2016 (9) TMI 735 - AT - Central Excise

Levy of penalty - no challenge to the confirmation of demand of duty or confiscation of the seized goods - unaccounted stock - The godown search revealed presence of the lamination goods, including inner pouch and outer packing with the brand name of the Kuber Group of Companies - The godown keeper the could not produce any documents to show the stock of the goods in the godown - Held that - as per proviso to Section 11AC if an assessee pays 25% of the penalty within a period of 30 days from the imposition of penalties, the penalty shall stand reduced to the said amount. Though the order of the Adjudicating Authority imposing penalty under Rule 25 cannot be faulted with though in normal circumstances penalty is required to be imposed in terms of Section 11AC, in which case the benefit of reduced penalty would have been available to the appellant, the said factor can be taken into consideration for reducing the penalty imposed under Rule 25. It already stand observed that Rule 25 does not require imposition of penalty to the extent of 100%. Further as a lot of time gap has passed between the date of passing of the order till date and the appellant had not deposited any penalty amount till date, I, by taking the interest factors into account reduce the penalty imposed upon M/s Jenith Laminators Pvt. Ltd. to 50% of the penalty imposed upon them. As regards penalty imposed on the Directors, it is seen that Director in his statement has admitted removal of the goods from its factory to godown, without payment of duty, and as such, he is also liable to penalty. - Penalty on director also reduced to 50% Decided partly in favor of assessee.

Summary

Issues:
Imposition of penalties under Rule 25 of the Central Excise Rules instead of Section 11AC in a case involving clandestine activities.

Analysis:
The judgment pertains to a case where the manufacturing unit was engaged in the production of laminations under Chapter 39 of the Central Excise Tariff Act, 1985. During a search operation, goods were found in the godown without proper documentation or payment of duty. The original Adjudicating Authority confirmed a duty demand of &8377; 3,74,847 and imposed penalties under Rule 25 of the Central Excise Rules. The Commissioner (Appeals) upheld this decision, leading to the current appeals.

The main contention raised by the appellants was the imposition of penalties under Rule 25 instead of Section 11AC for clandestine activities. The appellants argued that Section 11AC allows for a reduced penalty if 25% is paid within 30 days, which was not considered in this case. The Adjudicating Authority defended the penalty under Rule 25, stating it allows penalties not exceeding the duty amount, subject to Section 11AC. However, the Tribunal noted the difference in wording between Rule 25 and Section 11AC, where the latter allows for a penalty up to 100% of the duty.

Considering the delay in penalty payment and the appellant's argument for reduced penalties under Section 11AC, the Tribunal reduced the penalties imposed on the manufacturing unit and the Director to 50% of the original amounts. The Director was found liable for penalties due to his involvement in the removal of goods without duty payment. The judgment concluded by disposing of both appeals with the revised penalty amounts.

In summary, the Tribunal addressed the issue of penalty imposition under Rule 25 instead of Section 11AC in a case involving clandestine activities. By considering the wording of the rules, delay in payment, and the appellant's argument for reduced penalties, the Tribunal reduced the penalties imposed on the manufacturing unit and the Director to 50% of the original amounts, ultimately disposing of both appeals.