2011 (5) TMI 603 - AT - Central Excise

Tribunal Upholds Penalties for Goods Removal, Authorized Reps Liable under Rule 26

CCE, Kanpur Versus M/s Hind Glass Ind. & Others

CCE, Kanpur Versus M/s Hind Glass Ind. & Others - TMI Issues Involved:1. Whether penalty under section 11AC should be imposed on the respondent companies for shortage of finished goods.2. Whether penalty under Rule 26 of Central Excise Rules should be imposed on the authorized representatives of the respondent companies.3. Whether the benefit of reduced penalty under the proviso of section 11AC can be denied when duty has been paid before the issue of show cause notice.Analysis:Issue 1: Penalty under section 11AC on the respondent companiesIn both cases, significant shortages of finished goods were detected during stock checking, and the respondents admitted that the shortage was due to goods being removed without payment of duty. The Commissioner(Appeals) set aside the penalty, stating there was no evidence of clandestine removal. However, the Tribunal disagreed, citing the Hon'ble Supreme Court's judgment in Union of India vs. Rajasthan Spinning & Weaving Mills Ltd. The Tribunal held that penalty under section 11AC should be imposed due to the admitted removal of goods without duty payment. Nevertheless, since the duty was paid before the show cause notice, the Tribunal applied the Hon'ble Delhi High Court's judgment in K.P.Pouches vs. Union of India and ruled that the benefit of reduced penalty cannot be denied. The penalty imposed was modified to 25% of the duty demand.Issue 2: Penalty under Rule 26 of Central Excise Rules on authorized representativesThe Tribunal found that the authorized representatives had knowledge of the clandestine removal of goods without duty payment. Consequently, penalty under Rule 26 of Central Excise Rules was rightly imposed on them by the original adjudicating authority. The Tribunal held that setting aside the penalty by the Commissioner(Appeals) was incorrect, and the penalties on the authorized representatives were upheld.Issue 3: Benefit of reduced penalty under the proviso of section 11ACThe respondents argued that since duty was paid before the show cause notice, the reduced penalty should apply. The Tribunal agreed, stating that the benefit of reduced penalty cannot be denied in such cases. Additionally, it noted that in one case, 25% penalty had already been paid, and therefore, the penalty payable would be equal to 25% of the duty.In conclusion, the Tribunal set aside the Commissioner(Appeals) order, restored the penalties on the respondent companies at 25% of the duty demand, upheld the penalties on the authorized representatives, and disposed of the revenue's appeal and the Cross Objections accordingly.