who on receipt of such information shall not serve any notice under subsection (1) in respect of the duty so paid.

Learned counsel for the appellant-assessee also submitted that the appellant-assessee 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. Lastly, he made a request that the order passed by the Tribunal may kindly be set aside.

On the other hand, learned counsel for the department had justified the impugned order.

We heard both the parties at length and gone through the materials available on record. 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 Section # - 26 for levy of the penalty on the authorized signatory would be attracted.

In view of above, we find no reason to interfere with the impugned order. Hence, the same is hereby sustained along with the reasons mentioned therein.

Answer to substantial question of law is in affirmative and against the appellant-assessee.

In the result, the appeal filed by the assessee is dismissed.