2010 (6) TMI 416 - AT - Central Excise

Penalty - nothing on record to indicate that there was an intention-to evade the duty - factory is under the physical control of the Central Excise Officer Held that - provisions of Section 11AC of Central Excise Act, 1944 will not invoke - appropriate duty on the goods, which were unaccounted, discharged by the assessee when they sought provisional clearance of the goods - penalty imposed on the assessee under the provisions of Section 11AC of the Central Excise Act, 1944 cannot sustain.

Summary

Issues involved: Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Detailed Analysis:

1. Background and Facts: The case involves the appeal against an Order-in-Appeal upholding the imposition of equal penalty under Section 11AC of the Central Excise Act, 1944. The appellants, manufacturers of Cigarettes, had 220 cartons of cigarettes found secreted in a room other than the bonded storeroom during a search. The goods were provisionally released and cleared on payment of duty. Various penalties were proposed and imposed on the appellants and individuals involved.

2. Initial Orders and Appeals: The Additional Commissioner initially ordered confiscation, imposed fines, and penalties. The case was remanded for de novo adjudication, resulting in similar penalties. The appellants appealed against the imposition of equivalent penalty under Section 11AC, arguing that the provisions were not applicable as the goods were cleared provisionally and there was no intent to evade duty.

3. Arguments: The appellant's counsel contended that Section 11AC penalty was not justified as the goods were accounted for and cleared on payment of duty. They argued that there was no evidence of intent to evade duty, especially as the factory was under physical control during the relevant period. The Departmental Representative, however, supported the penalty under Section 11AC, citing the storage of goods outside the bonded storeroom as indicative of intent to evade duty.

4. Judgment: The Tribunal considered the submissions and records. It noted that the goods were within the factory premises, accounted for, and duty was paid upon clearance. The Tribunal emphasized that Section 11AC applies when duty is not paid due to fraud or intent to evade, which was not the case here. As the goods never left the factory and duty was discharged, the penalty under Section 11AC was deemed unsustainable. Consequently, the penalty under Section 11AC was set aside, and the appeal challenging its imposition was allowed.

This comprehensive analysis highlights the key details, arguments, and the Tribunal's reasoning leading to the decision to set aside the penalty under Section 11AC of the Central Excise Act, 1944 in this case.