2013 (6) TMI 390 - AT - Central Excise

Benefit of reduced penalty equal to 25% - Clandestine removal - manufacturing of cigarette - Held that - there is no dispute that the appellant had paid the entire duty chargeable on the cigarettes found short even before the issue of the show cause notice and still in the adjudication order passed by the Assistant Commissioner, no option has been given to the appellant to pay lower penalty in terms of proviso to Section 11AC by paying the reduce penalty within the 30 days of the order. - , the benefit of reduced penalty under proviso to Section 11AC cannot be denied to the appellant. Personal penalty - Held that - taking into account the fact he is only a paid employee of the appellant firm, the penalty of Rs. 25,000/- imposed is on higher side and, as such, the same is reduced to Rs. 5,000/-.

Summary

Issues:
1. Duty demand on short cigarettes
2. Imposition of penalties on the appellant firm and General Manager
3. Denial of option for reduced penalty under Section 11AC

Analysis:
1. The case involved a manufacturer of cigarettes where a stock of fully finished cigarettes was found short during a surprise visit by Central Excise officers. The shortage was acknowledged by the General Manager, who admitted to clandestinely removing the cigarettes without paying duty or issuing an invoice. The appellant deposited the entire duty even before receiving a show cause notice. The Assistant Commissioner confirmed the duty demand and imposed penalties on both the appellant firm and the General Manager.

2. The appellant argued that they should be eligible for the benefit of reduced penalty under Section 11AC, citing judgments from various High Courts. They contended that since the duty was paid before the notice and no option for reduced penalty was given, they should receive the benefit. Additionally, they argued that the penalty on the General Manager was unwarranted as he was only a paid employee not directly involved in the removal.

3. The Tribunal considered the submissions and relevant case laws. It noted that the appellant had paid the duty before the notice, yet no option for reduced penalty was provided. Relying on judgments from High Courts, the Tribunal ruled that the appellant was entitled to the benefit of reduced penalty under Section 11AC. Consequently, the penalty on the appellant was reduced to 25% of the confirmed duty amount. Regarding the penalty on the General Manager, despite his admission of involvement, the Tribunal considered his role as a paid employee and reduced his penalty from Rs. 25,000 to Rs. 5,000.

4. The Tribunal modified the impugned order, granting the appellant the benefit of reduced penalty under Section 11AC and reducing the penalty on the General Manager. The judgment highlighted the importance of providing the option for reduced penalty when duty is paid before the issuance of a show cause notice.