2016 (4) TMI 604 - AT - Central Excise

Non obtaining of Central Excise registration on reaching full exemption limit of Rs. One Crore - Imposition of penalty under Section 11AC and a separate penalty on partner under Rule 26 of the Central Excise Rules, 2002 on Appellant No.2 - Held that - We find that the appellant has violated the terms of the said declaration and had not intimated the Central Excise authorities on crossing the exemption limit of ₹ 1 Crore. They had not obtained the Central Excise registration on reaching full exemption limit of Rs. One Crore and had cleared goods without payment of duty. We find that they continued to clear the goods without payment of duty from 01.01.2005 to 07.03.2005 (till the visit of the officers). We do not agree with the contention of the learned Consultant that they had time till the end of March 2005 to file the Central Excise Returns and pay Central Excise duty. The said time limit is for a Central Excise Registered Licensee. If the appellant had intimated the Central Excise authorities on crossing the exemption limit, and followed the procedures prescribed in this regard as they themselves had solemnly declared to do, such contentions would have had some merit. We find that they were aware of the exemption limit and the procedures to be followed. Therefore, we find force in the contention of the learned Authorised Representative for Revenue that the ingredients for invoking extended period under Section 11A and for imposition of penalty under Section 11AC are present in the subject case. We find no reason to interfere with the order of the lower authorities imposing penalty under Section 11AC on the Appellant No.1. However, we find that the adjudicating authority had not extended the option of payment of 25% of the duty under Section 11AC and therefore, extending the same to the appellant by the Commissioner (Appeals) in the impugned order is justified. We also find force in the arguments of the learned Consultant that separate penalty should not be imposed on Appellant No.2 who is partner of the firm, as penalty has already been imposed on the partnership firm. See Pravin N. Shah vs. CESTAT 2012 (7) TMI 850 - GUJARAT HIGH COURT

Summary

Issues:
Levy of duty, imposition of penalty under Section 11AC, penalty under Rule 26 of Central Excise Rules, mistaken belief on exemption limit, evasion of duty, imposition of penalties on partnership firm and partner, violation of declaration, extended period under Section 11A, payment of duty, appeal outcomes.

Detailed Analysis:

1. Levy of Duty:
The Appellant No.1, engaged in manufacturing goods falling under Chapter 84, exceeded the exemption limit specified in Notification No. 8/2003-CE. Despite this, they neither obtained Central Excise Registration nor paid duty on goods cleared in excess of the limit. The duty liability was confirmed, and the appellants deposited the duty amount of ?9,02,563. The Commissioner (Appeals) modified the penalty under Section 11AC to 25% of the duty confirmed.

2. Imposition of Penalty under Section 11AC:
The Appellant No.1 contested the penalty imposition under Section 11AC, citing a mistaken belief that the exemption limit was ?3 Crores. They argued that they had no intention to evade duty and that the extended period under Section 11A was not applicable. The Tribunal found that the penalty imposed on Appellant No.1 was warranted due to the violation of declaration terms and failure to follow prescribed procedures.

3. Penalty under Rule 26 of Central Excise Rules:
A separate penalty of ?25,000 was imposed on Appellant No.2 under Rule 26 of the Central Excise Rules, 2002. The Appellant argued against this penalty, stating that since a penalty was already imposed on the partnership firm, a separate penalty on the partner was not sustainable. The Tribunal agreed with this argument, citing legal precedents supporting the non-imposition of separate penalties on the partner.

4. Violation of Declaration and Extended Period under Section 11A:
The Tribunal noted that the appellants violated the terms of the declaration by not intimating the Central Excise authorities upon crossing the exemption limit. They continued to clear goods without payment of duty, which led to the imposition of penalties. The Tribunal found that the ingredients for invoking the extended period under Section 11A and imposing penalty under Section 11AC were present in this case.

5. Outcome of Appeals:
After considering the submissions and perusing the records, the Tribunal dismissed the appeals filed by Appellant No.1 and Revenue. However, the appeal filed by Appellant No.2 succeeded. The Tribunal upheld the penalty on Appellant No.1 under Section 11AC but agreed with the reduction to 25% of the duty confirmed by the Commissioner (Appeals). Additionally, the Tribunal ruled in favor of Appellant No.2, stating that a separate penalty on the partner was not sustainable.

This detailed analysis covers the various issues involved in the legal judgment delivered by the Appellate Tribunal CESTAT AHMEDABAD, providing a comprehensive overview of the arguments presented and the Tribunal's findings on each issue.