2010 (9) TMI 953 - AT - Central Excise

Penalty u/s 11AC - clandestine removal - entire duty demand was deposited before issuance of SCN was deposited by the assessee, the penalty u/s 11AC was reduced to ₹ 25,000/- - Held that - if the assessee pays the entire duty along with interest and 25% of penalty amount within a period of 30 days from the date of passing of the order confirming demand of duty, the penalty shall stand reduced to 25% of the duty amount - thus, if the appellants have deposited the above dues along with 25% of the penalty, the penalty shall stand reduced to 25%. Penalty u/r 25 - case of appellant is that when penalty stand imposed under Section 11AC, there should be no penalty under Rule 25 - Held that - the appellants never filed an appeal against above order of the Tribunal, reducing penalty under Rule 25 to ₹ 25,000/-. As such, the said part of the order of Tribunal having not been appealed against by the appellant, they cannot contend for setting aside the penalty under said Rule, in remand proceedings when the said order was only challenged by Revenue for reduction of penalty under Section 11AC. As such, I confirm the penalty of ₹ 25,000/- imposed under Rule 25. Penalty u/r 26 on director - Held that - penalty under Rule 26 is not invocable if there is no proposal for confiscation of the goods - penalty imposed upon the director under Rule 26 of Central Excise Rules is set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Confirmation of duty and penalties imposed on the appellant and the director.
2. Reduction of penalties by the Tribunal and subsequent challenge by the Revenue.
3. Imposition of penalties under Section 11AC and Rule 25 of Central Excise Rules.
4. Setting aside of penalties on the director and subsequent remand by the High Court.
5. Application of Rule 26 of Central Excise Rules and penalties imposed under it.

Analysis:
The judgment involves the confirmation of duty and penalties imposed on the appellant and the director by the Assistant Commissioner, which were upheld by the Commissioner (Appeals). The Tribunal, in its earlier order, confirmed the duty demand but reduced the penalties under Section 11AC and Rule 25. However, the Revenue challenged this decision, leading to a remand by the High Court for reevaluation of penalty imposition in line with a Supreme Court decision.

Regarding penalties under Section 11AC, the Tribunal's order was revisited in light of the Supreme Court's ruling in the case of Dharmendra Textile Processors. The judge enhanced the penalty to the original duty amount but provided an option for reduction if the dues were paid within a specific timeframe, aligning with the proviso to Section 11AC.

On the penalty imposed under Rule 25, the appellant argued against its imposition alongside penalties under Section 11AC. However, since the Tribunal's decision reducing the penalty under Rule 25 was not appealed, the judge upheld the penalty of Rs. 25,000 under Rule 25.

The penalty imposed on the director was set aside by the Tribunal, prompting a remand by the High Court for a reevaluation. The judge noted discrepancies in the application of Rule 26 of Central Excise Rules and the lack of discussion on the director's involvement in the clearance of goods without duty payment. Following the precedent set in a Tribunal case, the judge set aside the penalty imposed on the director under Rule 26.

In conclusion, the judgment disposed of both appeals by confirming the duty demand, adjusting penalties under Section 11AC, upholding penalties under Rule 25, and setting aside the penalties on the director based on the application of Rule 26 and relevant precedents.