2013 (11) TMI 1024 - AT - Central Excise

Penalty u/s 11AC of Central Excise Act dropped by the Commissioner (Appeals) - Clandestine removal of goods Held that - Following Union of India vs. Rajasthan Spinning and Weaving Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA - when the elements for imposition of penalty under Section 11AC are present, the penalty under this Section has to be imposed irrespective of whether the duty involved on the goods cleared clandestinely had been paid before the issue of show cause notice - the order waiving the penalty on the assessee company under Section 11AC is not correct. Penalty on Authorised Signatory under Rule 26 Held that - He himself had admitted that the goods found short were removed from the factory without payment of duty and without issue of invoice and he also accepted the duty liability, penal provision of Rule 26 would be attract as he has dealt with the goods found short and were removed from the factory without payment of duty and without issue of invoice - just because the duty on the goods paid before the issue of show cause notice, the same cannot be treated as the ground for non-imposition of penalty under Rule 26 order set aside Decided in favour of Revenue.

Summary

Issues:
1. Clandestine removal of finished goods and raw material without payment of duty.
2. Imposition of penalty on the respondent company and the Authorised Signatory.
3. Applicability of penalty under Section 11AC and Rule 26.
4. Interpretation of legal precedents in determining penalty imposition.

Analysis:

1. The case involved the clandestine removal of finished goods and raw material without payment of duty. During a stock check, a shortage of MS Ingots and Silico Manganese was discovered, with the Authorised Signatory admitting to the removal of goods without payment of duty. The duty and Cenvat credit involved were paid subsequently by the respondent.

2. The Jurisdictional Assistant Commissioner confirmed the duty demand and imposed penalties on both the respondent company and the Authorised Signatory under Rule 26. However, the penalty was set aside by the Commissioner (Appeals) mainly because the duty on the goods had been paid before the show cause notice was issued.

3. The issue revolved around the applicability of penalty under Section 11AC and Rule 26. The Revenue contended that penalties should have been upheld based on the findings of clandestine removal. The learned DR argued that the decision of the Commissioner (Appeals) contradicted legal precedent and should be overturned.

4. The Tribunal analyzed the legal precedents cited, noting that the decision of the Hon'ble Bombay High Court was no longer valid in light of the Apex Court's judgment. The Tribunal held that penalties should be imposed under Section 11AC irrespective of whether duty had been paid before the issuance of the show cause notice. Additionally, the Authorised Signatory was found liable under Rule 26 due to admitting the removal of goods without payment of duty.

In conclusion, the Tribunal set aside the impugned order, restored the penalties imposed by the Assistant Commissioner, and allowed the Revenue's appeals based on the correct interpretation of penalty provisions and legal precedents.