ORDER
M.V. Ravindran, Member (J)
1. These two matters are listed for hearing on remand from the Hon’ble High Court of Punjab and Haryana at Chandigarh.
2. The relevant facts that arise for consideration are that the appellant’s factory was visited by the officers of the revenue and there was a shortage of raw materials and finished goods and also there was excess of the raw materials and finished goods. The officers seized the excess found raw materials and finished goods. Appellant deposited the amount of the duty involved in the shortages of raw materials and finished goods on the date of physical verification. A show cause notice was issued to the appellant for the confiscation of the seized goods and for appropriation of the amount of the duty deposited and for imposition of penalty. Adjudicating authority confiscated the excess found goods with an option to redeem the same on payment of redemption fine and imposed penalty on the appellant company and also its director. On an appeal the learned Commissioner (Appeals) concurred with the findings of the adjudicating authority and upheld the order in original. Appellant moved the Tribunal and tribunal upheld the order to the extent of confirmation of duty, confiscation of the excess goods but reduced the penalty on the appellant on the finding that the entire amount of duty has been paid by the appellant before the issuance of the show cause notice. Revenue aggrieved by the said order moved Hon’ble High Court at Chandigarh, wherein their lordships remanded the matter for reconsideration on the imposition of the penalty. Their lordships direction is as under:
In view of the order of this Court dated 21.7.2006 in CEA No 56 of 2005 Commissioner of Central Excise, Delhi-IV New CGO Complex, NH-IV, Faridabad v. Illpela Paramount Pvt Ltd, we allow this appeal, set aside order of the Tribunal and remand the case to the Tribunal for a fresh decision on the question of levy of penalty. If it is held that levy of penalty is warranted having regard to the requirements of the statute, the Tribunal will be bound to levy penalty equal to the amount of duty. Parties are directed to appear before the Tribunal for further proceedings on October 9, 2006.
3. Learned advocate appearing for the appellants submits that the appeal filed by the revenue is not maintainable as the appeal is against the company while there is no appeal filed against the setting aside of the penalty on the Director by the learned Commissioner (Appeals). As regards the penalty on the appellant company, it his submission that the Director of the company has admitted the fact there was shortage but it was not due to the clandestine removal but due to the improper accounting in the records by the unskilled labour. It is his submission that even the learned Commissioner (Appeals) has come to the conclusion that once the statement under Section 14 is recorded it has to be considered as true and correct. Hence it is the submission that the penalty amount as reduced by the tribunal in its earlier order is sufficient to meet the ends of justice.
4. Learned SDR on the other hand submits that in this case the appellant has been not able to give proper explanation as regards the shortage of inputs and finished goods. He submits that the penalty has to be imposed to the amount equivalent to the duty confirmed.
5. Considered the submissions made by both sides and perused the records. It is seen from the records that the officers of the revenue visited the appellant’s factory on 12.10.2000 and on physical stock verification found excess stock of raw materials (on which Modvat credit was availed) and finished goods, which were seized, on further verification it was found that there were shortages of Modvat credit availed raw materials and finished goods. The officers handed over the seized goods to the appellant for safekeeping. The officers on their return visit on 27.03.2001, checked the stock of the seized raw materials, which were handed over for safe keeping to appellant and found they were short. The explanation given by the Director of the appellant that the same may be due to the handling by the unskilled labour and due to theft by the villagers in the absence of the proper security staff. It is incomprehensible that the seized goods handed over for safe keeping were found short. The explanation put forth by the Director of the appellant is devoid of any merits in as much that the appellant did not produce any FIR lodged for theft of goods. If that be so then the explanation falls flat. As regards the another explanation, it is seen from records that the same explanation was given at the time first visit of the officers i.e. on 18.10.2000. It was for the appellant to take up the wake up call he got from the officers visit on 18.10.2000 and put in to motion a system to control this kind of irregularities. But the appellant allowed the matters to precipitate further, which is evident from the second physical verification on 27.03.2001 on which date there was shortage of the raw materials which were handed over for safe keeping. This lax attitude of the appellant would indicate that he is not serious in following the law and adverse inference has to be drawn. Hon’ble High Court of Punjab and Haryana in the case of CCE, Delhi IV v. Illpea Paramount Pvt. Ltd. in CEA No. 56/2005 as decided on 21.7.2006 held as under:
We are of the view that language of the statute is clear. If the situation demands imposition of penalty, the same has to be equal to the amount of duty. There is no doubt that penalty is not to be imposed mechanically. The statute itself lays down that penalty is to be levied only where duty is short-levied or short-paid erroneously refunded by reason of ‘fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules’. Element of mens rea is statutorily insisted upon. Once mens rea is established, the quantum is not left to the discretion of the authority. Though, such inflexible rule may not be valid in every situation but condition precedent for levy of penalty is statutorily laid down and in the said situations, making a provision for minimum penalty cannot be held to be arbitrary in any manner.
6. It is seen from the records that in the present case the appellant has not been able to satisfactorily explain the shortages with proper evidence. In the facts and circumstances, respectfully following the judgment of the Hon’ble High Court in the case of Illpea Paramount Pvt. Ltd (supra), the penalty in this case has to be imposed to the equivalent amount of the duty confirmed by the adjudicating authority.
7. As regards the appeal of the revenue, it is noticed that the revenue had not appealed against the learned commissioner (Appeals) order of setting aside the penalty on the Director but preferred an appeal only against the company and not against the Director. Under the circumstances there being no appeal against the setting aside of penalty on the Director of the company, is a lost case due to misjoinder of the parties even if appeal is said to be filed against the company. It is also seen that no action is taken to correct the cause title, to implead the other party at this stage would be beyond the period of limitation. This was the view taken by the tribunal in the case of Monica Electronic Ltd., as reported at 2002 (147) E.L.T. (T). Hence the appeal of the revenue is dismissed.
8. Accordingly, The appeals are disposed of as indicated in the above paragraphs.
(Order pronounced on 01/12/06)