2018 (3) TMI 490 - AT - Central Excise

100% EOU - penalty u/s 11AC and Rules 9(2), 173Q and Rule 226 of CER 1944 - discrepancies in the clearances of rejects by the appellants to the DTA - Held that - Even after remand, the adjudicating authority without taking into cognizance the said observations of the Tribunal has imposed equal penalty. On such score, the penalty imposed under section 173Q requires to be set aside. The disputed period is October, 1994 to March, 1999. The provisions of section 11 AC were introduced with effect from 28.09.1996 only. Therefore, the said provision can be applied only from such date - the penalty under section 11AC for the period prior to 28.09.1996 cannot sustain. Appeal allowed in part.

Summary

Issues:
1. Penalty imposed on appellant for clearing goods without payment of duty.
2. Appeal filed against the penalty imposition.
3. Discrepancies in clearance of rejects to DTA without duty payment.
4. Applicability of penalty provisions under section 11AC and Rule 173Q.

Analysis:

Issue 1: Penalty imposed on appellant for clearing goods without payment of duty
The appellant, a 100% E.O.U. engaged in manufacturing cable/cord for telephone instruments, faced penalties for clearing second-quality goods in DTA without duty payment. The officers issued a show-cause notice for recovery of an amount and proposed confiscation of goods under Central Excise Rules. The original authority confirmed duty demand, confiscated waste, and imposed penalties under various provisions.

Issue 2: Appeal filed against the penalty imposition
The appellant appealed to the Tribunal against the order. The Tribunal maintained duty demand, corrected calculation errors, and dismissed the department's appeal. It noted that the equal penalty imposed lacked consideration for the case's facts and the applicability of section 11AC during the disputed period. The matter was remanded for re-determination of penalty.

Issue 3: Discrepancies in clearance of rejects to DTA without duty payment
The appellant approached the High Court against the Tribunal's decision. Meanwhile, the original authority re-imposed an equal penalty under section 11AC and Rule 173Q post remand. The appellant contested the penalty, citing the Tribunal's directive to re-determine it and the non-applicability of section 11AC for the entire disputed period.

Issue 4: Applicability of penalty provisions under section 11AC and Rule 173Q
During the hearing, the appellant highlighted the Tribunal's observation that penalties under section 11AC and Rule 173Q were improper. The adjudicating authority did not consider this while imposing the penalty. The Tribunal found the penalty under section 173Q should be set aside and that section 11AC could not apply before 28.09.1996. Consequently, the penalty under section 11AC for the period before the said date was set aside.

In conclusion, the Tribunal modified the impugned order by setting aside the penalty under section 173Q and section 11AC before 28.09.1996, without disturbing other confirmations. The appeal was partially allowed based on the above terms.