2016 (3) TMI 620 - AT - Central Excise

Differential duty demand - Penalty imposed challenged - grievance of the assessee is that no option to pay reduced penalty of 25% under Section 11 AC was given to them, and that penalty on M/s Garden Silk Mils Limited under Rule 25 is not sustainable as the said unit was only a job worker, and that the penalty of ₹ 2 Lakhs on Shri Bipin Modi is too harsh as he is only a Director of M/s Alfino Fashions Pvt Limited. - Held that - Imposition of penalty, in addition to demand of duty with interest on the appellants are sustainable and appropriate. However we find that the option to pay 25% of the equivalent penalty imposed under Section 11 AC was not extended to M/s Alfino Fashions Pvt Ltd., by the lower authorities. As they were rightly eligible for the same, while upholding the imposition of penalty of ₹ 28,00,951/- under Section 11 AC on M/s Alfino Fashions pvt Ltd, we hold that they are eligible for the option of payment of reduced penalty of 25%, provided they pay the same within 30 days of receipt of this order. We also find that under the facts and Circumstances of the case, there is merit in the argument of the learned Counsel for the appellants that the penalty on M/s Garden Silk Mills Limited and Shri Bipin Modi should be reduced, and hence the penalty of ₹ 1 Lakh on M/s Garden Silk Mills Limited is reduced to ₹ 50,000/- and the penalty of ₹ 2 Lakh on Shri Bipin Modi is reduced to ₹ 1 Lakh. The impugned orders of the lower authorities are upheld with the said modification.

Summary

Issues:
- Appellants contesting penalty imposition and seeking reduced penalties
- Allegations of undervaluation of finished goods and evasion of Central Excise Duty
- Eligibility for reduced penalty under Section 11 AC
- Relationship between M/s Alfino Fashions Pvt Ltd and M/s Garden Silk Mills Ltd
- Appropriate penalties for the appellants

Analysis:

The judgment involves three appeals filed by M/s Alfino Fashions Pvt Ltd, Shri Bipin Modi, and M/s Garden Silk Mills Ltd against an order-in-appeal. The case revolves around the procurement and sale of processed yarn, with allegations of undervaluation and evasion of Central Excise Duty. The Department claimed that the appellants were interconnected entities operating from the same premises, leading to undervaluation of goods. Differential duty, interest, and penalties were demanded from the appellants, which they contested.

During the hearing, the appellants did not dispute the duty liability and interest but raised concerns about the penalty imposition. They argued that they were not given the option to pay a reduced penalty of 25% under Section 11 AC. Additionally, they contended that the penalty on M/s Garden Silk Mills Ltd as a job worker and on Shri Bipin Modi as a director was excessive. On the other hand, the Revenue Representative asserted that the appellants intentionally evaded duty through a deceptive scheme, justifying the penalties imposed.

After considering both sides' arguments and reviewing the records, the Tribunal upheld the imposition of penalties on the appellants. However, it acknowledged that M/s Alfino Fashions Pvt Ltd was eligible for the reduced penalty under Section 11 AC and directed them to pay within 30 days. The Tribunal also reduced the penalties on M/s Garden Silk Mills Ltd and Shri Bipin Modi based on the circumstances of the case. The final decision upheld the lower authorities' orders with modifications to the penalties imposed.

In conclusion, the Tribunal disposed of all three appeals, maintaining the penalties with adjustments as specified in the judgment. The decision highlighted the importance of appropriate penalties in cases involving Central Excise Duty evasion and undervaluation of goods, while also recognizing the appellants' rights to avail of certain penalty reduction provisions under the law.