2005 (6) TMI 368 - AT - Central Excise

Summary

Issues:
1. Clandestine removal of cotton yarn without payment of duty and excess stock found in factory premises.
2. Demand of duty, confiscation of excess stock, imposition of penalty under Section 11AC, and challenge against redemption fine and penalty.
3. Ignorance of Central Excise law claimed by the appellants as a defense against penalty.
4. Reduction of redemption fine and penalty amounts imposed by the lower authorities.

Issue 1:
The case involved the clandestine removal of cotton yarn without payment of duty and the discovery of excess stock in the factory premises during two separate visits by Central Excise officers in January 1998 and October 1998. The authorities issued show cause notices, confirmed duty demands, confiscated excess stock, and imposed penalties under relevant provisions.

Issue 2:
In the first instance, the appellants had already paid a part of the duty on the clandestinely removed cotton yarn before the show cause notice was issued. The original authority confirmed the duty demand, confiscated excess stock, and imposed a penalty under Section 11AC. The appellate challenge focused on the redemption fine and penalty amounts, leading to a reduction in the redemption fine from Rs. 6,000 to Rs. 4,000.

Issue 3:
The appellants claimed ignorance of Central Excise law as they had recently started manufacturing activities and were not fully aware of the legal requirements. However, the tribunal rejected this defense, stating that ignorance of law cannot be accepted as a valid excuse, especially when the clandestine removal of goods was admitted. The maximum penalty under Section 11AC was upheld at Rs. 41,239, despite the appellants' plea for a lower penalty.

Issue 4:
Regarding the second instance of excess stock found in the factory, the tribunal found the redemption fine and penalty amounts to be excessive. The redemption fine was reduced from Rs. 9,000 to Rs. 6,000, while the penalty of Rs. 28,422 imposed by the lower authorities was upheld as it was equal to the duty demanded and paid by the appellants. The tribunal clarified that the penalty was exclusively imposed under Section 11AC, considering the admitted clandestine removal.

In conclusion, the tribunal upheld the penalties imposed under Section 11AC but reduced the redemption fines in both instances where excess stock was discovered, emphasizing the need for compliance with Central Excise laws and regulations to avoid such penalties in the future.