2007 (6) TMI 96 - AT - Central Excise

Confiscation and penalty - Alleged that appellant is indulge in the fraudulent activity relating to the removal of goods and accordingly demand were made along with fine and penalty - Held that allegation was correct and confirmed demand fine and penalty with marginal relief

Summary

Issues Involved:
1. Scope of demand of duty in a show cause notice.
2. Confiscation and penalty imposition on seized goods.
3. Applicability of Section 125 of the Customs Act.
4. Justification and reduction of penalties imposed.

Issue 1: Scope of demand of duty in a show cause notice:
The case involved two units, where one processed goods and the other stored them for further processing. The show cause notice demanded duty on seized goods, with specific mention of separate demands for goods seized outside factory premises. The appellant argued that the confirmation of demands beyond what was specified in the notice was unsustainable. The Tribunal noted that while duty was paid for goods seized from one unit, the demand for goods seized from another unit was not explicitly mentioned in the notice. The Tribunal set aside the demand not specified in the notice, emphasizing the importance of aligning demands with show cause notices.

Issue 2: Confiscation and penalty imposition on seized goods:
The original authority had confirmed duty payment for seized goods, leading to confiscation, fines, and penalties. The Commissioner (Appeals) upheld most decisions but reduced a penalty. The appellant contended that demands exceeding the show cause notice were unjustified. The Tribunal found the duty payment for goods seized from one unit valid, as no disputes were raised. However, it deemed the demand for goods seized from another unit beyond the notice's scope and set it aside. The Tribunal also corrected an erroneous demand in a subsequent notice. The Tribunal clarified the significance of proper alignment between demands and show cause notices.

Issue 3: Applicability of Section 125 of the Customs Act:
The Commissioner (Appeals) justified duty demand under Section 125 of the Customs Act, but the Tribunal disagreed. It noted that Section 125 was not applicable for excise duty levy under the Central Excise Act. The Tribunal clarified the legal inapplicability of Section 125 in the context of excise duty, correcting the Commissioner's interpretation.

Issue 4: Justification and reduction of penalties imposed:
The penalties imposed on the units were contested, with one penalty reduced based on case circumstances. The Tribunal upheld a penalty reduction for one unit but rejected an appeal for another unit's penalty imposition. It emphasized justifications for penalty reductions based on case specifics, ensuring penalties were proportionate and legally sound.

In conclusion, the Tribunal partly allowed the appeal by setting aside unjustified demands and reducing penalties where warranted. It clarified the importance of aligning demands with show cause notices, highlighted the inapplicability of certain legal provisions, and emphasized the need for justified and proportionate penalty impositions.