2019 (6) TMI 1595 - AT - Central Excise

Levy of penalty - personal involvement by the appellant in the alleged clandestine manufacture and removal of the goods or not - HELD THAT - Undisputedly there has been manufacture and clearance of excisable goods clandestinely by M/s B.K. Industries of which Shri Radheshyam Sarda was the Director. In his statement recorded by the officers, Shri Sarda categorically admitted that the said manufacturing unit was indulged in clandestine manufacture and clearance of the finished goods during the relevant period and agreed to deposit the entire amount of duty not paid. Also, in his statement dated 25.11.2009, he has accepted that he looks after day to day affair of the factory including purchase, sale and production. Therefore, his plea that personal penalty cannot be imposed on him is without merit, accordingly, imposition of penalty under Rule 26 of Central Excise Rules, 2002 is justified. In the interest of justice, penalty imposed is reduced to ₹ 2.00 lakhs - appeal allowed in part.

Summary

Issues: Imposition of penalty on the appellant for alleged clandestine manufacture and removal of goods.

In this case, the appellant, who was the Director of a company engaged in manufacturing iron and steel products, challenged the imposition of a penalty of ?5.00 lakhs on him. The Central Excise officers found shortages in stock inputs/raw materials during a visit to the factory premises based on information from the Income Tax Department. A show-cause notice was issued for recovery of Central Excise duty, which was later reduced after adjudication. The appellant disputed the penalty, claiming no personal involvement in the alleged clandestine activities. The Revenue, however, argued that the appellant had admitted to clandestine activities in his statements and that the penalty was justified. The tribunal noted the admissions made by the appellant and upheld the imposition of a penalty but reduced it to ?2.00 lakhs considering the circumstances and the amount of duty involved. The appeal was partly allowed for the reduction of the penalty.

This judgment highlights the importance of evidence and admissions in cases involving clandestine activities. It underscores the liability of directors for penalties in such situations, even if they claim lack of personal involvement. The tribunal's decision to reduce the penalty demonstrates a balanced approach considering the duty amount and other relevant factors.