2017 (1) TMI 227 - AT - Central Excise

Clandestine removal - Interest - Penalty - Rule 26 of the CER, 2002 - Held that - It is on record that such activity of repacking and clearance of oil in metal containers in the guise of empty containers has been detected by the Revenue on the basis of investigations undertaken. The finding of such suppression and clandestine clearance also stands admitted. We find that penalty under Section 11 AC has been imposed for an amount equal to the duty evaded. The appellant-assessee has prayed for setting aside such penalty. In this connection, we note that the penalty under Section 11 AC becomes payable the moment duty demands get confirmed under Section 11 A in cases where the allegation of suppression of facts or fraud stands established. In the present case, we find that Shri S.K. Bansal, who is the director of the appellant-assessee, has involved himself in the evasion of Excise duty by clandestine clearance of the goods. But he might have not been aware of the manner of clandestine removal of the goods. It appears that he was not actively involved in the activities but he cannot deny his responsibility - However, keeping in view the facts and circumstances of the case, we reduce the penalty on Shri S.K. Bansal, Director, from ₹ 2 lakhs to ₹ 50,000/- which will meet the ends of justice - Appeal disposed of.

Summary

Issues:
- Duty demand on clearance of lubricating oil by repacking
- Penalty imposition on appellant-assessee
- Penalty imposition on director

Analysis:

Issue 1: Duty demand on clearance of lubricating oil by repacking
The case involves an appeal against an Order demanding Central Excise Duty for alleged clandestine removal of goods. The appellant, registered for manufacturing metal containers, repacked lubricating oil into 250 ml containers and cleared them by paying duty at the value of empty containers. The repacking activity was considered manufacturing under Section 2(f)(iii) of the Central Excise Act, leading to a duty demand of ?10,04,805 under Section 11A proviso. The interest and penalty under Section 11AC were also imposed. The Tribunal upheld the duty demand and interest, as the appellant admitted to the suppression and clandestine clearance. The penalty under Section 11AC, equal to the evaded duty, was upheld due to established suppression, leaving no discretion for setting it aside.

Issue 2: Penalty imposition on appellant-assessee
Regarding the penalty on the appellant-assessee, the Tribunal noted that the duty demand arose from clandestine clearance of goods through repacking, which was confirmed by investigations. As the duty evasion was established, the penalty under Section 11AC, equal to the evaded duty, was deemed payable. The Tribunal upheld this penalty, emphasizing that in cases of suppression or fraud, penalties under Section 11AC are mandatory upon duty confirmation. Thus, the penalty on the appellant-assessee was maintained.

Issue 3: Penalty imposition on director
The penalty imposed on the director, Shri S.K. Bansal, under Rule 26 of the Central Excise Rules, was also addressed. While acknowledging his involvement in the evasion of Excise duty through clandestine clearance, the Tribunal considered that he may not have been fully aware of the specifics of the evasion. Despite not being actively engaged, the director could not deny responsibility. Therefore, a penalty was deemed appropriate under Rule 26. However, considering the circumstances, the penalty on the director was reduced from ?2 lakhs to ?50,000 to serve the ends of justice. The Tribunal disposed of both appeals accordingly, pronouncing the decision on 22/12/2016.