Order date: 11 October 2022

Facts: 

• The applicant namely, M/s Mukesh Singhania and others, are a company that is engaged in the manufacture of formaldehyde having installed capacity of 3000 MT per annum.
• The applicant stated that one of the major raw materials which are used by them is Methanol, the appellant was working under the modvat/ cenvat scheme and was taking credit for dutiable inputs like methanol, used for the production of their finish products-formaldehyde, dutiable under subheading 2912 of the CETA.
• In a Search of the factory premises wherein the stock of raw material and finished goods was verified, as per revenue there was a shortage of 32.421 MT of methanol and a shortage of 262.400 MT of finish stock.

Issue:

• Whether the interest and penalty of alleging clandestine removal of 3996.286 MT formaldehyde (including 262.400 MT found short) valued at Rs. 2,79,74,002/- on which duty was demanded of Rs. 50,35,320/- is justified.

Order:

• The Authorities observed that there is no reasonable explanation in the impugned order and also in the previous order of this Tribunal, whereby the clandestine removal of finished goods been alleged at 1378.595 MT of formaldehyde.
• The authorities observed that the appellant has already suffered civil consequences by the impugned order in view of duty both on the allegation of clandestine removal as well as on the shortage of finished goods and raw materials, not a single instance of clandestine removal has been found by revenue by way of interception of any consignment without proper invoices/challan, etc.
• There is not a reasonable basis for the imposition of penalty under Section 11AC/Rule 209A of the Central Excise Rules, 1944. 
• Thus, the authority allowed this appeal in part and set aside the penalty under Section 11AC on the appellant company and also set aside the penalty imposed on the two directors Shri Promod Lunawat & Shri Mukesh Singhaniya under Rule 209A of Central Excise Rules, 1944.