2018 (1) TMI 706 - AT - Central Excise

Penalties - clandestine removal - shortages in the stock of raw materials and finished goods - Held that - the Commissioner (Appeals) has gone into the factual details to hold that penalties cannot be imposed on the respondent under the circumstances of the case - the appeal decided by the Commissioner (Appeals), based on facts, cannot be disturbed by the Tribunal - penalty rightly set aside - appeal dismissed - decided against Revenue.

Summary

Issues:
- Appeal against dropping of penalty by the Commissioner (Appeals) without proper appreciation of facts.
- Imposition of penalty under Section 11AC of the Central Excise Act, 1944.
- Justification of penalty imposition based on factual matrix and evidence of clandestine removal.

Analysis:

1. Appeal against Dropping of Penalty:
The Revenue filed an appeal challenging the order passed by the Commissioner (Appeals), asserting that the dropping of the penalty in the adjudication order was not legally sustainable. The appellant argued that the Commissioner (Appeals) did not provide specific observations to support the dropping of the penalty amount. The appellant relied on the judgment of the Hon'ble Supreme Court in the case of Z.B. Nagarkar Vs. Union of India to emphasize the mandatory nature of imposing penalties under Section 11AC of the Central Excise Act, 1944. The appellant contended that the liability for penalty payment hinges on the decision based on merit.

2. Imposition of Penalty under Section 11AC:
The respondent, represented by a consultant, defended the dropping of the penalty by the Commissioner (Appeals) by stating that the decision was justified based on the facts and circumstances of the case. The consultant argued that the Commissioner (Appeals) extensively elaborated on the reasons for not justifying the imposition of penalty under Section 11AC of the Central Excise Act, 1944. It was emphasized that the Commissioner (Appeals) based the decision on a thorough analysis of both facts and the law. The consultant contended that since the decision was factually driven, it should not be disturbed at the Tribunal's stage.

3. Justification of Penalty Imposition:
Upon hearing both arguments, the Tribunal found that while the Commissioner (Appeals) upheld the Central Excise duty demand, the imposition of penalty was dropped due to insufficient evidence of clandestine removal of goods. The Tribunal noted that the adjudicating authority failed to substantiate the charges of clandestine removal adequately. The Tribunal highlighted a paragraph from the impugned order where the Commissioner (Appeals) detailed the lack of incriminating evidence or material to prove clandestine removal, emphasizing the absence of intent to evade duty. The Tribunal agreed with the Commissioner (Appeals) that penalties could not be imposed without tangible evidence of clandestine activities. Based on the factual analysis provided by the Commissioner (Appeals), the Tribunal concluded that the appeal decision should stand, and there was no basis to disturb the dropping of the penalty against the respondent.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) to drop the penalty against the respondent, emphasizing the importance of factual evidence in justifying the imposition of penalties under the Central Excise Act, 1944. The Tribunal dismissed the appeal filed by the Revenue and disposed of the cross objections filed by the respondent accordingly.