2008 (12) TMI 136 - AT - Central Excise

Penalty u/r 26 of Central Excise Rules - From the reading of Rule 26, it is clear that the penalty prescribed under this rule is an amount not exceeding the duty involved or Rs. 10,000/- whichever is greater - what is prescribed in the Rules is upper limit of penalty and within that upper limit, the adjudicating authority has discretion to determine the quantum of penalty - there is no provision in this rule that penalty cannot be less than Rs. 10,000/- - therefore, Commissioner (Appeals) order upholding the penalty of Rs. 2,500/- is justified

Summary

Issues:
1. Shortage of stock of finished goods and raw material during a surprise visit to the factory.
2. Duty demand confirmation and penalty imposition on the company and its director.
3. Appeal for enhancement of penalty under Rule 26 of Central Excise Rules.

Issue 1: Shortage of Stock
During a surprise visit to the factory, officers discovered a shortage of stock of finished goods and raw material at M/s. Premier Ispat Ltd., leading to a duty demand of Rs. 1,45,004. The company paid the duty before the issuance of a show-cause notice. Subsequently, a notice was issued to confirm the duty demand and impose penalties on the company and its director under relevant provisions.

Issue 2: Duty Demand and Penalty Imposition
The Assistant Commissioner confirmed the duty demand and imposed a penalty of Rs. 10,000 on M/s. Premier Ispat Ltd. under Section 25 of Central Excise Rules, along with a penalty of Rs. 2,500 on the director. No penalty was imposed under Section 11AC. The Revenue filed an appeal seeking an increase in the penalty on the director, arguing that the minimum penalty under Rule 26 is Rs. 10,000.

Issue 3: Appeal for Penalty Enhancement
The Commissioner of Central Excise (Appeals) dismissed the Revenue's appeal, upholding the penalty of Rs. 2,500 on the director. The Revenue contended that the penalty should be at least Rs. 10,000 as per Rule 26. However, the Tribunal analyzed Rule 26, noting that the penalty should not exceed the duty involved or Rs. 10,000, whichever is greater. The Tribunal emphasized that the rule does not mandate a minimum penalty of Rs. 10,000, and the adjudicating authority has discretion within the prescribed upper limit. As the rule uses "not exceeding" instead of "equal to," the Tribunal found no merit in the Revenue's appeal and upheld the penalty of Rs. 2,500, dismissing the Revenue's appeal.

This judgment clarifies the interpretation of Rule 26 regarding penalties for excisable goods and highlights the discretionary power of the adjudicating authority within the specified limits.