2010 (8) TMI 354 - AT - Central Excise

Penalty on director clandestine removal adjudication appears to have travelled beyond the show cause notice without examining the statement recorded - no one confess that goods were cleared without issuing invoices with intent to avoid payment of tax to cause him prejudice - doubts do not permit the quasi-criminal proceedings to sustain - circumstances with cogent evidence did not suggest that the doer has submitted himself to the offence or the questionable act. It may be stated that because penalty is prescribed by law that shall not be automatically imposed. The governing facts and attendant circumstances with cogent evidence should suggest that the doer has submitted himself to the offence or the questionable act. In the present case the facts and circumstances failed to suggest to bring the respondent to that fold. - Decided in favor of assessee.

Summary

Issues:
- Appeal against penalty imposition on the respondent for clearing goods without issuing invoices to evade duty.
- Discrepancies in stock and the respondent's liability for the same.

Analysis:
1. Issue 1: Appeal against penalty imposition
The Revenue appealed against the first appellate order that waived the penalty imposed on the respondent for clearing goods without issuing invoices to evade duty. The Commissioner (Appeals) had found that the respondent was not directly responsible for the discrepancies in stock and, therefore, should not be penalized. However, the Revenue argued that the respondent, being the Director of the unit, had full control over day-to-day affairs and was aware of the activities, including the clearance of goods without invoices to evade duty. The adjudication order highlighted that the respondent admitted to the clearance of goods without invoices, indicating his awareness of the situation. The Tribunal noted that the adjudication order went beyond the show cause notice by involving the respondent in day-to-day activities without sufficient evidence. It emphasized that mere confession without cogent evidence is insufficient for penalty imposition in quasi-criminal proceedings. The Tribunal concluded that the facts and circumstances did not convincingly establish the respondent's involvement in the offense, leading to the dismissal of the Revenue's appeal.

2. Issue 2: Discrepancies in stock and respondent's liability
The adjudication order raised concerns about the discrepancies in stock and held the respondent responsible for ensuring the payment of Central Excise duty and Education Cess on excisable goods cleared from the factory. While the show cause notice implicated the respondent for having control over day-to-day affairs, the adjudication order failed to provide substantial evidence linking the respondent to the activities. The Tribunal pointed out that the respondent's admission in 2006 regarding goods clearance without invoices was insufficient to establish his liability, especially considering the lack of concrete evidence connecting him to the offense. It stressed that penalty imposition requires governing facts and cogent evidence to prove the respondent's involvement beyond doubt. Since the evidence presented did not convincingly implicate the respondent, the Tribunal dismissed the Revenue's appeal, highlighting the necessity for substantial proof in penalty cases.

This judgment from the Appellate Tribunal CESTAT, New Delhi, delivered by Shri D.N. Panda, Member (J), emphasizes the importance of substantial evidence and clear linkage between the respondent's actions and the alleged offense in penalty imposition cases related to excise duty evasion. The analysis underscores the need for a strong evidentiary basis to establish liability and highlights the Tribunal's scrutiny of the adjudication process beyond the show cause notice to ensure fairness and justice in quasi-criminal proceedings.