2017 (12) TMI 895 - AT - Central Excise

Penalty u/r 26 - benefit of reduced penalty u/s 11AC - interest - Clandestine manufacture and removal - Held that - Since the appellant had deposited the duty attributable to the goods manufactured in the same month, the interest demand cannot be fastened against the appellant since, there no delay in payment of the duty amount - Since, the entire amount of duty was deposited by the appellant before issuance of the SCN, the option for payment of reduced amount of penalty in terms of Section 11AC ibid should be available to it - benefit of reduced penalty allowed. Penalty u/r 26 - Held that - Since the appellant M/s Ganpati Ispat Pvt. Ltd. has accepted clandestine manufacture and removal of goods, the penalty imposed by the authorities below under Rule 26 is sustainable for the reason that without his active role and participation, the company cannot indulge with the fraudulent activity of removing the goods in clandestine manner - penalty justified but quantum reduced. Appeal allowed in part.

Summary

Issues:
1. Confirmation of duty demand against the appellant company.
2. Imposition of penalty on the appellant company and its director.
3. Benefit of reduced penalty under Section 11AC.
4. Imposition of personal penalty on the director.
5. Justification of penalty amount.

Analysis:

Confirmation of Duty Demand:
The case involved M/s Ganpati Ispat Pvt. Ltd., engaged in manufacturing iron and steel products, where duty evasion was suspected. The officers of DGCEI conducted a search, leading to the appellant accepting duty liability and depositing the amount. The original authority confirmed the duty demand along with interest and penalties. The Commissioner (Appeals) upheld this decision, prompting the appellants to appeal before the Tribunal.

Imposition of Penalty:
The appellant did not contest the duty demand but argued that the benefit of reduced penalty under Section 11AC was not extended. The appellant's consultant contended that personal penalty on the director was unjustified as he had no active role in the evasion. Citing a Gujarat High Court judgment, the consultant argued that the reduced penalty should apply if duty is paid promptly.

Benefit of Reduced Penalty:
The Tribunal acknowledged that the duty was paid promptly by the appellant, entitling them to the reduced penalty under Section 11AC. Referring to the Gujarat High Court case, the Tribunal directed the appellant to pay the reduced penalty within 30 days, emphasizing that the benefit should be available when duty is paid promptly.

Imposition of Personal Penalty:
The Tribunal upheld the penalty on the director, considering the company's involvement in clandestine activities. While justifying the penalty on the director, the Tribunal deemed the original penalty amount excessive, reducing it from ?2 lakhs to ?1 lakh.

Conclusion:
The Tribunal directed the appellant to pay the reduced penalty within the specified time frame and submit a compliance report. It upheld the penalty on the director but reduced the amount due to the duty liability involved. The appeals were disposed of with these modifications, ensuring fairness in penalty imposition based on the circumstances of the case.