2018 (9) TMI 451 - AT - Central Excise

Penalty u/r 26 of CER - Clandestine manufacture and removal - goods were removed without documents and without payment of duty - case of appellant is that they are not the manufacturers and the details of the manufacturers are given whose statements were recorded by the authorities but no further investigation was taken up that they are not liable to pay any duty nor penalized under rule 26 of Central Excise Rules 2002. Held that - There is no dispute as to the fact that fully manufactured fans packed in cartons were found in the godown premises of the appellant consignment notes were issued for the consignments loaded in the trucks mentioning the name and the destination appellant could not produce any invoice way bills issued by the consignors or the manufacturers covering the material. Despite given an opportunity to produce the documents which would indicate that appropriate central excise duty has been paid on these fans appellant could not do so - The show cause notice itself directed the appellant to produce any documents while defending the case as made in the show cause notice for imposition of penalty under rule 26. Appellant could not do so. Rule 26 would apply directly in the case in hand as appellant is the person who acquired the possession of goods and were concerned with depositing or keeping the fans on which admittedly duty liability was not discharged - appellant has no case for praying for setting aside the penalties imposed under rule 26. However the penalty imposed on the appellant seems to be excessive and thus the quantum is reduced. Appeal disposed off.

Summary

Issues:
1. Imposition of penalty under Rule 26 of Central Excise Rules, 2002 on the transporter for goods found in possession.
2. Lack of documents indicating payment of appropriate duty for the goods seized.
3. Excessive penalty imposed on the transporter.

Issue 1: Imposition of penalty under Rule 26 of Central Excise Rules, 2002:
The appellant, a transporter, contested the show cause notice claiming they were not liable to pay duty or be penalized under Rule 26 as they were not the manufacturers of the goods found in their possession. The appellant argued that no investigation was conducted to identify the manufacturers of the goods supposedly cleared without duty payment. The consultant for the appellant cited several decisions to support setting aside the penalty imposed under Rule 26. However, the Departmental Representative contended that in the absence of documents proving duty payment, the penalty was correctly imposed.

Issue 2: Lack of documents indicating payment of appropriate duty:
Upon investigation, it was found that fully manufactured fans were discovered in the appellant's premises without any accompanying invoices or way bills covering the material. Despite being given an opportunity, the appellant failed to produce any documents indicating the payment of central excise duty on the seized goods. The appellant could not substantiate their claim that the goods were manufactured and delivered for dispatch. As per Rule 26, a penalty can be imposed on any person concerned with goods liable for confiscation, and in this case, the appellant was found to be in possession of such goods without duty payment.

Issue 3: Excessive penalty imposed on the transporter:
The Tribunal acknowledged that while the duty liability on the seized goods was approximately ?17,11,090, the penalty imposed on the appellant was excessively high at ?10,00,000. Considering this discrepancy, the Tribunal modified the impugned order by reducing the penalty on the appellant to ?5,00,000, which was deemed more proportionate to the duty liability. The impugned order was thus partially upheld with the penalty amount adjusted accordingly.

In conclusion, the Tribunal upheld the penalty imposed on the transporter under Rule 26 of the Central Excise Rules, 2002, due to the lack of documents proving duty payment for the seized goods. However, the excessive penalty of ?10,00,000 was reduced to ?5,00,000, aligning it more closely with the duty liability amount.