2018 (9) TMI 629 - AT - Central Excise

Penalties on co-noticees - Clandestine removal - the ground of defense of Shri Rinki S. Gandhi is that he has not physically dealt with the goods being Managing Director of the Company and therefore, penalty under Rule 26 cannot be imposed - Held that - The beneficiary of the entire amount of ₹ 1,24,91,612/- would have been Shri Rinki S. Gandhi directly or indirectly. In these circumstances, the penalty on Shri Rinki S. Gandhi is rightly leaviable. However, the penalty of ₹ 25 Lakhs imposed on the appellant is disproportionate - quantum of penalty reduced. Penalty imposed on Shri V.K. Vora and Shri H.S. Nagraj - Held that - The investigations pointed out that Shri H.S. Nagraj, Manager (Sales and Administration) was maintaining regular invoices as well as the other invoices on which clandestine removal was done and also maintaining the record of illicit clearances by pencil in a private record. He was also giving directions for removal of the goods. Similarly, Shri V.K. Vora, President (Material) of M/s. Motorol Speciality Oil Limited was also giving direction for removal of inputs to job workers for which no entries were made in the Central Excise records. He was also instrumental in directing the employees of M/s. Motorol Speciality Oil Limited for appropriating the job work challans showing a huge quantity returned as residue - thus, they were directly involved in the entire activities of evasion - however, quantum of penalty is reduced. Penalties have also been imposed on M/s. M/s. Motorol Speciality Oil Limited, Halol and M/s. Motorol Lubricants Pvt. Limited, Vadodara under Rule 26 of Central Excise Rules, 2002 - Held that - The quantum of penalty is reduced. Appeal allowed in part.

Summary

Issues involved:
- Imposition of penalties on co-noticees for evasion of duty by clandestine clearance
- Re-quantification of duty demand and penalties
- Liability of individuals for penalties under Rule 26 of Central Excise Rules, 2002

Detailed Analysis:
1. The judgment involves five appeals filed by co-noticees against penalties imposed in a case of evasion of duty by clandestine clearance. The Tribunal found overwhelming evidence corroborating clandestine removal charges, upholding the findings against the main company. The Tribunal remanded the matter for re-quantification of duty demand and penalties, considering legal precedents like M/s. Shri Chakra Tyres and M/s. Maruti Udyog Limited. The Commissioner confirmed the duty demand and penalties, leading to the current appeal.

2. The appellants contested the penalties, arguing that employees should not be held liable if they did not personally benefit from the transactions. They claimed they acted under the directions of the company's Director and did not physically handle the goods, challenging the imposition of penalties under Rule 26 of Central Excise Rules, 2002. The appeals of other co-noticees relied on similar grounds as the main company's appeal.

3. The Tribunal reviewed the defenses presented by the appellants and reduced the penalties imposed. For the Managing Director, the penalty was reduced from ?25,00,000 to ?10,00,000 due to disproportionate imposition. Employees, Vice President, and Manager had their penalties reduced from ?5,00,000 to ?50,000 and ?50,000 to ?25,000 respectively, considering their roles and involvement in the evasion activities.

4. Penalties were also imposed on the companies involved under Rule 26 of Central Excise Rules, 2002. The Tribunal considered the application of the rule and reduced the penalties imposed on the companies, citing a relevant legal precedent. The judgment concluded by disposing of all appeals based on the revised penalties and considerations made for individual and company liabilities.

This detailed analysis covers the issues of penalties imposed, re-quantification of duty demand, and individual liability under Rule 26 of Central Excise Rules, 2002, as addressed in the Appellate Tribunal CESTAT AHMEDABAD's judgment.