2017 (1) TMI 702 - AT - Central Excise

Clandestine removal - recovery of duty - confiscation - imposition of penalty - Section 11AC of Central Excise Act, 1944 - Held that - both the authorities below have not extended the benefit of discharging 25% of the penalty imposed under Section 11AC of Central Excise Act, 1944. The said right is admissible to the Appellant company, in view of the judgment of Hon ble Gujarat High Court in the case of Santosh Textiles 2011 (3) TMI 1649 - GUJARAT HIGH COURT . Confiscation of plant and machinery - Held that - in absence of cogent evidences that the Appellant company is a habitual offender and other circumstances supported with evidences, confiscation of plant and machinery is unsustainable in law and accordingly set aside. Penalties imposed on partners as well as on firm - Held that - personal penalty had been imposed both on the partnership firm M/s National Metal Industries as well as on its partners viz. Shri Santosh Mittal and Shri Rajendra Agarwal which is contrary to the principle of law laid down by the Hon ble Gujarat High Court in the case of Santosh Textiles 2011 (3) TMI 1649 - GUJARAT HIGH COURT - penalty imposed on the partners are set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Appeal against OIA No.ID/83/Daman/2007 - Duty recovery and penalty imposition - Pre-deposit requirement under Section 35F - Extension of 25% penalty payment option - Maintainability of partners' appeal - Confiscation of plants & machinery under Rule 173Q(2) - Imposition of personal penalty on partners.

Analysis:

1. Duty Recovery and Penalty Imposition:
The appeals were filed against OIA No.ID/83/Daman/2007, where a duty recovery notice was issued to the Appellant Company for alleged clandestine removal of goods without duty payment. The demand was confirmed, and penalties were imposed on the company and its partners. The Commissioner (Appeals) directed a pre-deposit under Section 35F, which was not complied with, leading to dismissal of the appeal. The Tribunal remanded the matter for a reduced deposit, and upon compliance, the appeal was decided on merit.

2. Extension of 25% Penalty Payment Option:
The Appellant Company argued that the option to pay 25% of the penalty was not extended by the authorities, citing a Gujarat High Court decision. The Tribunal found merit in this argument and allowed the company to discharge 25% of the penalty imposed, subject to conditions laid down in the judgment.

3. Maintainability of Partners' Appeal:
The partners of the Appellant Company challenged the personal penalties imposed on them, arguing that they had not filed separate appeals initially. However, relying on a Bombay High Court judgment, they contended that their appeals should be maintainable. The Tribunal agreed, setting aside the penalties on the partners based on legal principles regarding imposition of penalties on partnership firms and partners.

4. Confiscation of Plants & Machinery:
The Appellant challenged the confiscation of plants & machinery under Rule 173Q(2), claiming lack of substantial evidence supporting the confiscation. The Tribunal found the evidence insufficient and set aside the confiscation, emphasizing the need for cogent evidence to sustain such actions.

5. Imposition of Personal Penalty on Partners:
The Tribunal noted that personal penalties were imposed on both the partnership firm and its partners, contrary to legal principles established by the Gujarat High Court. As per the precedent, penalties on the partners were deemed unsustainable, leading to the setting aside of the penalties and allowing the partners' appeals.

In conclusion, the appeals were disposed of with decisions favoring the Appellant Company and its partners on various grounds, including the extension of the penalty payment option, maintainability of partners' appeals, reversal of plant confiscation, and setting aside of personal penalties on the partners based on legal precedents and lack of evidence.