2011 (6) TMI 337 - AT - Central Excise

Enhancement of penalty - clandestine removal - the processed fabrics found short have been sold by them in the open market without cover of any Central Excise invoices and without payment of duty - Commissioner (A) lowered the penalty - Held that - As decided in UOI vs. Dharmendra Textile Processors 2008 (9) TMI 52 - SUPREME COURT there is no discretion with the authorities to impose lesser penalty in terms of the provisions of Section 11AC - As such modify the said order of Commissioner (Appeals) and enhance the penalty equivalent to the duty amount of Rs. 8, 40, 027/-. Revenue s appeal against the lowering down the penalty by Commissioner (Appeals) is accordingly allowed. Penalty - As regards penalty of Rs. One Lakhs imposed upon Director of the unit find that in respect of M/s. Narmada Fabrics Pvt. Limited Director of the Company is also liable to penalty inasmuch as the entire clandestine activities were being undertaken by the unit under the guidance and with the knowledge of Shri Ramkumar Agarwal - Further sale of the fabrics while being under seizure without informing the Revenue and without obtaining the provisional release is a serious act of defiance of law thereby making Shri Ramkumar Agarwal liable to penalty - Decided against the assessee.

Issues:
1. Confiscation of seized goods and confirmation of duty.
2. Imposition of penalties on the manufacturing unit and the Director.
3. Reduction of redemption fine and penalties by the appellate authority.
4. Disposal of seized goods without provisional release.
5. Applicability of penalty provisions under Section 11AC.
6. Extension of the option to pay reduced penalty.
7. Liability of the Director for penalties.

Analysis:

1. Confiscation of Seized Goods and Confirmation of Duty:
The case involved the confiscation of seized fabrics valued at Rs. 70 lakhs and the confirmation of duty amounting to Rs. 8,40,027 on goods cleared while under seizure. The original adjudicating authority passed an order imposing penalties and confirming the duty. The appellate authority upheld the confiscation and duty demand but reduced the redemption fine from Rs. 25 lakhs to Rs. 10 lakhs. The Tribunal upheld the confiscation and duty confirmation, emphasizing the malafide actions of the appellants in clandestinely clearing the seized goods without paying duty, thereby respecting the law.

2. Imposition of Penalties:
Penalties were imposed on the manufacturing unit and the Director under Section 11AC of the Central Excise Act, 1944, and Rule 26 of Central Excise Rules, 2002. The appellate authority reduced the penalties imposed, which was challenged by both the appellants and the Revenue. The Tribunal modified the penalties, increasing the penalty on the manufacturing unit to the duty amount of Rs. 8,40,027, citing Supreme Court decisions regarding the discretion of authorities in imposing penalties.

3. Reduction of Redemption Fine and Penalties:
The appellate authority had reduced the redemption fine and penalties imposed on the appellants. The Tribunal upheld the reduction in redemption fine to Rs. 10 lakhs but modified the penalties imposed, aligning them with the duty amount. The Tribunal also extended the option to pay a reduced penalty within a specified period, following a relevant Tribunal decision.

4. Disposal of Seized Goods Without Provisional Release:
The appellants disposed of the seized goods without seeking provisional release during the seizure period, reflecting malafide intentions. This act of clearing goods clandestinely while under seizure was considered a serious violation of the law by the Tribunal.

5. Applicability of Penalty Provisions under Section 11AC:
The Tribunal clarified the application of penalty provisions under Section 11AC, emphasizing the lack of discretion for authorities to impose penalties lower than the prescribed amount, as established by relevant Supreme Court decisions.

6. Extension of Option to Pay Reduced Penalty:
In line with a Tribunal decision, the appellants were given the option to pay a reduced penalty along with duty and interest within a specified period, resulting in a reduction of the penalty amount.

7. Liability of the Director for Penalties:
The Director of the company was held liable for penalties due to his involvement in the clandestine activities of the manufacturing unit. The Tribunal rejected the appeal against the penalty imposed on the Director, emphasizing his role in the defiance of law and the seriousness of the violations.

In conclusion, the Tribunal disposed of all three appeals, upholding the confiscation, duty confirmation, and penalties while providing clarifications on penalty provisions and extending options for reduced penalties in certain circumstances.

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