Penalty upheld under Rule 26 CER for clandestine removal from unregistered factory manufacturing LPG valves

The CESTAT Allahabad dismissed an appeal challenging penalty under Rule 26 of CER for clandestine removal of excisable goods. The appellant operated an unregistered factory manufacturing LPG stove valves and brass bars without maintaining proper records. Despite claiming non-service of show cause notice, the tribunal found service was properly effected through pasting at premises under panchnama. The appellant's own statement under Section 14 of Central Excise Act admitted active involvement in clandestine operations. The tribunal rejected the appellant's alibi defense, finding natural justice principles were complied with and the penalty was justified given admitted participation in unauthorized manufacturing activities.

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Issues Involved:

1. Demand of Central Excise Duty.
2. Recovery of Interest.
3. Imposition of Penalty under Rule 25.
4. Imposition of Penalty under Rule 26.
5. Violation of Principles of Natural Justice.

Summary:

1. Demand of Central Excise Duty:
The Commissioner confirmed the demand of Central Excise duty amounting to Rs 1,14,85,955/- from the unit of Shri Pintu Tyagi and Shri Pradeep Tyagi under Section 11A (4) of the Central Excise Act, 1944. The investigation revealed that the unit was engaged in clandestine manufacturing and clearance of excisable goods without registration and payment of duty, leading to evasion of the said amount.

2. Recovery of Interest:
Interest on the aforesaid demand of Central Excise duty was ordered to be recovered till the date of payment under Section 11AA/11AB of the Central Excise Act, 1944.

3. Imposition of Penalty under Rule 25:
A penalty of Rs 1,14,85,955/- was imposed on Shri Pintu Tyagi and Shri Pradeep Tyagi under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944, for their involvement in the evasion of duty.

4. Imposition of Penalty under Rule 26:
Separate penalties of Rs 5,00,000/- each were imposed on Shri Pintu Tyagi and Shri Pradeep Tyagi under Rule 26 of the Central Excise Rules, 2002 for their acts leading to the evasion of duty.

5. Violation of Principles of Natural Justice:
The appellant contended that the impugned order was passed in violation of the principles of natural justice. However, the Tribunal found that sufficient notice and opportunity were given to the appellant to reply to the show cause notice and appear for personal hearing. The service of hearing notices was effected by pasting at the residential and factory premises under proper panchnama when the appellant was not available to receive them. The Tribunal held that the principles of natural justice were sufficiently complied with and the appellant could not claim any violation.

Conclusion:
The Tribunal dismissed the appeal, upholding the demand of duty, recovery of interest, and imposition of penalties. The Tribunal found no merit in the appellant's claim of non-involvement and violation of natural justice, affirming that the appellant was actively involved in the clandestine activities and the penalties imposed were justified.

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