2017 (1) TMI 756 - AT - Central Excise

Clandestine removal - Whether under the facts and, circumstances, Commissioner (Appeals) have rightly retained penalty under Section 11 AC on the respondent-Company, and whether, he has rightly deleted the penalty against the Director, namely Sushil Kumar Goyal? Held that - It is only in case duty is determined on the fact that the duty is evaded by reason of fraud, collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of this Act or the Rules made thereunder, with the intent to evade payment of duty, the liability to pay penalty arises - I find that the determination of duty was not involved. Further, it is admitted fact that duty had been paid on the date of inspection. Thus, the issue of show cause notice is void ab initio. Appeal disposed off - decided against Revenue.

Summary

Issues:
1. Retention of penalty under Section 11 AC on the respondent-Company.
2. Deletion of penalty against the Director.

Analysis:

Issue 1: Retention of Penalty on the Company
The respondent-assessee, engaged in galvanization of G I Pipes & Tubes, faced an inspection revealing a shortage in stock. The absence of the authorized person led to goods being dispatched without an invoice, although recorded in the RG-I register. The duty involved was debited promptly. Subsequently, a show cause notice was issued proposing duty determination and penalty under Section 11 AC. The Order-in-Original confirmed the demand and imposed a penalty on the company and the Director. The Commissioner (Appeals) upheld the penalty on the company but deleted it for the Director. The Tribunal noted that the goods were properly recorded, ruling out clandestine removal. As duty was paid promptly without contest, the liability for penalty did not arise unless duty evasion due to fraud or willful misstatement was proven. Since duty was paid on inspection day and duty determination was not involved, the show cause notice was deemed void ab initio. Consequently, the appeal against the company's penalty was allowed.

Issue 2: Deletion of Penalty against the Director
The Tribunal dismissed the Revenue's appeal against the Director, emphasizing that no case of duty evasion or willful misstatement was established. As the duty was paid promptly and no fraudulent intent was proven, the liability for penalty against the Director was rejected. The appeal filed by the appellant-assessee was allowed, and the appeal against the Director was dismissed. The Tribunal's decision highlighted the importance of duty determination as a prerequisite for penalty imposition and the absence of fraudulent intent in the assessed scenario.

In conclusion, the Tribunal's judgment addressed the issues of penalty retention on the company and deletion of penalty against the Director, emphasizing the significance of duty determination and fraudulent intent in penalty imposition under Section 11 AC.