2017 (11) TMI 215 - AT - Central Excise

Clandestine removal - SSI Exemption - imposition of penalty on Shri Pritpal Singh, Director - Held that - in view of the difference of opinion the matter placed before the Hon ble President for nominating the third Member.

Summary

Issues:
1. Benefit of small scale exemption in cases of clandestine removal.
2. Imposition of penalty on the Director for clandestine removal.

Issue 1: Benefit of small scale exemption in cases of clandestine removal

The case involved the appeal by the Revenue against the Commissioner (Appeals) order upholding the allegation of clandestine removal of goods but extending the benefit of small scale exemption to the respondent. The tribunal examined whether the benefit of small scale exemption should be granted when goods are removed clandestinely. The Revenue relied on a previous decision but the tribunal noted that the issue was decided differently in other cases. The tribunal referenced the decisions in the cases of B.L. Kapur & Sons, Premier Rubber Factory, and P.R. Industries, emphasizing that exemption cannot be denied even in cases of clandestine removal. Consequently, the tribunal found no fault in the Commissioner (Appeals) order granting the small scale exemption.

Issue 2: Imposition of penalty on the Director for clandestine removal

Regarding the penalty imposed on the Director, the appellate authority had set it aside, arguing that penalizing the manufacturing unit fully made a separate penalty on the Director unjustified. However, the tribunal disagreed with this view. The tribunal reviewed the evidence against the Director, showing his direct involvement in the clandestine manufacture and clearance of goods. The tribunal highlighted statements indicating the Director's control over production and personnel. Additionally, a previous tribunal order upheld the penalty on the Director in a connected seizure case. The tribunal concluded that the clandestine removal occurred under the Director's full knowledge and supervision, justifying the imposition of a penalty under Rule 26. The tribunal reduced the penalty amount but upheld the imposition of a penalty on the Director.

In conclusion, the tribunal rejected the Revenue's appeals, upholding the benefit of small scale exemption in cases of clandestine removal and partially allowing the appeal regarding the penalty on the Director. Due to a difference of opinion between the Members on the penalty issue, the matter was directed to be placed before the Hon'ble President for nominating a third Member to resolve the discrepancy.