2016 (12) TMI 654 - AT - Central Excise

Imposition of redemption fine and penalties - job work - the main appellant is job worker of M/s Tafe Motors & Tractors Ltd. who is manufacturer of tractors and doing certain activity on job work basis. Under Notification No. 23/2004-CE. With effect from 09/07/2004 the tractor became duty free therefore the activity undertaken by main appellant became dutiable - Held that - As admitted that no goods were available therefore I hold that redemption fine is not imposable on the appellant in the light of the decision of Larger Bench of this Tribunal in the case of Shiv Kripa Ispat Pvt. Ltd. 2009 (1) TMI 124 - CESTAT MUMBAI where it was held that fine was not imposable when goods were allowed to be cleared. I have gone through the contents of the show cause notice there is no allegation in the show cause notice of fraud collusion wilful mis-statement suppression of fact or not paid the duty with an intend to evade payment of duty. In the absence of such elements penalty is not imposable on the main appellant under Section 11AC of the Act. Further I find that on co-appellants penalties have been imposed under Rule 26 of the Central Excise Rules 2002. Admittedly penalty under Rule 26 can be imposed subject to the provisions of Section 11AC of the Act which are absent here. Therefore penalties on all the appellants are not imposable - I set aside the imposition of redemption fine and penalty on all the appellants - appeal disposed off - decided in favor of appellant-assessee.

Summary

Issues: Appeal against imposition of redemption fine and penalties on the appellants.

Analysis:
The appellants challenged the impugned order imposing a redemption fine on the main appellant, M/s Indore CNC Private Ltd., and penalties on co-appellants. The main appellant acted as a job worker for M/s Tafe Motors & Tractors Ltd., a tractor manufacturer. Due to a change in duty status of tractors under Notification No. 23/2004-CE, the activity of the main appellant became dutiable. Proceedings were initiated for demanding duty with interest on clearances to M/s Tafe Motors and imposing penalties. A redemption fine of Rs. 25 lakhs was also imposed on the main appellant. The appellants contended that since no goods were available, redemption fine should not be imposed, citing a precedent. They also argued that since there were no allegations of fraud or intent to evade duty in the show cause notice, penalties should not be imposed.

The appellant's counsel argued that as duty with interest was paid and not contested, the focus was on contesting the redemption fine and penalties. They relied on a Tribunal decision stating that when goods are not available, redemption fine should not be imposed. Additionally, they emphasized the absence of specific allegations in the show cause notice to justify penalty imposition based on fraud or intent to evade duty.

On the other hand, the authorized representative supported the impugned order, stating that the appellants were aware of the duty-free status of tractors and had not paid duty, justifying the initiation of proceedings.

After considering both sides' arguments, the Tribunal held that since no goods were available, the redemption fine was not imposable based on the precedent cited. The Tribunal also noted the absence of allegations of fraud or intent to evade duty in the show cause notice, leading to the conclusion that penalties were not justifiable. Consequently, the Tribunal set aside the imposition of the redemption fine and penalties on all the appellants, disposing of the appeals accordingly.