IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. C.E.A.No.47 of 2010 (O&M) Date of decision: 10.8.2010 Commissioner of Central Excise. -----Appellant. Vs. M/s Aabhas Spinners (P) Ltd. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Kamal Sehgal, Sr. Standing counsel for the revenue. Mr. Sudeep Singh, Advocate for the assessee. --- ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the revenue under Section 35G of the Central Excise Act, 1944 (for short, “the Act”) against the order dated12.2.2009 passed by the Customs, Excise & Services Tax Appellate Tribunal, proposing to raise following substantial question of law:- “Whether Tribunal is justified in holding that the admitted and inexplicable shortage of raw material is not clandestine removal for the purpose of penal action under Section 11 AC of the Central Excise Act, 1944?” 3. The assessee is engaged in manufacture of yarn. The preventive staff of the Central Excise Department visited the C.E.A.No.47 of 2010 factory of the assessee on 15.3.2003 and found shortage of raw material and to that extent inference was drawn that there was clandestine removal. Accordingly, show cause notice was issued and the adjudicating authority confirmed demand for recovery and also levied penalty. On appeal, the levy of penalty was partly set aside on the assessee firm and penalty levied on the Director was waived. On further appeal, the assessee did not contest its liability to pay duty but only contested levy of penalty on the ground that there was no mens rea. It was stated that the Director was admitted in hospital and he was not liable for penalty on account of alleged shortage. At best, the assessee was liable for duty which had already been paid. The Tribunal held that in absence of any material to hold that goods were clandestinely removed, penalty was uncalled for. The observations of the Tribunal are as under:- “.....We find that the Director of the appellant company was out of station at the material time due to By-pass surgery and there is no dispute on this fact. So the statement of the Director of the appellate company would amount to presumption which cannot be the basis to suggest the clandestine removal. Hon’ble Punjab & Haryana High Court in the case of Omkar Steel Tubes (P) Ltd. (supra) held that for imposition of penalty under Section 11AC of the Act mens rea are to be satisfied. We have also noted that the demand of duty and payment thereof have not been disputed by the appellant. We do not find any material that the goods were clandestinely removed and, therefore, we 2 C.E.A.No.47 of 2010 hold that penalty under Section 11 AC of the Act is not warranted. Accordingly, penalty is set aside. Appeal is allowed.” 4. We have heard learned counsel for the parties. 5. In view of facts found, the liability of duty having been accepted, question before the Tribunal was only of levy of penalty under Section 11BC of the Act, for which mens rea was required under the statutory provision itself. The Tribunal having found that there was no mens rea, which finding was not shown to be perverse, no substantial question of law arises. 6. The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE August 10, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE 3