2020 (8) TMI 693 - AT - Central Excise

Recalculation of interest under section 11AB - recovering the penalty imposable under section 11AC of the Act - Benefit of reduced penalty - appellant, party to the diversification of the goods by the M/s. Salasar Steel in the domestic market, or not - M/s. Salasar Steel was the merchant exporter - HELD THAT - Taking notice of the fact that Hon'ble Chhattisgarh High Court have remanded the matter of penalty for the main party - M/s. Salasar Steel to the adjudicating authority. We deem it fit and proper to allow all these appeals by way of remand to the adjudicating authority for a denovo determination of the issue of imposition of penalty under Rule 26 after disposal of the matter in the case of M/s. Salasar Steel. The adjudicating authority is directed to dispose off these remanded matters along with M/s. Salasar Steel if the matter of M/s. Salasar Steel is still pending. Appeal allowed by way of remand.

Summary

Issues:
1. Demand of excise duty, interest, and penalty against M/s. Salasar Steel and others.
2. Compliance with Circular dated 22nd May, 2008 and the order of Hon'ble Delhi High Court in K P Pouches Private Ltd. case.
3. Recalculation of interest under Section 11AB and recovery of penalty under Section 11AC.
4. Imposition of penalty under Rule 26 on supporting manufacturers.
5. Remand of penalty determination for M/s. Salasar Steel and supporting manufacturers.

Analysis:
1. The appeals arose from an order demanding excise duty, interest, and penalty against M/s. Salasar Steel, its director, and other appellants. The High Court remanded the matter for recalculation of interest under Section 11AB and recovery of penalty under Section 11AC, without interfering with the duty demand.

2. The High Court's order focused on compliance with Circular dated 22nd May, 2008 and the Delhi High Court's decision in K P Pouches Private Ltd. case. The court directed the adjudicating authority to quantify interest and offer the option of reduced penalty in accordance with the Circular and the writ petition.

3. The supporting manufacturers supplied goods to M/s. Salasar Steel, a merchant exporter, under the CT-1 certificate scheme for export. They argued good faith supply under the scheme and cited precedent rulings for penalty imposition, emphasizing that penalties should be on natural persons, not corporate entities.

4. The Revenue's representative relied on the Commissioner's findings and tribunal rulings in similar cases. However, the Tribunal allowed the appeals by remanding the penalty determination for the supporting manufacturers, considering the remand for M/s. Salasar Steel and directing a denovo determination post the main party's case.

5. Ultimately, the appeals were allowed by way of remand to the adjudicating authority for a fresh determination of the penalty under Rule 26, ensuring the supporting manufacturers have the opportunity for a fair hearing and submission of additional evidence if necessary.