2011 (5) TMI 38 - AT - Central Excise

Demand - Clandestine removal - personal penalty - Rule 26 of the Central Excise Rules - the present case is not the one where the allegation are not clear, the invocation of right provisions of the law in the show cause notice is not specific and findings of the adjudicating authority confirming the liability to penal action under a particular Rule is not to the point - the right from the stage of the show cause notice till the findings in the adjudication order by the original adjudicating authority, it is only the provisions of Rule 26 of the Central Excise Rules, 2002, which has been held invokable - As a result, the same shall not vitiate the imposition of penalty upon the appellants As regards the quantum of penalties - in a case of duty evasion of Rs. 11 Lakhs, penalty of Rs. 2 lakhs has been imposed on Shri Vikas Bhushan and as such, for a duty evasion of Rs. 37 Lakhs, penalty of Rs. 6 Lakhs on Shri Vikas Bhushan is fully justified - All the appeals get disposed off

Summary

Issues:
Penalty imposition under Rule 26 of Central Excise Rules, 2002, read with Section 11AC of Central Excise Act, 1944.
Validity of cumulative and composite penalties.
Quantum of penalties imposed on the individuals involved.

Analysis:

Issue 1: Penalty imposition under Rule 26 of Central Excise Rules, 2002, read with Section 11AC of Central Excise Act, 1944:
The case involved penalties imposed on the appellants under Rule 26 of the Central Excise Rules, 2002, read with Section 11AC of the Central Excise Act, 1944. The advocate for the appellants argued against the imposition of cumulative and composite penalties, citing a Tribunal decision. However, it was noted that the original adjudicating authority had clearly found the appellants liable for penal action under Rule 26. The inclusion of Section 11AC in the operative part of the order was deemed not to have prejudiced the appellants, as the show cause notice specifically mentioned penalties under Rule 26. The appellate authority had already agreed to delete the reference to Section 11AC, and thus, the imposition of penalties was upheld.

Issue 2: Validity of cumulative and composite penalties:
The advocate referenced a Gujarat High Court decision regarding the imposition of composite penalties under different provisions of two Acts. However, in this case, the penalties were imposed under Rule 26 from the beginning, and the findings of the adjudicating authority supported this. The appearance of Section 11AC in the operative part of the order was not considered a basis for setting aside the penalties. It was concluded that the penalties imposed on the appellants were justified based on the specific provisions invoked and the nature of the violations.

Issue 3: Quantum of penalties imposed on the individuals involved:
Regarding the quantum of penalties, it was noted that the duty evasion by the company was significant, and penalties were imposed accordingly. The Director of the company was held responsible for repeated clandestine activities and was imposed a penalty of Rs. 6 lakhs. The Marketing Manager and Manager, though involved in the day-to-day functioning and supervising the clandestine activities, were not sharing in the profits earned. As employees, their penalties were reduced from Rs. 5 lakhs each to Rs. 75,000 each. The reasoning behind the penalties imposed on each individual was thoroughly analyzed, considering their roles and responsibilities in the illicit activities.

In conclusion, the judgment addressed the issues of penalty imposition, validity of penalties, and quantum of penalties in a detailed manner, ensuring a fair and reasoned decision based on the facts and legal provisions presented in the case.