2004 (11) TMI 188 - AT - Central Excise

Summary

Issues: Imposition of penalty on a company and its Managing Director for clearing gutkha without payment of Central Excise duty.

In this case, the Appellate Tribunal CESTAT, New Delhi heard two appeals filed by the Revenue regarding the imposition of penalties on a company and its Managing Director for clearing gutkha without paying Central Excise duty. The Central Excise officers intercepted a hand cart carrying gutkha without duty-paying documents. The Commissioner (Appeals) held that the company is not liable to penalty under Sec. 11AC of the Central Excise Act since they had paid duty before the show cause notice was issued, citing the Rashtriya Ispat Nigam Ltd. case. However, the penalty on the Managing Director was reduced from Rs. 10,000 to Rs. 5,000. The Revenue argued that the penalty should be imposed on the company as they cleared the goods without paying duty, emphasizing that no mens rea is required for imposing the penalty in such cases. They referred to the Hindustan Motors Ltd. case where penalty was upheld even though differential duty was paid before the show cause notice. The respondents cited the Rashtriya Ispat Nigam Ltd. case and the decision of the Larger Bench of the Tribunal in the Machino Montell (I) Ltd. case in their Cross Objection.

The Tribunal considered the submissions and noted that Rule 25 of the Central Excise Rules, 2002 allows for the imposition of penalties if excisable goods are removed in contravention of the rules. Since the goods were removed without paying duty, penalty was imposed under Rule 25(1)(a). The duty was paid only after the goods were intercepted, not due to the company detecting a mistake. Referring to the Zunjarrao Bhikaji Nagarkar case, the Tribunal emphasized that the levy of penalty is not discretionary. Additionally, the Allahabad High Court's decision in the Pee Aar Steels Pvt. Ltd. case highlighted that the timing of the show cause notice does not affect the imposition of penalties. Even if the duty is paid after the contravention is detected but before the notice is issued, the charge of removing goods without payment of duty still stands. In this case, since the entire duty was paid by the respondents, a penalty of Rs. 5,000 was deemed sufficient in the interest of justice. The penalty on the Managing Director was not enhanced. Thus, the appeals were disposed of accordingly.