2001 (5) TMI 365 - AT - Central Excise

Summary

Issues:
Penalty imposed on the manufacturer and its employees under Rule 173Q and Rule 209A, failure to enter complete production details, applicability of Rule 226, reduction of fine and penalty, imposition of penalty on employees, confiscation of goods and plant machinery.

Penalty Imposed on Manufacturer and Employees:
The penalty was imposed on the manufacturer for taking Modvat credit without entering particulars in the RG 23-A register. The Commissioner acknowledged the credit but imposed penalties. The Tribunal found the penalty unwarranted as the credit was accepted, and the penalty was solely based on the failure to enter details in the register. Thus, the penalty on this count was set aside. The second reason for the penalty was the delay in entering complete production details, attributed to a substitute clerk's errors. The Tribunal noted that this was a procedural lapse, not an attempt to evade duty, and ruled that Rule 173Q did not apply, suggesting Rule 226 for such cases.

Reduction of Fine and Penalty:
The duty payable was Rs. 30 lakhs, and the fine for redemption of goods was reduced from Rs. 47.5 lakhs to Rs. 1 lakh due to procedural contravention without any evasion attempt. The maximum penalty under Rule 226 was Rs. 2000, and the penalty imposed on the company was reduced to this level.

Imposition of Penalty on Employees and Confiscation of Goods:
The Tribunal found no basis for imposing penalties on the three employees as they were not personally involved in the register entries. It also ruled out the confiscation of plant and machinery, stating the procedural error did not indicate an intent to evade duty. Considering the company's significant annual duty payment and production value, errors were deemed understandable in such operations, and punishment should align with the gravity of the lapse and the motive behind it. Therefore, the confiscation of plant and machinery was set aside.

Conclusion:
The appeal was allowed in part for one case and entirely for all other appeals, with penalties reduced, confiscations set aside, and a focus on the procedural nature of the contraventions without any intent to evade duty.