2001 (10) TMI 165 - AT - Central Excise

Issues Involved:
1. Service of Show Cause Notice
2. Clandestine Removal of Goods
3. Imposition of Penalty under Section 11AC of the Central Excise Act
4. Imposition of Penalty under Rule 209A of Central Excise Rules

Issue-Wise Analysis:

1. Service of Show Cause Notice:
The appellants contended that the show-cause notice dated 20-11-97 was never served on the appellant company but only on Shri Arun Kumar Bansal in his capacity as Managing Director. They argued that the reply submitted by Shri Bansal was on his own behalf and not on behalf of the company. The appellants claimed they only became aware of the show-cause notice from a notice of hearing dated 9-3-2000 and immediately informed the Commissioner that they had not received any show-cause notice. They relied on several judicial precedents to argue that proper service of the show-cause notice is mandatory.

The Tribunal, however, found that the show-cause notice was duly served on the appellant company, as evidenced by letters from the company's Managing Director and Production Manager requesting extensions and documents. The Tribunal held that the affidavits provided by the appellants did not sufficiently counter the evidence of service and thus upheld that the show-cause notice was duly served.

2. Clandestine Removal of Goods:
The appellants argued that there was no cause for evasion of duty as they had a substantial balance in their RG23A Part-II account, and the demand of duty was barred by limitation due to lack of intent to evade. They cited the Supreme Court's decision in Cosmic Dyes Chemicals v. CCE, Bombay, which requires proof of intent to evade duty for invoking the proviso to Section 11A(1) of the Central Excise Act.

The Tribunal found that the Commissioner had adequately dealt with the issue of clandestine removal based on various statements from company officials, including admissions by Shri Bansal and others. The Tribunal upheld the demand of duty, noting that the mere balance in the RG23A register was not sufficient to conclude that goods could not be removed without payment of duty.

3. Imposition of Penalty under Section 11AC of the Central Excise Act:
The appellants argued that no penalty under Section 11AC could be imposed for periods before the section's introduction on 28-9-1996. They cited several cases, including Kota Oxygen Pvt. Ltd. v. CCE, Jaipur, to support their argument.

The Tribunal agreed that penalties under Section 11AC could not be imposed for periods before the section's introduction but could be imposed for the period after its introduction. They remanded the matter to the Commissioner for the imposition of penalties under Section 11AC for the relevant period.

4. Imposition of Penalty under Rule 209A of Central Excise Rules:
The appellants contended that no penalty should be imposed on Shri A.K. Bansal under Rule 209A as there was no evidence of his active involvement or knowledge of the goods' liability for confiscation. They cited the Tribunal's decisions in Kitply Industries Ltd. v. CCE, Shillong, and Garware Synthetics v. CCE.

The Tribunal found that there was no discussion in the adjudication order about Shri Bansal's role in the removal of excisable goods without payment of duty. They concluded that it could not be established that Shri Bansal knew or had reasons to believe that the goods were liable for confiscation. Therefore, the Tribunal set aside the penalty imposed on Shri Bansal.

Conclusion:
The Tribunal upheld the demand of duty and the service of the show-cause notice on the appellant company. They remanded the matter for the imposition of penalties under Section 11AC for the period after its introduction and set aside the penalty on Shri A.K. Bansal under Rule 209A. Both appeals were disposed of accordingly.

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