2017 (5) TMI 324 - AT - Central Excise

Imposition of Penalty u/r 26 of CER 2002 - quantum of penalty - clandestine removal - job work - penalty imposed on the appellant an employee of the main party M/s Qualimax Electronics (P) Ltd. situated at D-12 Site-IV Industrial Area Sahibabad Distt. Ghaziabad during the relevant period - the employee is believed to be involved in evasion of duty and in this way he has dealt with the goods which were cleared without payment of duty liable to confiscation - Held that - the appellant was a small-time employee drawing a salary of Rs. 10, 000/- during the relevant period. Although he is an educated person but it is not the case of Revenue that he was entitled to and/or getting the share in the clandestine activity of his employer. It appears that the appellant unknowingly got involved as an employee in the clandestine activity of his employers - the appellant is liable to penalty but at the same time the quantum of penalty imposed is quite high and harsh - penalty reduced to Rs. 2, 50, 000/- - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Imposition of penalty under Rule 26 of the Central Excise Rules, 2002 on the appellant, an employee of M/s Qualimax Electronics (P) Ltd.
2. Justification of the quantum of penalty of Rs. 10 lakhs imposed on the appellant.

Analysis:
1. The appeal revolved around the imposition of a penalty of Rs. 10 lakhs on the appellant, an employee of M/s Qualimax Electronics (P) Ltd., for his involvement in evasion of duty related to the clandestine clearance of Tyre Flaps. The investigation revealed that M/s QEPL was using a front firm, M/s Vikram Tyres, to clear goods manufactured by M/s QEPL without paying the appropriate Central Excise duty. The appellant, as the Manager of M/s QEPL, was found to be involved in the transportation, removal, and selling of these excisable goods. Despite being educated and drawing a modest salary, it was established that the appellant unknowingly participated in the clandestine activities of his employers. The Tribunal acknowledged his limited role as an employee and reduced the penalty imposed from Rs. 10 lakhs to Rs. 2,50,000, considering the circumstances.

2. The appellant's counsel argued that the appellant had no personal interest in the clandestine activities and was merely following instructions from the Directors of M/s QEPL. It was highlighted that the appellant was not benefiting financially from the evasion scheme and was drawing a minimal salary. The Revenue, however, supported the initial penalty citing the appellant's involvement in the evasion of duty. After evaluating the contentions and the evidence, the Tribunal agreed that the appellant, though liable for penalty, was a small-time employee who inadvertently became entangled in the unlawful activities of his superiors. Hence, the Tribunal deemed the original penalty amount of Rs. 10 lakhs as excessive and reduced it to Rs. 2,50,000, granting partial relief to the appellant. The decision was made to uphold the penalty but modify its quantum to align with the appellant's role and circumstances.

In conclusion, the Tribunal upheld the liability of the appellant for penalty under Rule 26 of the Central Excise Rules, 2002, but reduced the penalty amount from Rs. 10 lakhs to Rs. 2,50,000, considering the appellant's position as a small-time employee who was not directly benefiting from the evasion scheme.