2016 (6) TMI 666 - AT - Central Excise

Penalty against the appellant company and directors - removal of goods without payment of duty -whether the appellant are eligible to the benefit of 25% of the penalty imposed under section 11AC of CEA, 1944, since the appellant company had undisputedly paid the duty along with interest? - Held that - This issue is covered by a plethora of cases including by the decision of the Hon ble Gujarat High Court in the case of Commissioner of Central Excise, Surat-I vs. Krishnaram Dyeing and Finishing Works, (2013 (8) TMI 539 - GUJARAT HIGH COURT ). Accordingly, the appellants are eligible to the benefit of discharging 25% of the penalty imposed. The penalty on the Director is concerned, on going through the orders of the authorities below find that the appellant-Director Sri V.K.Jain had accepted/ratified the statement of their DGM admitting the clearances of goods without payment of duty and the demand has been confirmed on the basis of said statements. In these circumstance, do not see any reason for non-imposition of penalty on the Director as his role on removal of goods without payment of duty has been fairly established. However, keeping in view the amount of duty involved, personal penalty equal to the duty amount imposed on the Director is too harsh. Therefore, in the interest of justice, it is appropriate that the penalty on the appellant Sri V.K.Jain be reduced to ₹ 1,25,000/-. In view of the above, the appellant company is allowed to pay 25% of the penalty imposed under section 11AC of CEA, 1944 and Sri V.K.Jain is directed to pay penalty of ₹ 1,25,000/- under Rule 26 of Central Excise Rules, 2002. The appeals disposed off on the above terms.

Summary

Issues:
- Confirmation of penalty against the company
- Imposition of penalty on the Director

Confirmation of Penalty Against the Company:
The case involved a search operation at the factory premises of the Appellant resulting in the recovery of incriminatory documents related to the removal of goods without payment of duty. A show-cause cum demand notice was issued, alleging clandestine manufacture and removal of goods without duty payment. The demand was confirmed against the company with equivalent penalty imposed on the Director under Rule 26 of Central Excise Rules, 2002. The Ld. Commissioner (Appeals) upheld the order, leading to the present appeals. The company did not dispute the duty and penalty but contested the penalty imposition process. The company sought the benefit of a 25% penalty reduction, which was accepted by the Revenue. The Tribunal found the company eligible for the benefit of discharging 25% of the penalty imposed under section 11AC of CEA, 1944, considering previous legal precedents.

Imposition of Penalty on the Director:
Regarding the penalty on the Director, the Revenue argued that the penalty was rightly imposed based on evidence showing the Director's awareness of the clearance of goods without payment of duty. The Director had accepted and ratified statements admitting the clearances without duty payment. The Tribunal acknowledged the Director's involvement but deemed the penalty equal to the duty amount too harsh. In the interest of justice, the penalty on the Director was reduced to &8377; 1,25,000 under Rule 26 of Central Excise Rules, 2002. The company was allowed to pay 25% of the penalty imposed under section 11AC of CEA, 1944, while the Director was directed to pay the reduced penalty amount. The appeals were disposed of based on these terms.