2011 (3) TMI 831 - AT - Central Excise

Condition of pre-deposit of interest and penalty - The duty is confirmed against the appellant who is a 100% EOU, in respect of the shortages of indigenous raw material, procured duty free, detected by the officers at the time of their visit to the factory - The appellants authorised representative accepted that such duty free procured raw material stands cleared by them illegally and as such accepted the duty liability - The Hon ble High Court of Gujarat in the case of Exotic Associates Vs. CCE 2009 -TMI - 76674 - GUJARAT HIGH COUR has held that such an option can be extended by the appellate forum - Accordingly,upholding the imposition of penalty to the extent of 100%, extend an option to the appellant to pay the entire dues along with 25% of penalty within a period of thirty days from the communication of the present order, in which case the penalty shall stand reduced to 25%. As regards penalty on Director of the unit, learned advocate submits that in as much as penalty stands imposed on the unit, no separate penalty should be imposed upon the director - Learned DR submits that the removal of the raw material was under the directions of the director and with his knowledge - As such he is liable to penalty.

Summary

Issues:
Confirmation of demand of duty against the appellant, imposition of penalty under Section 11AC, extension of option to pay dues with reduced penalty, imposition of penalty on the director of the unit.

Confirmation of Demand of Duty:
The appellant, a 100% EOU, had shortages of duty-free procured indigenous raw material detected by officers during a visit to the factory. The appellant's representative acknowledged the illegal clearance of such raw material and accepted the duty liability. The appellant did not dispute the confirmation of the duty demand, leading to the confirmation of duty along with interest as uncontested.

Imposition of Penalty under Section 11AC:
The Hon'ble Supreme Court precedent in Union of India Vs. Dharmendra Textile Processors established that a penalty of 100% is mandatory under Section 11AC. Therefore, the penalty imposed by the authorities below, amounting to Rs.2,66,462, was upheld by the Tribunal.

Extension of Option to Pay Dues with Reduced Penalty:
The appellate forum extended an option to the appellant to pay the entire dues along with 25% of the penalty within thirty days from the communication of the order. This option, as per legal precedents like Swati Chemicals Industries Ltd. and judgments from the Hon'ble High Court of Gujarat, would reduce the penalty from 100% to 25%.

Imposition of Penalty on the Director of the Unit:
Regarding the penalty on the director of the unit, it was argued that since a penalty was already imposed on the unit, no separate penalty should be levied on the director. However, it was contended that the director's involvement in the removal of raw material without duty payment made him liable for penalty. The director's statement admitting to the clearance of duty-free raw material without payment established his liability. The penalty on the director was reduced from Rs.60,000 to Rs.15,000 due to the circumstances of the case, while his appeal was rejected.

In conclusion, the confirmation of duty demand, imposition of penalty under Section 11AC, extension of the option to pay dues with reduced penalty, and the imposition of penalty on the director were the key issues addressed in the judgment delivered by the Appellate Tribunal CESTAT, Ahmedabad.