2019 (5) TMI 1143 - AT - Central Excise

Clandestine removal - Bags and Soft Luggage items - Penalty imposed u/s 26 of CER - Demand based on statements of Directors - HELD THAT - When the officers of DGCEI visited the premises of the factory, they found 1806 Nos of bags which were not accounted for with intent to clear without payment of duty. Further, these bags were not seized from outside the factory premises or during transit and that were seized from the factory premises. Therefore, In view of Rule 4 of Central Excise Rules, duty is payable only at the time of clearance of goods from the factory and in this case, there was no clearance of the said goods from the factory addressing presumptions that they were not accounted with intent to clear without payment of duty is not tenable in law. With regard to the demand of ₹ 1,73,625/- on 1479 Nos of bags, the appellant during the pendency of this appeal had paid the duty of ₹ 1,73,625/- along with interest of ₹ 1,01,423/-. In view of the said payment of duty, I hold that the appellant could not prove by cogent and convincing evidence that they were not clandestinely removing the said goods therefore the duty on 1479 Nos of bags amounting to ₹ 1,73,625/- is confirmed. Penalty on Directors - HELD THAT - Penalty under Rule 26 of the Central Excise Rules is imposable on any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or the Rules but there is no evidence in the present case that the Directors in their individual capacity were guilty of any omissions and commissions mentioned in the Rule - Essentially, in the present case unintended lapses were there and hence the imposition of personal penalty on the Directors is not justified. Appeal allowed in part.

Summary

Issues Involved:
- Demand of Central Excise Duty on seized goods
- Demand of Central Excise Duty on excisable goods removed without payment
- Imposition of interest under Section 11AA of CEA
- Imposition of penalty under Section 11AC of CEA/Rule 25 of Central Excise Rules
- Imposition of penalty on Directors under Rule 26 of Central Excise Rules

Analysis:

Demand of Central Excise Duty on Seized Goods:
The case involved the seizure of 1806 bags from the appellant's premises by DGCEI officers, alleging non-accounting with intent to clear without payment of duty. The appellant argued that the goods were accounted for and intended for legitimate sale after discharging applicable duty. The tribunal noted that the bags were seized from the factory premises and not during transit, hence duty is payable only upon clearance from the factory. Citing precedent, the tribunal ruled that in the absence of evidence showing intent to evade duty, the demand of duty amounting to ?3,38,399/- was set aside.

Demand of Central Excise Duty on Excisable Goods Removed Without Payment:
Regarding the demand of ?1,73,625/- on 1479 bags allegedly removed without payment of duty, the appellant contended that these goods were manufactured by another entity below the duty threshold and sold through the appellant's premises. The tribunal found that the appellant failed to prove non-clandestine removal, as evidenced by the payment of the demanded duty and interest during the appeal. Consequently, the demand was confirmed, and equal penalty under Section 11AC was imposed.

Imposition of Penalty on Directors under Rule 26 of Central Excise Rules:
The tribunal addressed the imposition of penalties on the directors of the company. The appellant argued that the directors were not directly involved in any violations mentioned in the rule. Relying on precedent, the tribunal held that unless a specific role of the directors in the violations is established, penalties under Rule 26 are not justified. Consequently, the penalties on the directors were set aside, each reduced to ?50,000/-.

In conclusion, the tribunal set aside the demand of ?3,38,399/- on the company, confirmed the demand of ?1,73,625/- along with penalties, and dropped the penalties imposed on the directors. The appeals were disposed of accordingly.