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TMI Blog2019 (3) TMI 1421X X X X Extracts X X X X X X X X Extracts X X X X ..... cture of dyed terry towels. Towel fabrics, bath robes etc. The Director General of Central Excise Intelligence, Chennai Zonal Unit investigated the appellant and issued a show cause notice dated 04.10.2004 alleging that during the period 2000- 2001 to 2003-2004, the appellant clandestinely cleared the terry towels in domestic tariff area without account for them, without raising invoices and without paying duty. After following due process, the original authority vide Order-in-Original dated 13.06.2005 (i) confirmed the demand of Rs. 11,87,162/- under section 11A of Central Excise Act, 1944 (ii) confirmed the demand for interest on the duty demanded as per section 11 AB, (iii) imposed a penalty equivalent to the confirmed duty under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant preferred an appeal before the first appellate authority. The department also filed an appeal before the first appellate authority stating that the penalty imposable under section 11 AC should be Rs. 2,30,306/- and not Rs. 1,65,795/- because the entire amount was evaded although subsequently part of the amount was paid (Rs. 64,511/-). It was also alleged that confirmation has to be for the entire amount of duty and the amount already paid is eligible for appropriation against the confirmation. Therefore, the amount of Rs. 2,30,306/- be imposed as penalty and not Rs. 1,65,795/-. Both these appeals were decided by the first appellate authority in the impugned order, rejecting the appeal of the appellant and allowing the appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the first appellate authority stating that no prudent businessman would sell substandard samples to enhance their trade to their customers and therefore they would have characteristics similar to the goods which they would have sold subsequently. The appellant argues that the above contentions were beyond the scope of the show cause notice. He contends that they have paid Central Excise duty adopting sale price of Rs. 83/- per Kg as these goods were rejects. He argued that the department did not establish that they cleared prime quality goods. Alternatively, he submits that they have not collected central excise duty separately and thus they are entitled to the cum duty benefit which has not been extended to them. As they had paid an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e confirmed which was not done by the lower authority and this mistake was corrected by the first appellate authority. The amount already paid by them was set off against this demand. The mandatory penalty under section 11 AC does not get reduced because some amount has already been paid during investigation prior to the issuance of show cause notice. 5. We have considered the arguments on both sides and perused the records. Following issues have to be decided- (a) Whether the appellant has clandestinely removed the goods, (b) If so, they are liable to pay duty on them treating them as normal goods or treating them as substandard goods, (c) Whether the penalty under section 11AC needs to be imposed , (d) If so, whether the amount alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey cleared were sub-standard goods. If they were, indeed, sub-standard goods, there was no reason for them to not to raise any invoice accordingly and make appropriate entries in their records. In conclusion on this issue, we find that the appellant has cleared the goods clandestinely but has not been able to substantiate their claim that the goods were rejects or of substandard nature. 8. The amount of duty to be levied has already been revised by the lower authority in the denovo proceedings and by the first appellate authority giving the benefit of exemption available where the raw material used is only indigenous. On the question of amount of duty to be confirmed, we find any amount paid by the appellate during investigation as duty al ..... X X X X Extracts X X X X X X X X Extracts X X X X
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