2017 (11) TMI 648 - AT - Central Excise

Penalty u/r 209A of CER, 1944 - Clandestine removal - Revenue was of the view that RIL was consuming Ferro Chrome in excess hence, RIL have manufactured more quantity of billets/flats as against the quantity shown in record and cleared the same clandestinely without payment of duty - it was alleged that the appellant was responsible for his conduct to the business at the material time and the goods cleared from the factory without payment of appropriate excise duty is with his consent and connivance. Held that - It has not been brought on record by the Revenue that from where the other inputs were procured and used in the manufacture of final goods. Further, I find that for the commission received by M/s. RIL it has been alleged that the same is towards the sale proceeds of the goods cleared clandestinely. Whereas the Revenue has issued a show cause notice to demand service tax on the commissions earned. In that circumstance, penalty on the appellant is not imposable merely on the charge that appellant has failed to satisfactorily explain the contradiction in various statements recorded during investigation, being overall in-charge of M/s. RIL. A specific role of the appellant has not been alleged for the activity of M/s. RIL. In that circumstance, penalty on the appellant is not imposable. Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalty under Rule 209A of Central Excise Rules, 1944 on the appellant.
2. Allegations of clandestine removal of goods and duty evasion against the appellant.
3. Discrepancies in the case regarding excess consumption of raw materials and commission received.
4. Dismissal of appeal of M/s. RIL for non-compliance with Section 35F of Central Excise Act, 1944.

Analysis:

Issue 1: Imposition of penalty under Rule 209A
The appellant appealed against the penalty imposed under Rule 209A of the Central Excise Rules, 1944. The appellant argued that there was no concrete evidence of contravention of any law on their part. The case was based on presumptions and assumptions, with the demand against M/s. RIL primarily linked to excess consumption of raw materials. The appellant emphasized the need for the Revenue to effectively discharge the burden of proof. The appellant cited relevant case laws to support their contention that the statements relied upon were insufficient to establish guilt. The adjudicating authority's heavy reliance on certain statements was challenged, asserting that no concrete evidence implicated the appellant in duty evasion.

Issue 2: Allegations of clandestine removal and duty evasion
The case involved allegations of clandestine removal of goods and duty evasion against M/s. RIL and the appellant. The Revenue suspected that excess consumption of Ferro Chrome led to the clandestine manufacturing and removal of goods without duty payment. However, the appellant argued that the Revenue failed to establish the procurement and use of other inputs in the manufacturing process. Additionally, discrepancies arose regarding the nature of commissions received by M/s. RIL, with confusion between sale proceeds of clandestinely removed goods and service tax demandable commissions. The appellant contended that the penalty was unjustifiable based on contradictions in statements and lack of direct evidence linking them to the alleged illegal activities.

Issue 3: Dismissal of M/s. RIL's appeal
The Tribunal dismissed the appeal of M/s. RIL for non-compliance with Section 35F of the Central Excise Act, 1944. This dismissal did not impact the separate appeal of the appellant. The appellant's penalty was challenged based on the argument that their role in the alleged activities was not sufficiently proven. Citing precedents, the Tribunal emphasized the necessity of connecting the individual directly to the illegal activities for penalty imposition. As the appellant's specific involvement was not established, the penalty was deemed unjustifiable, and the impugned order imposing the penalty was set aside.

In conclusion, the Tribunal allowed the appeal filed by the appellant, setting aside the penalty imposed on them under Rule 209A of the Central Excise Rules, 1944. The decision highlighted the importance of concrete evidence and direct involvement in illegal activities for penalty imposition, ultimately ruling in favor of the appellant.