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TMI Blog2023 (12) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no such evidence which has been led by the Department - Even improper accounting is denying the mean clandestine removal, in the absence of circumstantial evidence proving the same. In view of the above, the redemption fine imposed on the goods set aside. Imposition of penalty on appellant No. 1 - HELD THAT:- The essential ingredient that is required to be satisfied for invoking Section 11AC and Rule 25(1) is suppression, collusion etc. which has to be established with an intent to evade payment of duty. In the instant case, it is noted that excess quantity of MS Ingots and MS Angles were found which had not been entered in the statutory books, which is liable for penalty. However, other than the statement, no other corroborative evidence has been brought on record to show that there was an intent to evade. There is also no evidence brought out to establish that the appellant No.1 had indulged in similar evasion earlier - the Learned Counsel has submitted that no malafide intention of clandestine removal of excess goods had been established, and sufficient corroborative evidence has not been established to prove the intention to evade. This contention is agreed upon. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, the same was seized under the relevant provisions. Consequent to the seizure, show cause notice dated 05.03.2013 was issued, proposing confiscation of the seized goods under Rule 25(1)(b) of the Central Excise Rules, 2002 (hereinafter referred to as the Rules ) and imposition of penalty under Rule 25(1)(b) of the Rules on appellant no.1 and penalty under Rule 26(1) of the Rules upon the appellant. The Original Authority adjudicated the notice, and the Commissioner (Appeals) upheld the Order-in-Original vide the impugned order. 3. The learned Counsel for the appellant No. 1 appellant No.2 submitted that the impugned Order-in-Appeal No. 135- 136(SM)CE/JPR/2021 dated 16.11.2021 passed by the Commissioner (Appeals), Central Excise and Central Goods Service Tax, Jaipur had been passed without appreciating the true legal and factual position. 4. The learned Counsel contended that no penalty can be imposed under Rule 25 and 26 of Central Excise Rules, 2002 unless mala fide intention towards clandestine removal of excess goods is shown. He contended that the adjudicating officer relied upon the judgment of Micro Super Cables (P) Ltd. Unit-II Vs. Commissioner of Central Excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der Section 14 of the Central Excise Act, 1944 despite the fact that the statements were later retracted. The impugned order has not given any importance to the retraction of the statements. 6. The learned Authorized Representative reiterated the discussions and findings given in the Order-in-Original and Orderin- Appeal. He submitted that the ingots and angles were found excess in the premises of the factory without any entry in the statutory records. The Authorized Representative submitted that Shri Mukesh Kumawat, authorized signatory of the unit was present during the Panchnama proceedings, and had agreed with the manner and method of stock verification, by appending his signature on Panchnama and stock verification. The retraction of the statement was merely an afterthought, and had been done after more than a year after tendering it. He contended that weighment on the basis of which physical stock verification report was prepared were not provided is irrelevant since Shri Mukesh Kumawat himself had stated in his statement that the appellant had violated Rule 10 of the Central Excise Rules, 2002 which provides for maintenance of proper records, on daily basis, in a legible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same. In view of the above, I set aside the redemption fine imposed on the goods. 9. I now take up the issue relating to imposition of penalty on appellant No. 1. A reading of the legal provisions makes it clear is that for imposition of penalty under Rule 25(1)(b), the condition of Section 11AC of the Central Excises Act, 1944 has to be satisfied. The said Section and Rule is reproduced herein after: 11AC. Penalty for short-levy or non-levy of duty in certain cases .-- (1) The amount of penalty for non-levy or short-levy or non-payment or short-payment or erroneous refund shall be as follows-- (a) where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, for any reason other than the reason of fraud or collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (10) of Section 11-A shall also be liable to pay a penalty not exceeding ten per cent of the duty so determined or Rupees Five thousand, whichever is higher: Pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions referred to in clause (c) is paid within thirty days of the date of communication of the order of the Central Excise Officer who has determined such duty, the amount of penalty liable to be paid by such person shall be twenty-five per cent of the duty so determined, subject to the condition that such reduced penalty is also paid within the period so specified. (2) Where the appellate authority or tribunal or court modifies the amount of duty of excise determined by the Central Excise Officer under sub-section (10) of Section 11A, then, the amount of penalty payable under clause (c) of sub-section (1) and the interest payable under Section 11AA shall stand modified accordingly and after taking into account the amount of duty of excise so modified, the person who is liable to pay duty as determined under sub-section (10) of Section 11A shall also be liable to pay such amount of penalty and interest so modified. (3) Where the amount of duty or penalty is increased by the appellate authority or tribunal or court over the amount determined under sub-section (10) of Section 11A by the Central Excise Officer, the time within which the interest and the reduced penalty is payabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder these rules; or (b) does not account for any excisable goods produced or manufactured or stored by him ; or (c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or (d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse [or an importer who issues an invoice on which CENVAT credit can be taken] or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (c) or clause (d) has been committed, or [five thousand rupees], whichever is greater. An order under sub-rule (1) shall be issued by the Central (2) Excise Officer, following the principles of natural justice. Penalty for certain offences. 10. I note that the essential ingredient that is required to be satisfied for invoking Section 11AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1AC, shall also be liable to pay a penalty equal to the duty so determined. For the purpose of invoking Section 11AC of the Act, the condition precedent is that the duty has not been levied, or paid or short-levied or short-paid or the refund is erroneously granted by reasons of fraud, collusion or any wilful misstatement or suppression of facts. If these ingredients are not present, penalty under Section 11AC cannot be levied. Since Rule 25 can be invoked subject to the provisions of Section 11AC of the Act, as a natural corollary, the ingredients mentioned in Section 11AC are also required to be considered while determining the question of levying of penalty under Rule 25 of the Central Excise Rules. 10. In other words, if the ingredients of Section 11AC are not shown to be fulfilled, the penalty under Section 11AC cannot be levied. Therefore, given the wording of Rule 25 of the CE Rules, the ingredients mentioned in Section 11AC have to be considered before determining the question of penalty. In the instant case it is not in dispute that the show cause notice ( SCN ) made no reference to Section 11AC and, therefore, there was no occasion to adjudicate the issue of impositio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat High Court, which in the considered view of the Court merit acceptance. 13. In that view of the matter, the Court is unable to find any infirmity in the impugned order of the CESTAT. No substantial question of law arises for determination by the Court. 11. I find that the Tribunal in the case of Nilesh Steel Alloy Private Ltd Vs Commissioner of Central Excise, Aurangabad [2008 (229) ELT 399 (Tri-Mum)] observed that penalty should not have been imposed merely because the stock of finished goods are found in the factory without entry in the production register especially, when there is no evidence of clandestine removal. In view of the above settled position, the levy of penalty under Rule 25(1) on the appellant in the instant case cannot be upheld. 12. I now come to the penalty levied under Rule 26(1) on the authorised signatory of the appellant No 2. In order to appreciate the facts and the arguments, I reproduce the rule for ease of reference: 26. Penalty for certain offences.- (1) Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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