2011 (3) TMI 948 - AT - Central Excise

Penalty - 100% penalty was imposed against the company, company has failed to pay the amount - duty free imported material was not brought into the factory premises but sold in open market without payment of appropriate duties of customs, without issue of invoice & without accounting in the statutory records - Held that - appellants in the clandestine removal of the goods with the intention to evade payment of duty which has been clearly established - not a fit case to show any leniency in the matter - appeal dismissed

Issues Involved:
1. Legality of the imposition of penalties under Rule 26 of the Central Excise Rules, 2002 and Section 112 of the Customs Act, 1962.
2. Justification for the quantification of penalties imposed on the appellants.

Detailed Analysis:

1. Legality of the imposition of penalties under Rule 26 of the Central Excise Rules, 2002 and Section 112 of the Customs Act, 1962:

The appeals challenge the penalties imposed by the Commissioner, Indore, under Rule 26 of the Central Excise Rules, 2002, and Section 112 of the Customs Act, 1962. The appellants argued that the penalties were imposed without meeting the basic requirements of these provisions, particularly the necessity for the goods to be confiscable. The appellants contended that the goods were neither ordered to be confiscated nor found liable for confiscation, thereby invalidating the penalties.

The Tribunal clarified that under Rule 26 and Section 112, penalties can be imposed if a person deals with goods knowing or having reason to believe that such goods are liable to confiscation. The requirement is the knowledge or belief regarding the liability of the goods to confiscation, not an actual order of confiscation. The Tribunal emphasized that the absence of a confiscation order does not preclude the imposition of penalties if the person had the requisite knowledge or belief.

The Tribunal referred to the previous order dated 8.07.2008, which established that the appellants knowingly dealt with excisable goods liable to confiscation, thereby rendering them liable to penalties under Rule 26 and Section 112. These findings were not challenged in the earlier proceedings, and the remand was specifically for reconsidering the quantification of penalties, not the basis of liability.

2. Justification for the quantification of penalties imposed on the appellants:

The Tribunal examined the quantification of penalties in light of the remand order dated 11.11.2008, which directed the Commissioner to reconsider the penalties due to the appellants' financial distress and the severity of the penalties. The Commissioner had reduced the penalties from Rs. 1 crore to Rs. 60 lakhs under Rule 26 and from Rs. 50 lakhs to Rs. 30 lakhs under Section 112 for Shri Ashwani Deewan. Similarly, penalties for Shri Mahendra Sharma were reduced from Rs. 10 lakhs to Rs. 6 lakhs under Rule 26 and from Rs. 5 lakhs to Rs. 3 lakhs under Section 112.

The Tribunal noted the detailed findings in the impugned order, which highlighted the active roles of the appellants in evading duty through clandestine removal of goods and manipulation of documents. The Commissioner found that Shri Ashwani Deewan engineered the evasion scheme and Shri Mahendra Sharma executed it under his direction. These findings justified the penalties imposed.

The Tribunal dismissed the appellants' request for a lenient view, noting that the company had failed to pay the penalty amount and the appellants' active participation in the evasion scheme warranted the penalties imposed. The Tribunal concluded that the penalties were appropriately quantified and justified based on the appellants' conduct and the established facts.

Conclusion:

The appeals were dismissed, upholding the penalties imposed by the Commissioner under Rule 26 of the Central Excise Rules, 2002, and Section 112 of the Customs Act, 1962. The Tribunal affirmed that the penalties were legally and factually justified, and the quantification of penalties was appropriate given the appellants' roles in the evasion scheme.

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