2011 (3) TMI 1128 - AT - Central Excise

Penalty - Benefit of SSI Notification No. 8/2000-CE dated 1st March 2000 denied - Held that - There is a clear mention in the show cause notice and further confirmed by the Adjudicating Authority that Director of the appellants company who was looking after the affairs of the company had clearly stated in his un-retracted statement that the appellants were aware that the goods in question were branded goods of another person and for the same reason, the appellants company was paying royalty to such another person and further that the appellants were aware that they were availing SSI exemption benefit under Notification No. 8/2000-CE dated 1st March 2000. This apparently discloses that in spite of knowing well that they were availing SSI exemption even though the same was not available to those persons using the brand name of another person for their product yet they continued to clear the goods with the use of the brand name by paying royalty to the another person to whom the brand name belonged to and yet continued to avail the exemption benefit under the said exemption notification till the date of visit by the excise officers to their factory. It was only after the visit by the excise officers to their factory that the appellants paid the duty. However, no interest for delayed payment of duty was paid. Very fact that the appellants awaited the visit of excise officers to their factory to pay the duty in relation to period of about one and half year itself discloses lack of bonafide. There is no explanation coming from the appellants as to what prevented them from clearing those dues prior to 18th October 2000 even though their Director has admitted that they knew that they were using the brand name of another person for their goods and for that purpose they were also paying royalty to such another person. Mere payment of duty, and that too only duty without any interest for delayed payment, cannot by itself be a ground to evade the liability in relation to the penalty. Thus the case is squarely covered by the provisions of Section 11AC and hence the 100% penalty was imposable in the matter.

Summary

Issues Involved:
1. Whether the conditions laid down under Section 11AC of the Central Excise Act, 1944, were satisfied for the imposition of penalty.
2. Whether the appellants were entitled to the benefit of SSI Notification No. 8/2000-CE dated 1st March 2000.
3. Whether the penalty imposed under Rule 173Q and Section 11AC was justified.

Issue-wise Detailed Analysis:

1. Conditions under Section 11AC for Imposition of Penalty:
The Hon'ble Delhi High Court remanded the matter to the Tribunal to decide if the conditions under Section 11AC were satisfied. The Tribunal was directed to consider this issue only if such a plea was raised in the grounds of appeal. The memo of appeal disclosed four grounds against the imposition of penalty: duty was paid before the show cause notice, no contravention of excise laws, the issue was a question of law, and consolidated penalty under Rule 173Q and Section 11AC was not permissible. The Tribunal noted that the duty demand was not contested by the appellants, and they did not dispute the liability to pay duty or the invocation of the extended period of limitation.

2. Entitlement to SSI Notification No. 8/2000-CE:
The appellants argued that they sold goods in plain boxes without a brand name and used branded carry-bags only for transportation. They claimed this did not affect their entitlement to the SSI exemption. However, the Director admitted the use of another person's brand name and payment of royalty, which indicated knowledge of availing SSI exemption despite ineligibility. The Tribunal found that the appellants continued to avail the exemption until the excise officers' visit, showing a lack of bonafide. The appellants did not provide evidence to support their claim that the brand name was only on carry-bags and not on the goods.

3. Justification of Penalty under Rule 173Q and Section 11AC:
The Tribunal examined the penalty imposed by the Additional Commissioner, which was equal to the duty amount and a personal penalty on the Director. The appellants did not challenge the duty demand or the extended period of limitation. The Tribunal cited the Supreme Court's rulings in Dharamendra Textile Processors and Rajasthan Spinning & Weaving Mills, which mandated that penalties under Section 11AC must be equivalent to the duty defaulted. The Tribunal dismissed the appellants' reliance on earlier decisions that predated these Supreme Court rulings. The Tribunal also noted that the matter involved factual appreciation rather than a question of law and that the appellants failed to produce evidence to support their claims.

Conclusion:
The Tribunal concluded that the appellants' failure to pay duty was in contravention of the provisions of law and that the 100% penalty under Section 11AC was justified. The appeals were dismissed, affirming the penalties imposed by the lower authorities.