Customs, Excise and Gold Tribunal - Delhi
Cce vs Modern Steel And Agro Indus. And Shri ... on 16 July, 2007
Equivalent citations: 2007(121)ECC55, 2007ECR55(TRI.-DELHI), 2007(217)ELT462(TRI-DEL)
ORDER
R.K. Abichandani, J. (President)
1. These two appeals are preferred against the common order of the Commissioner (Appeals) made on 19.04.2005 by which the penalties imposed on the respondents under the order-in-original were set-aside on the ground that the respondent No. 1 (original noticee No. 1 - Partnership Firm) had already paid up the full amount of duty and penalty, and the respondent No. 2 (original noticee No. 2 - partner of the said Firm) had also deposited the full amount of penalty. Admittedly, the entire duty amount of Rs. 78,841/- was paid up by the respondent No. 1 by paying Rs. 53,851/- on 12.01.2002 i.e the date on which the Revenue Officers visited the factory and when shortages were noticed, and the remaining amount of Rs. 25,000/- on 14.01.2002. Twenty five per cent of the duty amount was paid by way of penalty on 19.03.2002 presumably for taking the benefit of the provisions of first proviso to Section 11-AC of the Act. The respondent No. 2 - partner of the noticee No. 1, paid up the full amount of penalty after the order was made.
2. The learned authorised representative for the Revenue has contended that, penalty, equal to the duty, payable i.e of Rs. 78,851/- was correctly imposed on the respondent No. 1 - Partnership Firm, and there was no valid reason for the Appellate Authority to set-aside such penalty. He also submitted that, separate penalty was liable to be imposed on the respondent No. 2 - Partner, under Rule 26 of the said Rules and there was no warrant for disturbing that order. He relies upon the decision of the Larger Bench of this Tribunal in the case of Commissioner of Central Excise, Delhi-IV v. Ilpea Paramount Pvt. Ltd., decided on 21st June, 2007, in which it was held, following the decision of the Hon'ble High Court of Punjab & Haryana, that, once it was held that imposition of penalty under Section 11-AC of the Act was warranted, the wordings of Section 11-AC do not leave any option for imposing a reduced penalty, except as specifically provided for in the amended provisions of Section 11-AC, by the first proviso. It was submitted that, since there was a clear finding of clandestine removal of goods given on the basis of the facts admitted by the partner himself, penalty, equal to the duty amount, was warranted in this case even under Rule 25 of the Central Excise Rules, 2001. It was also submitted that, the entitlement to reduce penalty of 25% of the duty determined was not established, because payment of the interest amount was not shown to have been made as required by the first proviso to Section 11-AC of the Act.
3. The learned Counsel appearing for the respondents in these two appeals, argued that, there was no allegation of any intention to evade duty made in the show cause notice and in which penalty was proposed to be imposed under Rule 25 of the said Rules, which prescribes a minimum penalty of only Rs. 10,000/-. It was submitted that, the entire duty amount and penalty calculated at 25% of the duty determined was, admittedly, paid up before the issuance of the show cause notice dated 30.12.2002. He submitted that, there was no demand of interest made in the show cause notice and even no separate demand of interest was required to be made under Section 11-AB, since there was no direction to pay interest in the order-in-original. The interest under Rule 11-AB was required to be paid from "the first date of the month succeeding the month in which duty ought to have been paid under the Act." Since duty liability was detected on 12.01.2002 and there was no allegation that it ought to have been paid earlier, no interest amount was required to be paid as contemplated by the proviso to Section 11-AC. He, therefore, submitted that, the maximum liability to pay penalty cannot exceed in respect of the respondent firm to anything more than 25% of the duty determined which was already paid up. He placed reliance on the decision of this Tribunal in the case of Avery Cycles Inds. Ltd. v. CCE, Ludhiana , more particularly, on paragraph 5 of the judgment, in which it was held that, when the amount was deposited earlier than the issuance of a show cause notice, adjustment of such amount, made in the adjudication order determining the duty, should be treated as payment made within 30 days from the date of the commencement of the order.
4. The evidence on record discloses that, the partner of the respondent firm, who is the respondent No. 2 in Appeal No. E/2648/05-SM, had admitted that, the firm had indulged in the act of clandestine manufacture of the excisable goods. It is also proved from the record that, on physical verification of the stocks lying in the factory premises, a shortage of 40.396 MT of raw material and 0.810 MT of scrap was detected. These shortages were admitted by the partner of the firm, who also signed the verification charts prepared on the spot, on 12.01.2002. The said partner (Shri Kamal Singla), in terms, admitted that, the said raw material was sold by them in the local market without entering the same in the statutory records and without issuing invoices and also without paying the Central Excise Duty of Rs. 77,721/-, which was payable thereon. He agreed to deposit the duty amount of Rs. 78,841/-, which came to be deposited, as noted above. Since the manufacture of the excisable goods was not accounted for in the Daily Stock Accounts and the goods were clandestinely cleared without issuance of any invoice and without subjecting the same to assessment and payment of Central Excise Duty, this was a clear case of clandestine manufacture and clearance with intent to evade payment of duty, as rightly held by the adjudicating authority. The facts admitted by the partner of the firm were reproduced in the show cause notice, and the allegations contained therein clearly implied intention to evade duty. When the facts alleged in the show cause notice were sufficient to put the noticees to guard that they had clandestinely removed the excisable goods without issuing invoice and without payment of excise duty, it is obvious that, such action was with intent to evade duty. In the show cause notice the following Rule 25 of the said Rules was invoked:
25. Confiscation and penalty - (1) Subject to the provisions of Section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer, -
(a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under 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 certification 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 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 rupees ten thousand, whichever is greater.
