2017 (2) TMI 1030 - AT - Central Excise

Clandestine removal - wrong availment of cenvat credit - penalty u/s 11AC of the Act - Held that - The amount of duty has already been paid by the appellants before issuance of the SCN. Therefore, the appellant was required to be given an option to pay 25% of the duty as penalty, as per the proviso of section 11AC of the Act - As the penalty against the main appellant has been reduced to 25% of the duty confirmed as per the proviso of section 11AC of the CEA, therefore, considering the gravity of reduction of penalty, the penalty on Sh. Arvinder Pal Singh, Director of the M/s S.K. Sacks is also reduced to the tune of ₹ 35,000/- - appeal disposed off - decided partly in favor of appellants.

Summary

Issues:
Appeal against demand of duty, penalties imposed on appellants.

Analysis:
The appellants challenged the order confirming duty demand, penalties, and interest. The case involved mis-utilization of cenvat credit and benefit under SSI Exemption Notification, leading to the detection of duty evasion due to clandestine goods removal. A duty of ?3,34,756 + 7226/- was demanded for clandestine removal and ?16,540/- for wrong cenvat credit availment. The duty demand was confirmed, imposing a penalty of ?3,58,522/- on the main appellant under section 11AC, and a penalty of ?50,000/- on the Director. The appellants contested only the penalties, not the duty liability, having paid the duty and interest before the show cause notice. They argued for a penalty reduction to 25% of confirmed duty, citing legal precedents like City Cables, Bajaj Travels, and United Chain Industries. The AR supported the impugned order.

The Tribunal noted the appellants' non-dispute on duty liability and focus on penalty reduction. Due to the duty payment before the notice, the appellants should have been given the 25% penalty option as per section 11AC proviso, which the adjudicating authority failed to do. Relying on legal precedents and the case of United Chain Industries, the penalty was reduced to 25% of the duty confirmed against the main appellant. Consequently, the penalty on the Director was also reduced to ?35,000/- in line with the reduction for the main appellant. The appeals were disposed of with these terms, favoring the appellants.

This judgment highlights the importance of adhering to statutory provisions regarding penalty imposition, especially when duty has been paid before the issuance of a show cause notice. The Tribunal's decision to reduce the penalties based on legal precedents and the proviso of section 11AC demonstrates a fair and consistent application of penalty provisions in excise law.