2014 (7) TMI 402 - AT - Central Excise

Imposition of penalty - benefit of reduced penalty upto 25% - Held that - demand of duty of ₹ 14,00,100/- as not contested. Joint Commissioner, while adjudicating the show cause notice has, in clear terms, extended the option to pay the entire duty amount along with interest and 25% of the penalty within a period of 30 days from the passing of the order-in-original to the appellant, who have chosen not to avail the same. Once such option was given to the assessee, who have failed to exercise the same, the reduction of penalty at the second appellate stage would neither be justified nor in accordance with the provisions of law. The entire idea of depositing the dues alongwith 25% of penalty within a period of 30 days from the passing of the order by the original Adjudicating Authority gets defeated if the appellant who has chosen to ignore such an option on that particular point of time is extended the same after a gap of period, at the appeal stage. As such, I find no merits in the prayer of the learned advocate to reduce the penalty to 25%. - Decided against assessee. As regards penalty of ₹ 50,000/- on Shri R.P. Sharma, the Manger of the company. I find that there is no direct evidence on record indicating his involvement in the clandestine activities. He was only an employee of the company and in the absence of any evidence to implicate him, I, by extending the benefit of doubt to him set aside the penalty of ₹ 50,000/- imposed upon on him. - Decided in favour of assessee.

Issues:
1. Confirmation of demand of duty against M/s Kuber Tobacco Products Pvt. Ltd.
2. Imposition of penalty on M/s Kuber Tobacco Products Pvt. Ltd. and Shri R.P. Sharma, Manager.
3. Applicability of penalty reduction provision under Section 11AC of the Central Excise Act.
4. Justification for penalty imposition on the Manager.

Confirmation of Demand of Duty:
The judgment revolves around confirming the demand of duty amounting to Rs. 14,00,100 against M/s Kuber Tobacco Products Pvt. Ltd. for clandestine clearance of their final products. The Central Excise officers discovered excesses and shortages during a factory visit, along with recovery of loose papers indicating cash sales of gutkha and pan masala related to clandestine clearances. The appellant admitted to these activities, leading to the initiation of proceedings and subsequent confirmation of the duty demand by the lower authorities. The appellant's appeal to reduce the penalty and contest the demand was rejected by the Tribunal.

Imposition of Penalty:
In addition to confirming the duty demand, penalties were imposed on M/s Kuber Tobacco Products Pvt. Ltd. and the Manager, Shri R.P. Sharma. The original Adjudicating Authority imposed penalties under Section 11AC of the Central Excise Act, 1944, amounting to 100% of the duty evaded. Despite the appellant's failure to exercise the option to pay the duty, interest, and 25% of the penalty within the specified period, the Tribunal upheld the penalties as per the law declared by the Hon'ble Supreme Court. The penalty on the Manager was set aside due to lack of direct evidence implicating him in the clandestine activities, granting him the benefit of doubt.

Applicability of Penalty Reduction Provision:
The Tribunal analyzed the applicability of the penalty reduction provision under Section 11AC of the Central Excise Act, which allows the assessee to pay the duty, interest, and 25% of the penalty within 30 days to reduce the penalty to 25%. The Tribunal emphasized that the option must be extended by the original Adjudicating Authority, and in this case, the appellant was given the option but chose not to avail it. Therefore, the Tribunal concluded that reducing the penalty at the appellate stage would not be justified, as the appellant had ignored the option initially provided.

Justification for Penalty Imposition on the Manager:
Regarding the penalty imposed on the Manager, Shri R.P. Sharma, the Tribunal found no direct evidence linking him to the clandestine activities. As he was merely an employee responsible for day-to-day affairs without concrete evidence of involvement, the Tribunal set aside the penalty of Rs. 50,000 imposed on him, extending the benefit of doubt. The Tribunal disposed of both appeals by rejecting the appeal of M/s Kuber Tobacco Products Pvt. Ltd. and setting aside the penalty on the Manager.

This detailed analysis of the judgment highlights the key issues addressed, decisions made, and legal principles applied by the Tribunal in the case.

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