Judgment:
1. In this appeal, which has been filed against the Order-in-Appeal of the Commissioner (Appeals), the Revenue has questioned the dropping of the penalty of Rs. 10,000 confirmed on the respondents under Rule 173Q, by the adjudicating authority, while confirming the demand of duty of Rs. 49,193, on account of shortage of the raw material and finished goods.
2. The respondents have filed the cross objections wherein they have reiterated the correctness of the impugned order. They prayed for the decision on merits.
3. The learned JDR has contended that the penalty under Rule 173Q could not be dropped against the respondents for the simple reason that they deposited the duty before issuance of show cause notice. According to him, this deposit was not voluntary, but it was on the asking by the Officers of Central Excise.
4. I have gone through the record and the contention of learned JDR deserves to be accepted. The Officers of Central Excise on checking detected the shortage of 24.250 MT of raw material and 2.525 MT of finished goods involving duty of Rs. 43,941 and Rs. 5,252 in the factory of the respondents. No plausible explanation was offered by the respondents for these shortages. Shri Anil Kumar Singla, Manager of the respondents who was associated in the verification of stock, by the officers, pleaded that their accountant was part time employee and he could not attend the record, due to illness. But his explanation, in my view, was rightly rejected by the adjudicating authority for want of any evidence to corroborate the same. In fact, shortage of raw materials and finished goods was apparently due to clandestine removal of the goods by them. It is only thereafter that the respondents debited the duty payable on the raw material as well as finished goods in their RG-23A Part-II register. This deposit under these circumstances, could not be said to had been made voluntarily, but only with a view to save themselves from imposition of mandatory penalty under Rule 173Q of the Rules. They would not have deposited the duty of their own, if not caught by the department after checking of their stock in the factory. The Commissioner (Appeals) by simply following the ratio of law laid down in the case of Dharampur Sugar Mills Limited, 1990 (46) ELT 400 followed thereafter in Siemens Ltd. v. CCE, Aurangabad, 1990 (34) RLT 831 and TELCO v. UOI, 1994 (72) ELT 525, which have been also referred by the respondents in the cross objection, has dropped the penalty of Rs. 10,000 on the respondents which was imposed by the adjudicating authority, on them. But in my view, the ratio of law down in those cases is not attracted to the case of the respondents. In those cases, keeping in view facts and circumstances brought on record, the penalty was dropped. The intention of the respondents therein was also not found to be mala fide. But in this case from the record, it is quite evident that the respondents were working with a mala fide intention. They had removed the raw material and finished goods without payment of duty, in a clandestine manner, and could not offer any valid reason for the same at the spot to the Central Excise Officer. After having been caught by the Officers, they only debited the duty amount. If the officers had not visited their factory and detected this shortage, the respondents would not be debited the duty amount. It is also not the case of the respondents that inadvertantly or due to the lapse of their employee, the raw materials and the finished goods were removed from the factory and the duty could not be debited. In the absence of any plausible explanation, it can be safely inferred that the respondents deliberately evaded payment of duty. The subsequent deposit of duty by them at the time of visit of the Central Excise Officers, was made with a view to avoid penal action. The imposition of the penalty, in a case shortage of raw materials and the finished goods, on account of clandestine removal, is mandatory under Rule 173Q. If imposition of penalty under this rule dispensed with on the simple ground that the defaulter/manufacturer/trader, had deposited the duty on the asking of the Central Excise Officers, it would only promote clandestine removal of the goods by them. Every trader/manufacturer would firstly indulge in the clandestine removal of the goods without payment of duty and then offer to deposit the duty, when found guilty by the officers of the department. The imposition of penalty is only measure through which such removal of goods by the unscrupulous manufacturer/trader can be avoided to a large extent.
5. Therefore, in the light of discussion made above, the impugned order dropping penalty on the respondents is set aside. The Order-in-Original imposing penalty of Rs. 10,000 on the respondents while confirming the duty is restored, in toto. The appeal of the Revenue accordingly stands allowed while cross-objections of the respondents are rejected.