Case Law Details

Case Name : C.C.E. Vs M/s Avi Sales Pvt Ltd. (CESTAT Ahmedabad)
Appeal Number : Appeal No. E/471/2011
Date of Judgement/Order : 21/02/2017
Related Assessment Year :

Ld. Advocate Shri S. J. Vyas for the appellant submitted that in the present appeals the appellants are challenging the order on the ground that imposition of penalty under Section 11AC of CEA,1944 against the appellant company and personal penalty under Rule 26 of Central Excise Rules,2002 on the Director is unjustified. The Ld. Advocate for the Appellants submits that the appellant under a bonafide belief, cleared the goods at NIL rate of duty and major portion of the demand relates to their trading sales. It is his contention that the demand confirmed initially was reduced to Rs. 3,92,051/- after extending the benefit of cum-duty-price as well as production of purchase invoices relatable to trading sales. It is his submission that where ever they could not establish the trading activity by production of purchase invoices, duty was confirmed. It is contention that there was no malafide intention to evade payment of duty as all the sales during the relevant period have been duly recorded in their books of account and no clearance was alleged to have been clandestinely made without maintenance of records. It is his further contention that penalty on the Director was confirmed without specifying his active role for non payment of central excise duty on the clearances made during the said period. Therefore, no penalty is imposable on the Director.

Per contra, Ld. AR for the Revenue submitted that the appellant during the period 2001 to 2003-2004 classifying their goods as Agricultural machineries, which were used for separating cotton fibres from the seeds, that is for non-agricultural purpose, cleared at NIL rate of duty. It is his contention that since the proper use of machinery has not been disclosed to the department and the Ginning machineries were cleared at NIL rate of duty, therefore, there was an element of suppression and hence imposition of penalty under Section 11AC of Central Excise Act, 1944, has been rightly confirmed. Further, he has submitted that since the Director is overall in charge of the factory, therefore personal penalty on him has been rightly imposed and confirmed.

 In his rejoinder, the Ld. Advocate submitted that due to rivalry between the directors they could not produce relevant documents on export and other sales affected by the appellant, resulting into confirmation of the demand for lack of evidence.

Heard both sides. The questions involved in the Appeals filed by the assesses are: whether the penalty on the appellant company imposed under Section 11AC of Central Excise Act, 1944, and personal penalty under Rule 26 of Central Excise Rules,2002 on the Director are sustainable or otherwise. The Revenue is in Appeal challenging the benefit of discharging 25% of the penalty imposed under Sec.11AC, subject to fulfilment condition by the assessee, extended by the Ld. Commissioner(Appeals) in the impugned Order.

I find that even though initially the demand for recovery of duty was Rs.36,38,679/- through show cause notice dated 09.08.2005, but in the second round of litigation, before the Adjudicating Authority, it was reduced to 32,07,982/- and later drastically reduced by the Ld. Commissioner (Appeals) to Rs.3,92,051/-. The Revenue has not challenged the reduction in duty. I find that the allegation against the appellant was that they have removed during the relevant period 2001 to 2004, Ginning Machineries at NIL rate of duty claiming its use in agricultural purpose, whereas its use was other wise and hence the same was held to be dutiable and duty initially not paid was confirmed. However, considering that the major portion of the sales turnover is attributable to trading activity, hence, after deducting the trading sales in computing sales under SSI exemption Notification no.08/2003 and extending cum-duty-price benefit, the liability got reduced to Rs.3,92,051/-. This reduction in the liability, however, in my view cannot absolve the appellant of the charge of removal of goods without payment of duty invoking extended period of limitation, since all the facts necessary in the clearance of goods as agricultural machinery had not been disclosed at the time of its removal from the factory. I find the Ld. Commissioner (Appeals) has recorded reasons in justifying the demand as well as imposition of penalty under Section 11AC of the Central Excise Act, 1944 on the Appellant Company. Hence, the same do not call for interference. As far as personal penalty on the Director is concerned, the said appellant could able bring out evidence before the Adjudicating Authority that due to infighting between the two Directors at the relevant time, they could not able to disclose all the facts to the department relating to export and other trading sales. Also, from the evidences as recorded and analysed in the impugned order, the role of the Director has not been specifically discussed and brought out the fact that non-payment of duty was at his instance. In these circumstances, the personal penalty on the Director is unwarranted and accordingly set aside.

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