2010 (8) TMI 915 - AT - Central Excise

Summary

Issues:
1. Clandestine removal of goods without payment of duty.
2. Liability of the Director for penalty under Rule 26 of the Central Excise Rules.
3. Interpretation of the provisions of Section 11A(2) of the Central Excise Act regarding penalty imposition.

Analysis:

Issue 1: Clandestine removal of goods without payment of duty
The case involved the clandestine removal of 99.9 MT of sponge iron from a factory without issuing invoices or paying Central Excise Duty. Statements from company officials confirmed the evasion, leading to a show cause notice for duty evasion and penalties.

Issue 2: Liability of the Director for penalty under Rule 26
The Director of the company was held liable for penalty under Rule 26 of the Central Excise Rules due to his involvement in the clandestine removal of goods. The Commissioner (Appeals) set aside the penalty on the Director, sparking an appeal by the department.

Issue 3: Interpretation of Section 11A(2) provisions
The Commissioner (Appeals) invoked the 1st proviso to Section 11A(2) to waive the penalty on the Director, citing full duty payment. However, the appellate authority found that the interest and 25% penalty were paid after the stipulated 30-day period, rendering the waiver incorrect. The penalty on the Director was reduced to Rs. 25,000.

In conclusion, while the penalty on the Director was initially set aside, the appellate authority restored the Assistant Commissioner's decision due to payment timing discrepancies. The penalty was reduced to Rs. 25,000 considering the duty payment before the show cause notice issue.