(2) An order under Sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice.
The penal provisions of Rules 25 and 26 of the said Rules owe their genesis to Sub-section (4) of Section 37 of the Central Excise Act, 1944, which empowered the Central Government to make such rules under Sub-section (4). Section 11-AC of the Act provides for penalty equal to the duty determined with a built-in mechanism in the first proviso to get the benefit of reduced penal liability of 25% of the duty determined. In cases, where the duty of such excise was not levied or paid or short levied or short paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of the rules made there under with intent to evade payment of duty, Rule 25 of the said Rules does not incorporate the said element of guilty mind and provides for confiscation and penalty resulting from the default contemplated in Clauses (a) to (d) thereof. While Section 11-AC of the said Act provides for penalty, for cases when the requisite mens rea is present, Rule 25(1) of the said Rules provides for confiscation as well as 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 rupees ten thousand, whichever is greater." On a closer scrutiny of these clauses, it would appear that, while Clauses (a), (b) and (c) do not refer to intention to evade payment of duty as a requisite element for imposition of penalty, Clause (d) of Rule 25(1) clearly refers to contravention of any of the provisions of the Rules or the notifications issued thereunder "with intent to evade payment of duty". It will be noticed that, while Section 11-AC speaks of contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty, Clause (d) of Rule 25(1) contemplates contravention of any of the provisions of the Rules or the notifications issued thereunder with intent to evade payment of duty. On a combined and harmonious reading of Section 11-AC of the said Act and Rule 25 of the said Rules, which obviously cannot be interpreted to take away the rigour of Section 11-AC in respect of the cases which fall under Clause (d) of Rule 25(1), it would appear that, the maximum liability to pay penalty not exceeding the duty contemplated by Rule 25 would ordinarily be attracted in cases where there is intention to evade payment of duty as contemplated by Section 11-AC of the said Act. In other cases, where there is no such intention and there are contraventions of the nature referred to in Clauses (a), (b) or (c), penalty may be imposed not exceeding the duty on the excisable goods or Rs. 10,000/- whichever is greater. In the present case, as noted above, the clandestine removal of goods, coupled with not issuing invoices and not making entries in the statutory records, which were admitted facts, clearly pointed at the intention to evade payment of duty. The question, that is now required to be considered is, whether the benefit of the first proviso to Section 11-AC can be extended to the defaulter who is liable to penalty under Rule 25, in the absence of any such provision specified in Rule 25. The proviso to Section 11-AC on which reliance was placed reads as follows:
Provided that where such duty as determined under Sub-section (2) of Section 11 A, and the interest payable thereon under Section 11-AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this Section shall be twenty-five per cent of the duty so determined:
5. The said proviso contemplates a situation where duty is determined under Sub-section (2) of Section 11A and it is paid up along with interest payable under Section 11-AB within 30 days from the date of the communication of the order of the Central Excise Officer determining such duty. The determination of duty under Section 11A(2) is required to be done in all cases falling under Section 11A(1) both with and without mens rea. The first proviso to Section 11-AC does not confine its benefit to contraventions of the provisions of the Act or the Rules with intent to evade payment of duty, but would apply even in cases where such mens rea is absent and there are contravention of the provisions of the Act and the Rules as covered by Clauses (a), (b) or (c) of Rule 25(1). The opening words of Rule 25 make it clear that, the provisions made thereunder are subject to the provisions of Section 11-AC of the Act. Therefore, the benefit of an early payment within 30 days from the date of communication of the order contemplated by the first proviso to Rule 11-AC would also be applicable to cases where penalty is imposed under Rule 25(1) of the said Rules, if the requirements of the said first proviso to Section 11-AC are satisfied. The amount of duty paid by the respondent was adjusted against the confirmed demand as per the adjudicating order. The assessee had paid up 25% of such duty amount towards penalty prior to the issuance of the show cause notice. Therefore, the penalty of Rs. 78,841/-, which was imposed under Rule 25 on the assessee, stood reduced to 25% of the duty determined, i.e to Rs. 19,710.25. The liability of the appellant partner under Rule 26 is distinct from the liability of the nature contemplated by Rule 25. However, since penalty is imposable on the respondent No. 1 - Partnership Firm, no separate penalty is imposed on the respondent No. 2 - Partner, because he will be jointly and severally liable with the other partners in respect of the penalty payable by the Partnership Firm.
6. For the foregoing reasons, in Appeal No. E/2647/2005-SM, penalty of Rs. 19,710/- is imposed under Rule 25 of the Central Excise Rules, 2001, on the respondent No. 1 - Partnership Firm, and it is accordingly allowed; while in Appeal No. E/2648/2005-SM, since the above penalty is imposed on the Partnership Firm, for which the respondent No. 2 - partner, will be liable jointly and severally along with other partners for its payment, no separate penalty is imposed. Both the appeals stand disposed of accordingly.
(Dictated and pronounced in the open Court on the 16th day of July, 2007)