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Issues:
Imposition of penalty under Rule 209 instead of Rule 173Q, applicability of Rule 14A for penalty imposition, imposition of penalty under Rule 209A without confiscation proposal, diversion of goods to Domestic Tariff Area without informing the Department, legality of penalty imposition on all appellants. Analysis: The case involved three appellants who were Export Oriented Units manufacturing various types of yarn. The appellants maintained a running bond account debited with Central Excise Duty payable on goods cleared for export. However, due to unapproved samples, goods meant for export were diverted to the Domestic Tariff Area without informing the Central Excise Department, leading to a subsequent seizure of the yarn by the authorities. The main contention raised by the appellants was regarding the imposition of penalty under Rule 209 by the Commissioner, which was not invoked in the show cause notice (SCN). The appellants argued that Rule 173Q was not applicable to them, and penalty under Rule 209 was incorrect as they should have been penalized under Rule 14A, which had a maximum penalty limit of Rs. 2,000. The appellants also challenged the imposition of penalty under Rule 209A, stating that confiscation of goods was not proposed in the SCN, making the confiscation by the Commissioner incorrect. Upon review, the Tribunal noted that Rule 14A was the relevant provision for penalty imposition in this case, with a maximum penalty of Rs. 2,000 per instance. Considering there were five consignments involved, the total penalty amount was determined to be Rs. 10,000. The Tribunal also observed that the penalties imposed on the other two appellants were not justified as there was no contravention of rules by them, leading to the penalties being set aside for those appellants. In conclusion, the Tribunal allowed the appeals in part, setting aside the penalties imposed on two of the appellants and confirming the penalty under Rule 14A for the remaining appellant. The judgment highlighted the importance of correctly applying the relevant rules and procedures in penalty imposition cases related to diversion of goods and non-compliance with export regulations.
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