Tribunal upholds duty demand, interest, and penalty for repacking lubricating oil without paying duty. Director's penalty reduced.

The Tribunal upheld the duty demand and interest on the appellant for repacking lubricating oil into containers and clearing them without paying the appropriate duty. The penalty under Section 11AC was also upheld due to established suppression. The penalty on the director was reduced from Rs. 2 lakhs to Rs. 50,000 considering his limited involvement in the evasion. Both appeals were disposed of on 22/12/2016.

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Issues:
- Duty demand on clearance of lubricating oil by repacking
- Penalty imposition on appellant-assessee
- Penalty imposition on director

Analysis:

Issue 1: Duty demand on clearance of lubricating oil by repacking
The case involves an appeal against an Order demanding Central Excise Duty for alleged clandestine removal of goods. The appellant, registered for manufacturing metal containers, repacked lubricating oil into 250 ml containers and cleared them by paying duty at the value of empty containers. The repacking activity was considered manufacturing under Section 2(f)(iii) of the Central Excise Act, leading to a duty demand of Rs. 10,04,805 under Section 11A proviso. The interest and penalty under Section 11AC were also imposed. The Tribunal upheld the duty demand and interest, as the appellant admitted to the suppression and clandestine clearance. The penalty under Section 11AC, equal to the evaded duty, was upheld due to established suppression, leaving no discretion for setting it aside.

Issue 2: Penalty imposition on appellant-assessee
Regarding the penalty on the appellant-assessee, the Tribunal noted that the duty demand arose from clandestine clearance of goods through repacking, which was confirmed by investigations. As the duty evasion was established, the penalty under Section 11AC, equal to the evaded duty, was deemed payable. The Tribunal upheld this penalty, emphasizing that in cases of suppression or fraud, penalties under Section 11AC are mandatory upon duty confirmation. Thus, the penalty on the appellant-assessee was maintained.

Issue 3: Penalty imposition on director
The penalty imposed on the director, Shri S.K. Bansal, under Rule 26 of the Central Excise Rules, was also addressed. While acknowledging his involvement in the evasion of Excise duty through clandestine clearance, the Tribunal considered that he may not have been fully aware of the specifics of the evasion. Despite not being actively engaged, the director could not deny responsibility. Therefore, a penalty was deemed appropriate under Rule 26. However, considering the circumstances, the penalty on the director was reduced from Rs. 2 lakhs to Rs. 50,000 to serve the ends of justice. The Tribunal disposed of both appeals accordingly, pronouncing the decision on 22/12/2016.

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