Tribunal grants reduced penalty to cigarette manufacturer under Section 11AC, emphasizing duty prepayment benefits.

The Tribunal ruled in favor of the appellant, a cigarette manufacturer, granting them the benefit of reduced penalty under Section 11AC. The appellant had paid the duty before receiving a show cause notice, entitling them to the reduced penalty despite the absence of an explicit option. The penalty on the General Manager, who admitted involvement but was considered a paid employee not directly engaged in the removal, was reduced significantly. The judgment emphasized the necessity of offering the option for reduced penalty when duty is paid preemptively.

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Issues:
1. Duty demand on short cigarettes
2. Imposition of penalties on the appellant firm and General Manager
3. Denial of option for reduced penalty under Section 11AC

Analysis:
1. The case involved a manufacturer of cigarettes where a stock of fully finished cigarettes was found short during a surprise visit by Central Excise officers. The shortage was acknowledged by the General Manager, who admitted to clandestinely removing the cigarettes without paying duty or issuing an invoice. The appellant deposited the entire duty even before receiving a show cause notice. The Assistant Commissioner confirmed the duty demand and imposed penalties on both the appellant firm and the General Manager.

2. The appellant argued that they should be eligible for the benefit of reduced penalty under Section 11AC, citing judgments from various High Courts. They contended that since the duty was paid before the notice and no option for reduced penalty was given, they should receive the benefit. Additionally, they argued that the penalty on the General Manager was unwarranted as he was only a paid employee not directly involved in the removal.

3. The Tribunal considered the submissions and relevant case laws. It noted that the appellant had paid the duty before the notice, yet no option for reduced penalty was provided. Relying on judgments from High Courts, the Tribunal ruled that the appellant was entitled to the benefit of reduced penalty under Section 11AC. Consequently, the penalty on the appellant was reduced to 25% of the confirmed duty amount. Regarding the penalty on the General Manager, despite his admission of involvement, the Tribunal considered his role as a paid employee and reduced his penalty from Rs. 25,000 to Rs. 5,000.

4. The Tribunal modified the impugned order, granting the appellant the benefit of reduced penalty under Section 11AC and reducing the penalty on the General Manager. The judgment highlighted the importance of providing the option for reduced penalty when duty is paid before the issuance of a show cause notice.

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