2011 (3) TMI 948 - AT - Central Excise

Tribunal upholds penalties under Central Excise and Customs Act rules, emphasizing liability for confiscation.

The appeals challenging penalties imposed under Rule 26 of the Central Excise Rules, 2002, and Section 112 of the Customs Act, 1962 were dismissed. The ... Penalty for dealing with excisable or contravening goods knowing or having reason to believe they are liable to confiscation - penalty under Rule 26 of the Central Excise Rules, 2002 for persons dealing with goods liable to confiscation - penalty under Section 112 of the Customs Act, 1962 for dealing with goods liable to confiscation - knowledge or reason to believe as the foundational requirement for penal liability - remand limited to quantification of penalty - finality of earlier findings not challenged on remandPenalty for dealing with excisable or contravening goods knowing or having reason to believe they are liable to confiscation - penalty under Rule 26 of the Central Excise Rules, 2002 for persons dealing with goods liable to confiscation - penalty under Section 112 of the Customs Act, 1962 for dealing with goods liable to confiscation - knowledge or reason to believe as the foundational requirement for penal liability - Validity of imposition and quantification of penalties against the appellants under Rule 26 and Section 112. - HELD THAT: - The Court held that both Rule 26 and Section 112 require that the person dealt with goods knowing or having reason to believe that such goods were liable to confiscation; they do not require that the goods must have been formally ordered confiscated. The Tribunal's earlier order (reproduced in the record) had found that the appellants knowingly dealt with excisable/contravening goods and had reason to believe they were liable to confiscation. The appeals before the Tribunal were remanded specifically for reconsideration of the quantum of penalty, not to reopen the foundational findings of knowledge or liability. The Commissioner, in the impugned order, recorded detailed findings (including the appellants' roles, documentary manipulation, diversion/sale of duty free goods and maintenance of records) which sustain the conclusion of penal liability. On remand the Commissioner re quantified and reduced the original penalties; having regard to the established active participation of the appellants and the remand being limited to quantification, it was not open to the appellants to challenge the foundational findings at this stage. The request for further leniency was rejected on the facts and findings recorded by the authority.Penalties imposed and their re quantification by the adjudicating authority under Rule 26 and Section 112 are sustained.Final Conclusion: The appeals are dismissed; the adjudicating authority's imposition and re quantification of penalties under Rule 26 of the Central Excise Rules, 2002 and Section 112 of the Customs Act, 1962 against the appellants are upheld and no further reduction or leniency is accorded. Issues Involved:1. Legality of the imposition of penalties under Rule 26 of the Central Excise Rules, 2002 and Section 112 of the Customs Act, 1962.2. Justification for the quantification of penalties imposed on the appellants.Detailed Analysis:1. Legality of the imposition of penalties under Rule 26 of the Central Excise Rules, 2002 and Section 112 of the Customs Act, 1962:The appeals challenge the penalties imposed by the Commissioner, Indore, under Rule 26 of the Central Excise Rules, 2002, and Section 112 of the Customs Act, 1962. The appellants argued that the penalties were imposed without meeting the basic requirements of these provisions, particularly the necessity for the goods to be confiscable. The appellants contended that the goods were neither ordered to be confiscated nor found liable for confiscation, thereby invalidating the penalties.The Tribunal clarified that under Rule 26 and Section 112, penalties can be imposed if a person deals with goods knowing or having reason to believe that such goods are liable to confiscation. The requirement is the knowledge or belief regarding the liability of the goods to confiscation, not an actual order of confiscation. The Tribunal emphasized that the absence of a confiscation order does not preclude the imposition of penalties if the person had the requisite knowledge or belief.The Tribunal referred to the previous order dated 8.07.2008, which established that the appellants knowingly dealt with excisable goods liable to confiscation, thereby rendering them liable to penalties under Rule 26 and Section 112. These findings were not challenged in the earlier proceedings, and the remand was specifically for reconsidering the quantification of penalties, not the basis of liability.2. Justification for the quantification of penalties imposed on the appellants:The Tribunal examined the quantification of penalties in light of the remand order dated 11.11.2008, which directed the Commissioner to reconsider the penalties due to the appellants' financial distress and the severity of the penalties. The Commissioner had reduced the penalties from Rs. 1 crore to Rs. 60 lakhs under Rule 26 and from Rs. 50 lakhs to Rs. 30 lakhs under Section 112 for Shri Ashwani Deewan. Similarly, penalties for Shri Mahendra Sharma were reduced from Rs. 10 lakhs to Rs. 6 lakhs under Rule 26 and from Rs. 5 lakhs to Rs. 3 lakhs under Section 112.The Tribunal noted the detailed findings in the impugned order, which highlighted the active roles of the appellants in evading duty through clandestine removal of goods and manipulation of documents. The Commissioner found that Shri Ashwani Deewan engineered the evasion scheme and Shri Mahendra Sharma executed it under his direction. These findings justified the penalties imposed.The Tribunal dismissed the appellants' request for a lenient view, noting that the company had failed to pay the penalty amount and the appellants' active participation in the evasion scheme warranted the penalties imposed. The Tribunal concluded that the penalties were appropriately quantified and justified based on the appellants' conduct and the established facts.Conclusion:The appeals were dismissed, upholding the penalties imposed by the Commissioner under Rule 26 of the Central Excise Rules, 2002, and Section 112 of the Customs Act, 1962. The Tribunal affirmed that the penalties were legally and factually justified, and the quantification of penalties was appropriate given the appellants' roles in the evasion scheme.