2017 (1) TMI 214 - AT - Central Excise

Clandestine removal - Interest - Penalty - Held that - Tribunal in CCE, Chandigarh vs. Vikash Garg 2011 (266) ELT 137 (Tri-Del) , which is on similar facts, supports the view that penalty on the partner should be abated - Appeal allowed.

Summary

Issues:
Appeal against order passed by Commissioner (Appeals) upholding penalty on supplier but concluding proceedings against director for alleged clandestine manufacture.

Analysis:
The appeal was filed against an order passed by the Commissioner (Appeals) upholding the penalty on the supplier but concluding the proceedings against the director for alleged clandestine manufacture. The investigation was conducted by DGCEI on M/s. G & G Ispat (P) Ltd. Raipur for clandestine manufacture. The original authority confirmed the Central Excise duty on alleged clandestinely cleared goods along with interest and imposed penalties on the assessee and the director. The Commissioner (Appeals) upheld the penalty on the supplier but concluded the proceedings against the director. The main contention in the appeal was whether the penalty on the director should be upheld. The advocate for the appellant argued that as per Section 11A(2) proviso, if the duty along with interest and 25% of penalty is paid within 30 days of the show cause notice, the proceedings should be deemed concluded, citing a relevant Tribunal decision. On the other hand, the Revenue argued that since the director was involved in clandestine activities, the penalty should be upheld.

The Tribunal analyzed the relevant legal provisions under Section 11A(2) and the provisos. It was noted that the duty demand was proposed against the partnership firm, and the show cause notice was directed against the firm. The original authority had accepted the payment of duty, interest, and 25% of the penalty, closing the proceedings against the firm. The proviso to Section 11A(2) specified that the proceedings in respect of all noticees shall be conclusive as to the matters stated therein. Since the proceedings against the partnership firm were closed, there was no justification for imposing penalties on the partners. The penalties under Rule 26 of the Central Excise Rules, 2002, were connected to the duty demand under Section 11A. Therefore, the Tribunal set aside the penalty imposed on the director, concluding that the penalty was not justified based on the legal provisions and the specific circumstances of the case.

In conclusion, the Tribunal set aside the penalty imposed on the director, allowing the appeal. The decision was based on the clear provisions of Section 11A(2) and the provisos, which indicated that once the proceedings against the partnership firm were concluded, there was no basis for imposing penalties on the partners. The judgment highlighted the importance of legal provisions and the need for penalties to be justified based on the specific circumstances and liabilities of the parties involved in the case.