S.S. Garg ORDER
S.S. Garg, Member (J)
1. The present appeals are directed against the impugned order dated 11.9.2012 vide which the learned Commissioner (A) has upheld the Order-in-Original. Briefly the facts of the present case are that the appellant is a dealer for dealing in plastic granules and also as have manufacturing unit for manufacturing PP bags. During the course of audit, it was noted that there were some discrepancies in the stock account with the actual quantity of granules stored. Thereafter physical stock of material was taken and during the stock taking there were certain grades of materials for which the stock book had no balance and for certain grades, there were stocks in stock book but no material. On questioning the same, the appellant's officials informed that they were not maintaining the stock on the basis of grades, since all the material were plastic granules and for all the materials removed, they were issuing the invoices and in regard to the shortage, it was mentioned that sometimes one grade got substituted to another grade. As such, it was contended that there were no shortage and in future they would try to keep one to one correlation. The officers verified the books and came to the conclusion that the appellant had passed on fraudulent credit of Rs. 10,08,094/-. It was also contended that further a sum of Rs. 9,27,909/- prior to 10.1.2008 were passed as CENVAT credit without physical supply of materials. On these allegations, a show-cause notice was issued as to show why the penalty should not be imposed to the extent of CENVAT credit under provisions of Section 11AC read with Rule 25. Apart from that a show-cause notice was also issued to the Director asking him to show-cause as to why penalty should not be imposed on him under Rule 26. The appellant refuted the allegation in the show-cause notice and submitted that there was no investigation conducted to prove that they had passed any duty credit fraudulently and there was no investigation as to the beneficiaries who have received the same. The Additional Commissioner vide Order-in-Original imposed the penalty of Rs. 4/- lakh under Rule 25 read with Section 11AC. Further a penalty of Rs. 40,000/- was imposed on the appellant-Director, Shri A.P. Venkateshwaran. Being aggrieved by the Order-in-Original, the appellant preferred an appeal before the Commissioner and the Commissioner (A) upheld the Order-in-Original and rejected the appeal of the appellant.
2. I have heard both parties and perused the material on record.
3. The learned counsel for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without following the mandatory provisions of the Central Excise Act. He further submitted that with regard to the allegations in the show-cause notice, no investigation was conducted by the Department to prove that the appellant had passed CENVAT credit fraudulently. He further submitted that there is no iota of evidence as to who were the beneficiaries of the fraudulent CENVAT credit alleged to have been passed on by the appellant. He further submitted that the impugned order is based on assumptions and conjectures and surmises without having concrete evidence to prove the allegations against the appellant. He also submitted that the imposition of penalty under Rule 25 read with Section 11AC is not maintainable in law without the determination of demand of duty against the appellant. He further submitted that unless and until Section 11AC is proved, no action can be taken under Rule 25 and in the present case there is no order of confiscation or there is no order demanding duty. Accordingly, the imposition of penalty is totally unwarranted under the facts and circums........