Gulabchand Silk Mills Pvt Ltd v. Cce

Date of decision: 27.9.07 Order No.__________________ Per Justice R.K.Abichandani: This appeal has been filed by the Revenue against the order of the Commissioner(Appeals). The Revenue has challenging the order of the Commissioner(Appeals) to the extent that it has reduced the penalty of Rs.2,14,739/- imposed on the respondent by the adjudicating authority to Rs.25,000/-.

2. The learned Authorised Representative for the Department has strongly contended that there was absolutely no warrant on the facts of the case for taking a lenient view of the matter and reducing the penalty imposed by the adjudicating authority in the facts and circumstances of the case, apart from the fact that as per the decision of the Honble High Court of Punjab & Haryana (CCE, Delhi-III vs Machino Montell(I) Ltd. 2006(4)STR.177(P&H), and the decision of Honble High Court of Bombay in First Appeal No.240/07 decided on 25.7.07 and of the Larger Bench in CCE, Delhi-IV vs Ilpea Paramound Pvt. Ltd. reported in 2007(213)ELT.500 where imposition of penalty is warranted the wordings of Section 11AC do not leave any option for imposing a reduced penalty, except as provided for in the amended provisions of section 11ac.

3. It appears from the evidence on record that when the physical verification of the stock was done by the preventive staff on 14.9.02 in the factory premises of the respondent, engaged in the manufacture of Iron & Steel product, it was found that there was a shortage to the extent of 80.345 m.ts. of steel ingots valued at Rs.1004312/- involving Cenvat credit of Rs.160690/- and 21.373 m.ts of MS Bars valued at Rs.335556/- involving central excise duty of Rs.53689/-.

4. In the statement of the partner of the respondent Mr. Sanjeev Kumar, it was stated that he was present when the factory premises were visited by the officers and stock verification was done. It was also admitted that there was the said shortage noticed during the verification. The verification charts were admittedly prepared on the spot and were signed by the partner. He categorically admitted the shortage and proceeded to state that the shortage had occurred because, due to financial crises, the goods were sold on cash basis in the local market at the rate of Rs.12500/- per m.t. for steel ingots and Rs.15700/- per m.t. for M.S.bars. He also admitted that these transactions were not entered into the statutory record and the goods were removed without paying the central excise duty which was payable by the respondent. It was also stated that he could not record the names of the buyers to whom the goods were sold and those persons were unknown to him. These admitted facts have never been retracted and show the blatant way in which the respondent assessee acted with intent to evading payment of duty. In a case like this there would obviously be no warrant for reducing penalty from the amount equal to the duty determined as was imposed by the adjudicating authority. When the adjudicating authority had imposed penalty in accordance with the provisions of section 11ac in case of such gross violation of the provisions of law, the appellant Commissioner could not have reduced the penalty by interfering with the discretion of the adjudicating authority without there being any indication that the order of penalty was in any way legally defective. Even if another view is possible to be taken, it would not be open for the appellate authority to take such a different view when the view already taken is a plausible view taken on the basis of the evidence on record and in accordance with the statutory provisions. The appellate Commissioner has grossly erred in giving benefit of doubt to the respondent, by observing that there was simply presumption of clandestine removal. There was no question of any presumption when clandestine removal was specifically admitted by the partner by stating that the goods were sold on cash basis due to financial crises faced by the assessee, without issuing invoice or entering them in the relevant record and without paying excise duty which was payable by them. The observations made by Division Bench of this Tribunal in the case of Gulabchand Silk Mills Pvt. Ltd. vs CCE, Hyderabad reported in 2005(184)ELT.263 need to be recalled in this context: In any type of clandestine activity, the persons try their best not to leave any evidence. We cannot expect persons indulging in clandestine clearance to faithfully put the details of all such clearances in some register and append their signature. This is never done. Hence, clandestine activity at best can be established only by circumstantial evidence. It should also be borne in mind that it will be humanly impossible to establish every link in the chain of clandestine activity.

5. The duty determined was fully warranted under Section 11AC as imposed by the adjudicating authority for cogent reasons, and, therefore, the question whether any reduced penalty could be imposed or not does not arise for consideration in this matter.

6. For the foregoing reasons the impugned order, to the extent that it reduces penalty imposed on the respondent, is set aside, and the penalty imposed by the order-in-original is restored. The appeal is accordingly allowed. Order dictated in the open Court. (Justice R.K.Abichandani) President