Customs, Excise and Gold Tribunal - Tamil Nadu
Sri Selvakumar Textiles vs Commissioner Of C. Ex. on 22 June, 2005
Equivalent citations: 2005(188)ELT334(TRI-CHENNAI)
ORDER P.G. Chacko, Member (J)
1. Officers of Central Excise on 28-2-2000, intercepted a Tempo which was transporting 14 bags of 55's cotton yarn, without Central Excise invoice from the factory of M/s. Lakshmi Textile Exporters Ltd., Coimbatore (for short, LTEL) (appellants in Appeal No. E/913/2004). The Officers seized the vehicle and the cotton yarn. It appeared to them from an invoice dated 14-2-2000 produced by one Shri Raju (who was accompanying the goods) that the goods were being transported to the premises of M/s. Sri Selvakumar Textiles (in short, SSKT). A statement of Shri R. Manoharan, Manager of SSKT (appellants in appeal No. E/911/2004) was recorded by the officers. A statement was also recorded from a functionary of M/s. LTEL. Subsequently a show cause notice was issued to M/s. LTEL, M/s. SSKT and Shri K. Rajendran, owner of the Tempo (appellant in Appeal No. E/912/2004). In adjudication of this notice, the original authority confiscated the cotton yarn (valued at Rs. 1,16,000/-) with a redemption fine of Rs. 29,000/-, confiscated the vehicle with a redemption fine of Rs. 25,000/-, imposed a penalty of Rs. 10,672/- (equal to duty on the yarn) under Section 11AC of the Central Excise Act on M/s. LTEL and a penalty Rs. 3,000/-under Rule 209A of the Central Excise Rules, 1944 on M/s. SSKT. The first appellate authority upheld the decision of the adjudicating authority. Hence the present appeals.
2. After examining the records and hearing both sides. I find that, admittedly, the cotton yarn was cleared from the factory of M/s. LTEL without payment of duty and was being transported to M/s. SSKT. The removal of the goods was, admittedly, not accompanied by any duty-paying document. Such goods were certainly liable to confiscation. The lower authorities gave option for redemption of the goods against payment of Rs. 29,000/-. There is no reason to consider this amount as unreasonably high, having regard to the fact that goods valued at Rs. 1,16,000/- was being removed from the factory without invoice and without payment of duty. The redemption fine, therefore, requires to be affirmed.
3. The duty on the goods, amounting to Rs. 10,672/- was paid by the party on 22-3-2000, before the issuance of show cause notice. The lower authorities have imposed a penalty of equal amount on the manufacturer under Section 11 AC on the ground of clandestine removal of yarn. It has been argued by ld. Consultant that this penalty cannot be sustained as the duty had been paid prior to issuance of the show cause notice. Certain decisions have been cited by him in support of this argument. The argument has been contested by ld. SDR, who has relied on Final Order Nos. 126/2005, dated 24-1-2005 and 365/2005, dated 8-3-2005 [2005 (186) E.L.T. 178 (T)] of the South Zonal Bench (Chennai) to argue that the case law cited by ld. Consultant is not applicable to the facts of the instant case as the payment of duty in the instant case was not voluntary. The duty was paid on,ly after clandestine removal of goods was noticed by the department. Countering this argument, ld. Consultant has submitted that whether or not payment of duty was voluntary is immaterial. In this connection, he has relied on the Madras High Court's judgment in CCE, Madras v. Jkon Engineering (P) Ltd. [2005 (67) RLT 157 (Mad.)]. The following questions of law had arisen before the High Court :
"1. Whether payment of Central Excise Duty by the manufacturer of excisable goods without Registration/and observance of Central Excise Law, before issue of Notice under proviso to Section 11A of the Act would absolve him from the liability of penalty under Section 11 AC of Act?
2. Whether in the facts and circumstances of the case the Appellate Tribunal was correct in sustaining the order of the Commissioner (Appeals) who set aside the penalty imposed under Section 11 AC of the Act in a case of suppression of facts on the ground of pay of duty in question before conclusion of adjudication proceedings?
3. Whether it can be concluded from the order of the Appellate Tribunal that the Tribunal has confirmed the duty demanded by the adjudicating authority under proviso to Section 11A of the Act?"
All the three questions of law were answered in favour of the assessee by the High Court after noting that the Tribunal's decision in Rashtriya Ispat Nigam Ltd. v. CCE, Viasakhapatnam (CEGAT-Bang)] holding that, where duty was paid prior to issuance of show cause notice, no penalty could be imposed on the assessee in any circumstance, was upheld by the Supreme Court [2004 (163) E.L.T. A53 (S.C.)] The ratio of the High Court's above order on the reference applications filed by the department is very clear and the same is to the effect that, irrespective of whether non-payment of duty was on account of suppression of facts or not and whether the subsequent payment of duty was before issuance of show cause notice or thereafter, any penalty is not imposable on the assessee under Section 11 AC of the Central Excise Act, provided the duty was paid before the conclusion of the adjudication proceedings. No better case law has been cited before me. Hence the penalty imposed on M/s. LTEL under Section 11AC cannot be sustained. Appeal No. E/913/2004 is allowed only to the extent of setting aside this penalty.
3. There is a penalty of Rs. 3,000/- on M/s. SSKT under Rule 209A. Under this provision of law, a penalty could be imposed on a person who acquired possession of, or otherwise physically dealt with, any excisable goods which, according to his belief or knowledge, was liable to confiscation. The above penalty is in relation to confiscation of the cotton yarn, the goods was seized while in transit. The department has no case that M/s. SSKT had physically dealt with the goods in any manner whatsoever. Hence Rule 209A was not invocable against them. Appeal No. E/911/2004 is allowed. In the result, penalty on the appellant stands vacated.
4. A redemption fine of Rs. 25,000/- has been imposed in lieu of confiscation of the tempo. It has been argued by ld. Consultant that neither the driver nor the owner of the tempo (appellant in Appeal No. E/912/2004) had any knowledge of the fact that goods liable to confiscation were being transported by the vehicle. It has been pointed out that the original authority recorded a finding that the driver had no knowledge of the said fact. There is also nothing on record to indicate that the owner of the vehicle was knowing that it was being used for transporting goods which were liable to confiscation. The mandatory condition for confiscation of a vehicle under Section 115 of the Customs Act (made applicable to goods under the Central Excise Act) is that the owner of the vehicle, his agent, if any, and any person in charge of the vehicle (driver) should have the knowledge that the vehicle was being used for transportation of offending goods. This condition has not been satisfied in the instant case. Consequently the redemption fine requires to be set aside. Appeal No. E/912/2004 is accordingly allowed.
(Order dictated and pronounced in open Court)