2017 (3) TMI 720 - AT - Central Excise

Penalty u/s 11AC - interest under 11AB - personal penalty u/r 26 of CER, 2002 - job-work - loan licence agreement - appellant s case is that the adjudicating authority in the adjudication order did not give an option for payment of reduced penalty of 25%, even if there is a circular dated 22-5-2000 issued by the Board to the field formation that option of 25% reduced penalty provided under second provision to Section 11AC should be mandatorily mentioned in the order in original itself by the adjudicating authority - Held that - any of the cases wherein penalty u/s 11AC of the Act is imposed the provisions contained in 1 and 2 proviso to Section 11AC should be mandatorily mentioned in the Order-in-Original itself by the adjudicating authority - as per the aforesaid board circular, the adjudicating authority must have mentioned in the Order-in-Original regarding the option of reduced penalty provided under Section 11AC - the appellant deserve an opportunity for availing option of the reduced penalty. As regard the penalties, the Managing Director was not looking after day to day maintenance of the excise records. Moreover he has not disputed the liability and admittedly paid substantial amount of duty - Regarding the penalty on the employee Shri. Dilip Oak, I found that he is a small time employee of the appellant company and is also not in the job, there is also no evidence that he is beneficiary of any non payment of duty by the appellant - personal penalty on the both above appellants are not sustainable, more so when penalty was imposed on the appellant company. Appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Appellant's liability for excise duty on job work goods.
2. Imposition of penalties under Section 11AC and Rule 26 of Central Excise Rules, 2002.
3. Appellant's plea for waiver of penalties.
4. Compliance with board circular on reduced penalty option.

Issue 1: Appellant's liability for excise duty on job work goods:
The appellant, engaged in manufacturing excisable goods, was found to have not recorded the manufacture and clearances of job work goods in their RG1 register, leading to non-payment of appropriate excise duty. The DGCEI officers conducted a search based on information and issued a show cause notice, resulting in a confirmed demand of &8377; 38,53,952/- and penalties. The appellant admitted duty liability but appealed for waiver of penalties, not disputing the duty demand.

Issue 2: Imposition of penalties under Section 11AC and Rule 26 of Central Excise Rules, 2002:
The adjudicating authority imposed penalties under Section 11AC and Rule 26 of Central Excise Rules, 2002, totaling &8377; 38,53,952/- and additional penalties on specific individuals. The appellant appealed for waiver of penalties citing lack of an option for reduced penalty in the adjudication order and argued against the personal penalties imposed on the Managing Director and ex-employees.

Issue 3: Appellant's plea for waiver of penalties:
The appellant sought waiver of penalties under Section 11AC, interest under Section 11AB, and personal penalties under Rule 26 of Central Excise Rules, 2002. The appellant contended that the adjudicating authority failed to provide the option for reduced penalty of 25% as mandated by a board circular, emphasizing that the penalties on individuals, including the Managing Director and ex-employees, should be waived due to their roles and circumstances.

Issue 4: Compliance with board circular on reduced penalty option:
The appellant argued that the adjudicating authority did not adhere to a board circular mandating the mention of the option for reduced penalty of 25% in the order-in-original. The appellant relied on various judgments supporting the binding nature of board circulars on field formations. The appellate tribunal, considering the board circular, directed the adjudicating authority to grant the option for reduced penalty of 25% to the appellant and set aside the personal penalties on the Managing Director and ex-employee, while abating the appeal of the deceased ex-employee.

This detailed analysis covers the appellant's liability, penalties imposed, plea for waiver, and compliance with the board circular, resulting in a remand for fresh order and allowance of appeals for certain individuals based on the tribunal's findings.