Penalty reduced from Rs. 5 Lacs to Rs. 1 Lac under Central Excise Rules

The penalty imposed under Rule 26 of Central Excise Rules, 2002, amounting to Rs. 5 Lacs, was reduced to Rs. 1 Lac by the Appellate Tribunal CESTAT Ahmedabad. The Tribunal found that while a penalty for improper accounting by the Chairman and MD of the appellant company was warranted, there was insufficient evidence to support the allegation of clandestine removal of goods without duty payment. The decision was in favor of the appellant, with the penalty modification pronounced by Hon'ble Member (Judicial) Mr. Ramesh Nair on 08.06.2022.

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Issues:
Penalty imposed under Rule 26 of Central Excise Rules, 2002 upheld by Commissioner (Appeals) - Appellant failed to account for manufactured goods properly - Excess goods found unaccounted - Confiscation, redemption fine, and penalty imposed - Appeal against penalty reduction from Rs. 5 Lacs to Rs. 1 Lac.

Analysis:
The appeal before the Appellate Tribunal CESTAT Ahmedabad was directed against the Order-In-Appeal where the penalty imposed under Rule 26 of Central Excise Rules, 2002 was upheld by the learned Commissioner (Appeals). The penalty of Rs. 5 Lacs was imposed on the appellant due to the failure to account for the manufactured goods properly, leading to the discovery of excess unaccounted goods during an inspection, resulting in confiscation, redemption fine, and penalty imposition.

Despite several notices, no one appeared on behalf of the appellant during the proceedings. The learned Superintendent (AR) representing the revenue reiterated the findings of the impugned order during the hearing. Upon careful consideration of the submissions made by the learned AR and perusal of the records, the Hon'ble Member (Judicial) Mr. Ramesh Nair reviewed the case.

The Commissioner (Appeals) had upheld the penalty under Rule 26 based on the finding that the Chairman & MD of the appellant company was involved in the possession of finished excisable goods without proper accounting, intending to clear them without issuing Central Excise Invoices or paying Central Excise Duty. However, the appellant's statements to the investigating agency did not support the allegation that the goods were kept for clandestine removal without duty payment. The appellant attributed the unaccounted goods to mismanagement and staff turnover, stating that the goods were not intended for clandestine removal. The Hon'ble Member noted that while a token penalty could be imposed for the lack of proper accounting by the Chairman and MD, a personal penalty for clandestine removal was not justified.

Consequently, the penalty was reduced from Rs. 5 Lacs to Rs. 1 Lac by the Appellate Tribunal, modifying the impugned order accordingly. The appeal was partly allowed in favor of the appellant. The decision was pronounced in open court on 08.06.2022 by Hon'ble Member (Judicial) Mr. Ramesh Nair.

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