COMMISSIONER OF CENTRAL EXCISE Vs. NIKHIL FOOTWEARS

JUDGEMENT

(1.) The Revenue has filed this appeal impugning the order (Annexure P-3) dated 14.11.2007, passed by the Customs, Excise and Service Tax Tribunal, New Delhi ( for short 'the Tribunal') vide which the penalty imposed upon the respondents was set aside and it was held that there was no clandestine removal of any input which was being used by the respondents in manufacturing of their product.

(2.) The respondents are engaged in manufacture of footwear, P.U. Sole etc. which are classifiable under CETH 6401.02 of the Central Excise Tariff Act, 1985. On 18.2.2003, the Central Excise Officers visited the factory premises of the respondents and verified the stocks of inputs. It was found that there was shortage of inputs, namely, cyclohaxamine and PVC compound. Accordingly, a show notice was served upon the respondents to which they replied. The Assistant Commissioner, Central Excise vide his order dated 24.3.2004, confirmed the demand of Central Excise amounting to Rs.2,39,713/- and also imposed penalty equivalent to the amount of duty. The respondents had duly paid the duty even before issuance of show cause notice and had admitted their liability to pay the duty, but challenged the penalty imposed on them before the Commissioner, Central Excise. The Commissioner vide his order (Annexure P-2) dated 30.9.2005, maintained the penalty as imposed by the Assistant Commissioner, however, he also imposed a penalty of Rs.30,000/- for violation of Rule 13 of the Cenvat Credit Rules, 2002.

(3.) The respondents challenged the aforementioned order before the Tribunal, who vide the impugned order (Annexure P-3) set aside the penalty and held that there was no intention on part of the respondents to clandestinely remove the inputs of cyclohaxamine and PVC compound. Counsel for the appellant has submitted that as per physical verification conducted by the officials of the Excise Department, there was a shortfall in the inputs of cyclohaxamine and PVC compound. The respondents have explained the shortage by submitting that as far as cyclohaxamine is concerned, the same has evaporation tendency and due to evaporation process, a reasonable loss of 5.93% of this material occurred. He further submits that as far as PVC compound is concerned, there was negligible shortfall in the inputs of 0.18% only and hence it cannot be said that there was any intention on part of the respondents to evade the payment of duty on the aforementioned inputs.