2004 (11) TMI 419 - AT - Central Excise

Summary

Issues:
Imposition of penalty on a company and its Managing Director for clearing gutkha without paying Central Excise duty.

Analysis:
The appeals were filed by the Revenue against M/s. S.P. Tobacco Pvt. Ltd. and its Managing Director for clearing gutkha without paying Central Excise duty. The Central Excise officers intercepted a hand cart carrying gutkha without duty-paying documents. The Commissioner (Appeals) held that the Company is not liable to penalty under Sec. 11AC of the Central Excise Act as they had paid duty before the show cause notice was issued. However, the penalty on the Managing Director was reduced from Rs. 10,000 to Rs. 5,000. The Revenue argued that penalty should be imposed on the company for clearing goods without payment of duty, regardless of paying the duty before the show cause notice. They cited precedents like Hindustan Motors Ltd. case where penalty was imposed even after paying differential duty before the notice. The respondents relied on the Rashtriya Ispat Nigam Ltd. case and the decision of the Larger Bench of the Tribunal in the case of C.C.E. v Machino Montell (I) Ltd.

The Tribunal considered Rule 25 of Central Excise Rules, 2002, which provides for penalty if excisable goods are removed in contravention of the rules. Since the goods were removed without payment of duty, penalty was deemed imposable under Rule 25(1)(a). The respondents did not claim that duty was paid after detecting a mistake, but rather after interception by Central Excise Officers. The Tribunal referred to the Zunjarrao Bhikaji Nagarkar case, emphasizing that penalty is not discretionary when goods are liable to confiscation. Additionally, the Allahabad High Court's decision in Pee Aar Steels Pvt. Ltd. v. C.C.E. was cited, stating that the timing of the show cause notice does not affect the imposition of penalty. The Tribunal concluded that paying duty after detection does not absolve the charge of removing goods without payment of duty, but it can be a mitigating factor for imposing a lesser penalty. As the entire duty was deposited by the respondents, a penalty of Rs. 5,000 was imposed on the company, with no enhancement for the Managing Director.

In summary, the Tribunal upheld the imposition of a penalty on the company for clearing goods without paying Central Excise duty, despite duty payment after interception. The decision was based on relevant legal provisions and precedents, with consideration given to mitigating circumstances for determining the penalty amount.