2020 (2) TMI 904 - AT - Central Excise

Levy of personal penalty on the Manager Director of the company - Quantum of penalty u/r 26 of CER - short payment of duty - clearance of Bone Meat Meal in Domestic Tariff Area on payment of duty - benefit of N/N. 13/98-CE dated 02.06.1998 - HELD THAT - When in his appeal and throughout the proceedings appellant has not disputed that the company was clearing the goods after determining the classification of goods and payment of duty as determined by them in after availing the benefit of exemption under Notification No. 13/98-CE, the submission made by the learned Consultant to the effect that lower authorities have not followed the settled procedure of assessment i.e. determining classification etc. cannot be detrimental to the proceedings. At the relevant time the unit namely M/s P M L Industries was working under the scheme of self assessment as introduced in the year 1997 and paying the duty after determining the classification and value of the goods. Hence if the Revenue Authorities have in the present proceedings not determined the classification separately it can be concluded that department do not dispute the classification etc. There cannot be any dispute in this appeal that duty has been short paid in respect of the clearances made by M/s. P.M.L industries. Also the liability to confiscation of the goods which have been cleared on short payment of duty can be disputed. It is settled principle of law that when the two authorities have sitting separately arrived at the same finding of fact the same should normally not be disturbed till the time it can be shown to be perverse. Nothing has been produced to show that findings recorded by both the lower authorities in respect of the present appellant is perverse, hence we are not inclined to disturb the same - there are no merits in submissions that penalty under Rule 26 could not have been imposed upon the appellant, however, the penalty equivalent to the duty evaded on by P.M.L industries on the appellant is too harsh and should be reduced. Holding that penalty under Rule 26 is imposable on appellant, the same is reduced to ₹ 10,00,000/- - appeal allowed in part.

Summary

Issues Involved:
1. Demand of Central Excise duty and interest.
2. Imposition of personal penalties under Rule 25 and Rule 26 of Central Excise Rules, 2002.
3. Classification and valuation of goods cleared by the appellant.
4. Relationship between the appellant and related entities.
5. Liability of the Managing Director for the contraventions.

Detailed Analysis:

1. Demand of Central Excise Duty and Interest:
The Additional Commissioner confirmed the demand of Central Excise duty amounting to ?53,17,908/- against the noticee under Section 11A of the Central Excise Act, 1944, along with interest under Section 11AB. This demand arose from three show cause notices alleging under-valuation of goods cleared in the Domestic Tariff Area (DTA).

2. Imposition of Personal Penalties:
The Additional Commissioner imposed personal penalties of ?53,17,908/- on both the company and its Managing Director under Rule 25 and Rule 26 of the Central Excise Rules, 2002, respectively. The penalties were upheld by the Commissioner (Appeals) and were challenged in the present appeal.

3. Classification and Valuation of Goods:
The appellant argued that the demand and penalties were unsustainable as the valuation was determined under Section 4 of the Central Excise Act, 1944, instead of Section 14 of the Customs Act, 1962, which should apply to EOUs clearing goods in the DTA. The appellant cited precedents like EON Polymers Ltd. and Circular No. 933/23/2010-CX to support their claim. However, the Tribunal noted that the appellant did not dispute the classification and payment of duty under self-assessment, and thus, the classification was not in question.

4. Relationship Between the Appellant and Related Entities:
The adjudicating authority found that the appellant had a significant role in the operations of both P.M.L. Industries and Hi-tech Group, with common directors and financial dealings between the entities. Statements from various employees confirmed the mutual interest and control exercised by the appellant over both companies, leading to under-valuation and short payment of duty.

5. Liability of the Managing Director:
The Tribunal noted that the appellant, as the Managing Director, was responsible for the day-to-day operations and decisions leading to the short payment of duty. The adjudicating authority detailed the appellant's pivotal role in the contraventions, justifying the imposition of penalty under Rule 26 of the Central Excise Rules, 2002. However, the Tribunal found the penalty amount too harsh and reduced it to ?10,00,000/-.

Conclusion:
The Tribunal upheld the findings of the lower authorities regarding the short payment of duty and the appellant's liability. The penalty under Rule 26 was deemed appropriate but reduced to ?10,00,000/- considering the circumstances. The appeal was partially allowed, reducing the penalty imposed on the appellant.