ORDER
M.V. Ravindran, Member (J)
1. This appeal is listed for hearing on the direction of the Hon’ble High Court of Punjab & Haryana at Chandigarh in Central Excise Appeal No. 12 of 2005 decided on 31/07/06. The Hon’ble High Court has directed the Tribunal as under:
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.
2. The relevant fact that arise for consideration are the appellants were manufacturers of Tobacco and were registered under the Central Excise Act. The officers of the Anti Evasion visited the appellant’s factory on 08/06/2001, on the physical stock checking, it was noticed that there was a shortage of finished goods. The appellant deposited the entire amount of Central Excise duty involved on such shortage before the issuance of show cause notice. Show cause notice was issued to the appellant for the appropriation of the amount of the duty paid and for imposition of penalty. The adjudicating authority appropriated amount of the duty paid by the appellant against the demand confirmed and also imposed equivalent penalty under Section 11AC and under Rule 173Q/25 of the Central Excise Rules. On an appeal, Commissioner (Appeals) set aside the penalty imposed under Rule 173Q/25 of the Central Excise Rules but upheld the penalty imposed under Section 11AC. On an appeal the Tribunal vide its order dated 28/04/04 set aside the penalty imposed on appellant on the ground that the appellants had already deposited the entire amount of the duty before the issuance of show cause notice.
3. Learned advocate appearing on behalf of the appellants submits that the question of imposition of penalty under Section 11AC, when the entire amount of the duty is deposited before the issuance of show cause notice is settled by the Hon’ble High Court of Karnataka in the case of CCE, Mangalore v. Shree Krishna Pipe Industries as reported at . It is his submission that the appellant had deposited the entire amount of the duty before the issuance of show cause notice is undisputed.
4. The learned DR on the other hand submits that the issue now requires re-consideration on the direction of the Hon’ble High Court and also in the light of the decision of the Hon’ble High Court of Punjab & Haryana in the case of M/s Illpea Paramount Pvt. Ltd. in Central Excise Appeal No. 56 of 2005 decided on 21/07/06.
5. Considered the submissions made at length by both sides and perused records. It is noticed that the partner of the appellant in his statement recorded on the spot, on conclusion of the stock taking of the finished goods had admitted that there is shortage of the finished goods and the Central Excise duty on such shortage is Rs. 1,02,060/-. The appellant was not able to give satisfactory explanation nor could the appellant produce the duty paying documents in respect of the shortages noticed in the factory during the physical verification, even till the reply to the show cause notice. This would indicate the removal of the goods was without issuance of any invoice and without making any entry in the records. The belated plea taken, that the shortage could be due to pilferage is of no support to defence as it is worth mentioning that the goods were packed in small packets which are further packed in bags and these are further packed into larger cartons/bags. The pilferage of such a huge quantity would be impracticable in view of the fact that the bags have to be cut open to pilfer the quantity found short. In the absence of any FIR in respect of the pilferage, the plea taken by the appellant is improbable. It is clearly established that the appellant could not produce any evidence regarding the clearances of such shortages on payment of duty. Hence, adverse inference is to be drawn and the ultimate conclusion would be that the appellant has removed these goods clandestinely without payment of duty.
6. The Hon’ble High Court of Punjab & Haryana in the case of M/s Illpea Paramount Pvt. Ltd. has 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 or 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 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 situation, making a provision for minimum penalty cannot be held to be arbitrary in any manner.
We, therefore, do not find any reason to interpret the plain language of the statute to hold that what is laid down is only maximum amount of penalty and not the minimum.
In view of above interpretation, 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 appeal before the Tribunal for further proceedings on October 9, 2006.
7. The ratio of the judgement of the Hon’ble High Court, under whose jurisdiction the current appellant lies would require that the penalty on the appellant has to be imposed having regard to the language of Section 11AC. In the present case before me, the appellant has not been able to give any explanation regarding the shortages of the finished goods and hence it is clearly established that these goods were removed by them clandestinely.
8. Accordingly, respectfully following the Hon’ble High Court’s judgement in the case of Illpea Paramount Pvt. Ltd. (Supra), the appellant is liable to be penalized to the equivalent amount of the duty they sought to evade by clandestinely removing the goods. The impugned order which upholds the imposition of penalty to the equivalent amount of duty under Section 11AC of the Central Excise Act, 1944, is upheld and the appeal is dismissed.
(Pronounced on 06.12.06)