2021 (12) TMI 336 - HC - Central Excise

Levy of penalty on the company and its Director - initiation of proceeding was not permissible under Section 11A since there was no short-levy or non-levy of short payment of duty was existing on the date of initiation of proceeding - imposition of penalty is likely to be mandatory when penalty under Rule 25 is not mandatory - validity of levy of penalty under Rule 25 without any proposal for confiscation and/or confiscation of the goods and without mentioning any sub-rule is maintainable - Whether separate penalty on the Director is imposable, when penalty has been imposed on the company? HELD THAT - The assessee was ready to pay interest and the Tribunal has recorded such a concession. Therefore, the only issue whether penalty was rightly imposed or not is the crux of the matter which needs consideration. Considering the facts and circumstances of the case it is found that the penalty was rightly imposed on the assessee. Whether the assessee would be entitled to the benefit of paragraph 2 of the order of adjudication dated 15th December, 2016 by which the adjudicating authority stated that if the duty determined under Section 11A is paid within thirty days from the date of communication of the order of adjudication the amount of penalty liable to be paid by the assessee shall be 25% of the duty so determined provided further if the reduced penalty is also paid within 30 days from the date of receipt of the order of adjudication? - HELD THAT - Admittedly the duty has been paid much earlier by cheque dated 29th August 2005 i.e. much prior to the issuance of the showcause notice. Therefore, the appellant should be granted the benefit of 25% of the duty so determined by the adjudicating authority. The other condition which has been stipulated in the order of adjudication is that reduced penalty should be paid within 30 days from the date of receipt of the order of adjudication. Though such may be the condition but the same cannot negate the appellant/assessee s right to prefer a statutory appeal provided under the Act. Two tiers of appeal, have been provided for under the Act and, therefore, the proper interpretation to compute the period of thirty days for payment of the reduced penalty is that such period shall start from the date on which the matter attains finality. The present proceeding is an appeal against the order of the Tribunal which is a continuation of the original proceeding though strictly not in the nature of first appeal under the Code of Civil Procedure as in the instant appeal the Court is to be satisfied that substantial question of law is involved. Nevertheless, this appeal has been pending before this Court from 2017. If the appellant is permitted to pay reduced penalty i.e. 25% of the duty so determined within 30 days from the date of receipt of server copy of this order, the benefit should enure in favour of the appellant/assessee - the substantial question of law are answered against the assessee and the only relief granted to the assessee is permitting them to pay 25% of the duty determined by the adjudicating authority in this order of 15th December, 2016 within 30 days from the date of receipt of the server copy of this judgement and order. Appeal dismissed.

Summary

Issues Involved:
1. Imposition of penalty on the company and its Director
2. Perversity in Tribunal's finding regarding penalty imposition
3. Imposition of penalty under Rule 25 without proposal for confiscation
4. Imposition of separate penalty on the Director

Analysis:

Issue 1: Imposition of Penalty on the Company and its Director
The main issue in this case was whether the penalty imposed on the assessee and director was justified under the Central Excise Act and Rules. The Court found that there was clandestine removal of excisable goods without payment of duty, which was admitted by the director. The goods were cleared without payment of excise duty, and even though the duty was paid after detection by the department, the evasion was deliberate. The Court upheld the penalty imposed on the assessee, considering the deliberate evasion of duty.

Issue 2: Perversity in Tribunal's Finding
The Tribunal's finding regarding the imposition of penalty was challenged by the assessee. The Tribunal confirmed the order of the first appellate authority, which held that penalty was imposable due to the deliberate evasion of duty. The Court noted that the Tribunal recorded the assessee's readiness to pay interest, indicating an acknowledgment of the evasion. The Court concluded that the penalty was rightly imposed based on the facts and circumstances of the case.

Issue 3: Imposition of Penalty under Rule 25
The contention regarding the imposition of penalty under Rule 25 without a proposal for confiscation was raised. The Court observed that the show-cause notice's alleged defect was not raised by the assessee, and the admission of clandestine removal was undisputed. The Court held that paying duty before the notice did not exempt the assessee from penalty. The penalty under Rule 25 was deemed justified due to the deliberate evasion of duty.

Issue 4: Separate Penalty on the Director
The question of imposing a separate penalty on the Director when a penalty was already imposed on the company was considered. The Court focused on the deliberate evasion of duty admitted by the director, leading to the imposition of penalties. The Court upheld the penalty on both the company and the director, emphasizing the deliberate nature of the evasion.

In conclusion, the Court dismissed the appeal, upholding the penalty imposed on the assessee and granting the benefit of reduced penalty if paid within the specified timeframe. The Court clarified the conditions for availing the benefit of reduced penalty and emphasized the importance of complying with the payment terms to benefit from the order.