Commissioner of C. Ex. and Customs vs Jaiprakash Bhartiya

Heard. The appeal is admitted on the following substantial question of law.

Whether the Tribunal, while passing the impugned order has correctly applied their mind in arriving at a decision that the respondents are not required to pay duty and penalty, when there is a prima facie case that the respondents have admitted the shortage; signed the panchanama and deposited the duty payment?

In this case, search action was conducted at the business premises of the respondents on 31st July 2004 and 2nd October 2004, wherein on eye declaration it was found that mere was shortage of 335.135 MT of M.S. Scrap and 248.080 MT of M.S. Scrap respectively. Accordingly panchanama was drawn and statement of the respondent No. 1 was recorded. On the basis of the panchanama and the statement, a show cause notice was issued to the respondents on 3rd January 2006 to show cause as to why the duty should not be recovered on the goods found to be short and penalty should not be imposed. The said show-cause notice was adjudicated by an order-in-original dated 30th October 2006 wherein the demand was confirmed and penalty u/s 11AC for an equivalent amount of duty was imposed. Appeal filed against the said order was dismissed by the Commissioner of Central Excise (Appeals) on 28th February 2007. On a further appeal filed by the respondents, the CESTAT by its order dated 11th September 2009 set aside the orders passed by the authorities below on the ground that the managing director of the respondent No. 1 had explained the reasons for shortages found during the course of search, but the adjudicating authority as well as the appellate authority had not considered the reasons explained by the respondents.

The counsel for the respondents pointed out to us that even in the show-cause notice, it is stated that in view of the statement of the managing director, the explanation given by the respondent No. 1 would not be considered. In our opinion, where the statement recorded is sought to be explained by the deponent, both the statement as well as the correctness of the explanation would have to be considered. In the present case, none of the authorities below have considered the explanation given by the respondent No. 1. It is only if the explanation given by the respondent No. 1 is accepted on merits, the demand and the penalty could be deleted. Without considering the correctness of the explanation, the demand and the penalty could not be deleted by the Tribunal.

In these circumstances, the orders passed by the adjudicating authority as well as the impugned order passed by the CESTAT are quashed and set aside and the matter is remanded back to the adjudicating authority to pass a fresh order in accordance with law and after considering the explanation given by the respondent No. 1 on its own merits. We make it clear that we have not expressed any opinion regarding the correctness of the explanation given by the respondent No. 1.

The appeal is disposed off in the above terms with no order as to costs.