2017 (9) TMI 543 - AT - Central Excise

Penalty u/r 26 - Clandestine removal - Shortage of goods - penalty imposed on mere belief and not on corroborative evidences - Held that - the adjudicating authority in the denovo adjudication confirmed demand of ₹ 42 lacs but since the appeal of M/s. Sunrise Zinc Ltd stand dismissed as on date, demand of Rs, 42 Lacs stands upheld. As regard the role of Shri. Pankaj Jaju, he was actively involved in the entire operation being Executive Director of M/s. Sunrise Zinc Ltd. - It is also found that though the Ld. Counsel has submitted that while imposing penalty charge of belief of confiscation of the goods is not made by the adjudicating authority. However in the findings given in para 51.4, it is clearly held that Shri. Pankaj Jaju knows and had reason to believe that goods were liable to confiscation therefore he was liable for penalty under Rule 26. As regard the penalties on the other persons i.e. Victor Industries, Crown Indystries Unique Trading Corporation and Suman Bardia, they are not related to the company who has indulged in the clandestine removal i.e. M/s. Sunrise Zink Ltd. However they were involved in dealing with the goods which were cleared clandestinely therefore their involvement in not direct but indirect involvement was very much established. The penalty imposed on the appellants are excessive which deserve to be reduced considering the nature of the case and their role. Since the duty should not have been confirmed to the tune of ₹ 42 Lacs, the penalty commensurate to the said amount is also not proper. The penalty on Shri Pankaj Jaju reduced from ₹ 25 lacs to ₹ 4 Lacs and on other appellants i.e. Unique Trading Corporation penalty of ₹ 2 lacs to ₹ 25,000/- In respect of Victor Industries, Crown Industries and Suman Bardia, penalty of ₹ 15,000/- reduced to ₹ 10,000/-. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Confirmation of demand and penalty in the first adjudication.
2. Denovo adjudication leading to increased demand and penalties.
3. Imposition of penalties under Rule 26.
4. Involvement of different parties in the clandestine removal of goods.
5. Appeal against the denovo adjudication order.

Issue 1: Confirmation of demand and penalty in the first adjudication

In the initial adjudication, a demand of ?26,71,450 was confirmed against M/s. Sunrise Zinc Ltd, along with a penalty of ?20 lakhs on Shri Pankaj Jaju and smaller penalties on other parties. The Tribunal remanded the case back to the adjudicating authority for a fresh decision. In the subsequent denovo adjudication, the demand was increased to approximately ?42 lakhs, with higher penalties imposed. The appeal by M/s. Sunrise Zinc Ltd was dismissed due to non-compliance, leading to the confirmation of the demand.

Issue 2: Denovo adjudication leading to increased demand and penalties

The appellant argued that the adjudicating authority exceeded its mandate by reopening the entire case and confirming a higher demand than initially decided. The penalties imposed were contested on the grounds that there was no charge of confiscation of goods against the individuals. The appellant cited a case law to support this argument. The appellant contended that penalties on other parties were unjustified as their direct involvement was not proven.

Issue 3: Imposition of penalties under Rule 26

The Revenue authority justified the penalties by asserting the involvement of all appellants in the clandestine removal of goods by M/s. Sunrise Zinc Ltd. The authority maintained that penalties were rightly imposed due to the established connection between the appellants and the illicit activities.

Issue 4: Involvement of different parties in the clandestine removal of goods

The Member(Judicial) analyzed the roles of the parties involved. It was noted that Shri Pankaj Jaju, as the Executive Director of M/s. Sunrise Zinc Ltd, played an active role in the unlawful operations. Statements from company officials and corroborative evidence highlighted his significant involvement. The indirect involvement of other parties in dealing with the goods cleared clandestinely was also established, leading to penalties being imposed on them.

Issue 5: Appeal against the denovo adjudication order

After considering arguments from both sides and reviewing the records, the Member(Judicial) concluded that the penalties imposed were excessive given the circumstances. The demand of ?42 lakhs was deemed improper, leading to a reduction in penalties. The penalty on Shri Pankaj Jaju was reduced from ?25 lakhs to ?4 lakhs, and penalties on other appellants were also decreased. The appeals were partly allowed based on the reduced penalties.

This detailed analysis of the judgment covers the issues related to the confirmation of demand, denovo adjudication, imposition of penalties under Rule 26, involvement of different parties in the illicit activities, and the subsequent appeal against the denovo adjudication order.