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Issues: (i) whether the penalty equal to 100% of duty imposed under Section 11AC could be sustained with an option to pay 25% of the penalty within the prescribed time where such option had not been granted by the lower authority; (ii) whether the penalty imposed on the director under Rule 26 of the Central Excise Rules, 1944 was liable to be interfered with.
Issue (i): whether the penalty equal to 100% of duty imposed under Section 11AC could be sustained with an option to pay 25% of the penalty within the prescribed time where such option had not been granted by the lower authority.
Analysis: The duty and interest were accepted and the penalty under Section 11AC was upheld in principle, the concealment being linked to clandestine removal. Since the lower authority had not extended the statutory option to discharge 25% of the penalty within the prescribed period, the Tribunal granted that benefit at the appellate stage.
Conclusion: The penalty equal to 100% of duty was sustained, but the assessee was given an option to pay 25% of the penalty within 30 days, failing which the higher penalty would stand.
Issue (ii): whether the penalty imposed on the director under Rule 26 of the Central Excise Rules, 1944 was liable to be interfered with.
Analysis: The finding against the director was based on his role in facilitating suppression of information connected with clandestine removal. The Tribunal found him liable to penalty under Rule 26, but considered the amount excessive in the circumstances and reduced it.
Conclusion: The director's penalty was upheld in principle and reduced from Rs. 2 lakhs to Rs. 1 lakh.
Final Conclusion: The duty and interest remained confirmed, the substantive penalty on the manufacturing unit was sustained with a concessional payment option, and the director's penalty was reduced.
Ratio Decidendi: Where the statutory concession under Section 11AC is not extended by the original authority, the appellate forum may extend that option while sustaining the penalty in principle; penalty under Rule 26 may be reduced on facts even where liability is established.
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