2017 (6) TMI 968 - AT - Central Excise

Quantum of penalty - Rule 173Q(1) of the CER, 1944 - Clandestine removal - clearances of power loom spares in the guise of rough castings - Held that - Tribunal vide various decisions have held that penalty cannot be enhanced in de novo proceedings. The appellant cannot be placed in a precarious position than they were in before filing the appeals - reliance was placed in the case of M/s. Tata Iron & Steel Co. Ltd. Versus Commissioner of Central Excise, Jamshedpur 2016 (4) TMI 625 - CESTAT KOLKATA - penalty reduced to ₹ 28,586/- - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Confirmation of demand and penalty under Rule 173Q(1) of the Central Excise Rules, 1944.
2. Applicability of SSI exemption under Notification No.175/86.
3. Imposition of penalty in de novo proceedings.

Analysis:
1. The appeal was against an order confirming a demand of ?28,586 and imposing a penalty of ?6 lakhs on the appellant under Rule 173Q(1) of the Central Excise Rules, 1944. The impugned order was passed in de novo proceedings conducted following the Tribunal's final order. The Commissioner upheld the demand and penalty against the appellant based on previous adjudication orders related to clandestine clearances and duty payments. The appellant challenged the imposition of penalty exceeding the amount imposed in previous proceedings, citing legal precedents that penalty cannot be enhanced in de novo proceedings. The Tribunal, after considering the submissions, reduced the penalty to ?28,586, aligning with established principles that the appellant should not be in a worse position post-appeal.

2. The case involved the eligibility of the appellant for SSI exemption under Notification No.175/86. The appellant, a partnership firm engaged in manufacturing iron and steel castings and power looms, had faced multiple rounds of adjudication and appeals regarding duty payments and exemptions. The Tribunal found that the adjudicating authority had erred in determining the duty payable by not fully considering the benefits available to the appellant as an SSI unit under Notification No.175/86. Despite initially allowing some exemptions, the authority miscalculated the duty payable by applying a higher tariff rate, overlooking the further exemption available under the same notification. The Tribunal, in previous orders, had directed the authority to re-examine the appellant's eligibility for the SSI exemption. Ultimately, the Tribunal affirmed the appellant's entitlement to the SSI exemption and remanded the case for reconsideration, leading to the imposition of a reduced penalty and confirmation of a lower demand amount.

3. The issue of penalty imposition in de novo proceedings was a focal point of contention. The appellant argued against the increase in penalty beyond the amount imposed in the initial order, relying on legal principles and precedents that prohibit enhancing penalties in such circumstances. The Tribunal, after reviewing the arguments and case laws presented by both parties, concurred with the appellant's position. Citing established decisions, the Tribunal held that penalties should not be escalated in de novo proceedings, ensuring that appellants are not disadvantaged by filing appeals. Consequently, the Tribunal reduced the penalty to ?28,586, granting relief to the appellant in line with the legal principles governing penalty enhancements in appellate processes.