2016 (7) TMI 722 - HC - Central Excise

Levy of penalty upon the appellant under Rule 173Q of the Central Excise Rules, 1944 for clandestine removal of the goods - Held that - The removal of excisable goods were substantial looking to the further annexures annexed with the show cause notice issued by the respondent-Department and also looking to the Order-in-Original passed by the Commissioner of Central Excise in his order dated 17th October, 2005. Sizable amount of central excise duty was evaded and, hence, no error has been committed while passing the Order-in-Original by the Commissioner of Central Excise, Ranchi as well as by the CESTAT, Kolkata for imposing penalty of ₹ 2 Lakh upon each of the appellants. We see no reason to take any other view than what is taken by the CESTAT, Kolkata. So far as penalty of ₹ 35 Lakhs upon the company is concerned, the matter has already been remanded by the CESTAT, Kolkata. The amount of ₹ 2 Lakh per head of penalty is absolutely just and proper, looking to the nature of clandestine removal of the goods without payment of the duty. There is no substance in these Tax Appeals and, hence, the same are, hereby, dismissed.

Issues:
1. Clandestine removal of excisable goods without payment of duty.
2. Classification of goods as excisable or semi-finished products.
3. Imposition of penalty on company and directors for removal of goods.

Issue 1: Clandestine removal of excisable goods without payment of duty
The Tax Appeal was filed against the judgment of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) regarding the removal of goods without duty payment. The appellant argued that the goods were not excisable as they were semi-finished products. However, the High Court rejected this argument based on the findings of the CESTAT and the Order-in-Original. The Court noted that the goods were excisable and were removed without payment of duty, leading to the imposition of penalties. The Court dismissed the appeal, stating that no substantial question of law was involved.

Issue 2: Classification of goods as excisable or semi-finished products
The appellant contended that the goods were semi-finished products and not excisable. The Court disagreed, stating that the process of drawing wires from solid aluminum constituted manufacturing, making the goods excisable. The Court emphasized that each stage of manufacturing, including the production of semi-finished goods, attracts excise duty. The appellant's argument that Rule 56-B exempted semi-finished goods from duty was rejected as no exemption order was produced. The Court upheld the imposition of duty on the goods and dismissed the appeal.

Issue 3: Imposition of penalty on company and directors for removal of goods
Penalties were imposed on both the company and its directors for the clandestine removal of goods without duty payment. The directors filed separate appeals against the penalties. The Court upheld the penalties, stating that when excisable goods are removed without duty payment, both the company and its management are liable for penalties. The Court found the penalties justified based on the significant evasion of central excise duty. The appeals by the directors were dismissed, affirming the penalties imposed by the CESTAT and the Commissioner of Central Excise.

In conclusion, the High Court upheld the findings of the CESTAT and the Commissioner of Central Excise, confirming the liability for duty payment and penalties on the company and its directors for the clandestine removal of excisable goods without payment. The Court emphasized the obligation to pay excise duty on all stages of manufacturing and found no grounds to interfere with the penalties imposed.

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