2010 (6) TMI 409 - AT - Central Excise

Penalty on director - Contumacious conduct of the director is not coming out from record - mens rea does not come out, mere acceptance of discrepancy at the investigation stage not be commitment of offence - Penalty proceeding being quasi criminal in nature, the charge framed calls for evidence of conscious abatement to establish the same evidence is absent

Summary

Issues:
1. Applicability of third proviso to Section 11AC of Central Excise Act 1944 for penalty imposition.
2. Quantum of penalty and duty liability determination.
3. Levy of penalty on an individual for alleged offense.

Analysis:
1. The appellant sought to invoke the third proviso to Section 11AC of the Central Excise Act 1944 to dispose of the appeal, arguing that the duty had been paid at the time of investigation. The appellant referred to the decision in K.P. Pouches (P) Ltd. v. Union of India, which allowed for concessional penalties under Section 11AC. The Revenue objected, citing a case of clandestine removal to argue for the imposition of the entire penalty. The Tribunal acknowledged the exigibility of the penalty, but considered the applicability of the third proviso and the statutory provisions. The Tribunal confirmed the duty demand but limited the penalty to 25% of the duty amount, following the statutory provision and the decision in Rajasthan Spinning Mills case.

2. In determining the quantum of penalty and duty liability, the Tribunal recognized the penalty as sustainable but subject to the third proviso to Section 11AC and the decision in K.P. Pouches (P) Ltd. case. The appellant was granted a concessional penalty limited to 25% of the duty amount involved. The Tribunal confirmed the duty demand but modified the penalty amount, directing it to be restricted to 25% of the duty element. As a result, the appeal was partly allowed, with the first appellate order being modified.

3. Regarding the appeal of an individual, Shri Bharat Bhushan, related to the levy of a penalty of Rs. 1,00,000, the Tribunal examined the evidence of conscious abatement to establish the offense. The Tribunal noted that the order did not disclose whether the offense was committed within the conscious knowledge of the individual or under his instructions. Without evidence of mens rea or conscious involvement, the Tribunal concluded that there was no contumacious conduct or conscious abatement by the director. Mere acceptance of discrepancy at the investigation stage did not constitute an offense. As the element of conscious abatement was absent, the Tribunal allowed the appeal of Shri Bharat Bhushan, directing that no penalty be imposed on him as the director.