CCE Vs. MODERN STEEL AND AGRO INDUS. AND

JUDGEMENT

(1.) THESE two appeals are preferred against the common order of the Commissioner (Appeals) made on 19.04.2005 by which the penalties imposed on the respondents under the order -in -original were set -aside on the ground that the respondent No. 1 (original noticee No. 1 - Partnership Firm) had already paid up the full amount of duty and penalty, and the respondent No. 2 (original noticee No. 2 - partner of the said Firm) had also deposited the full amount of penalty. Admittedly, the entire duty amount of Rs. 78,841/ - was paid up by the respondent No. 1 by paying Rs. 53,851/ - on 12.01.2002 i.e the date on which the Revenue Officers visited the factory and when shortages were noticed, and the remaining amount of Rs. 25,000/ - on 14.01.2002. Twenty five per cent of the duty amount was paid by way of penalty on 19.03.2002 presumably for taking the benefit of the provisions of first proviso to Section 11 -AC of the Act. The respondent No. 2 - partner of the noticee No. 1, paid up the full amount of penalty after the order was made.

(2.) THE learned authorised representative for the Revenue has contended that, penalty, equal to the duty, payable i.e of Rs. 78,851/ - was correctly imposed on the respondent No. 1 - Partnership Firm, and there was no valid reason for the Appellate Authority to set -aside such penalty. He also submitted that, separate penalty was liable to be imposed on the respondent No. 2 - Partner, under Rule 26 of the said Rules and there was no warrant for disturbing that order. He relies upon the decision of the Larger Bench of this Tribunal in the case of Commissioner of Central Excise, Delhi -IV v. Ilpea Paramount Pvt. Ltd., decided on 21st June, 2007, in which it was held, following the decision of the Hon'ble High Court of Punjab and Haryana, that, once it was held that imposition of penalty under Section 11 -AC of the Act was warranted, the wordings of Section 11 -AC do not leave any option for imposing a reduced penalty, except as specifically provided for in the amended provisions of Section 11 -AC, by the first proviso. It was submitted that, since there was a clear finding of clandestine removal of goods given on the basis of the facts admitted by the partner himself, penalty, equal to the duty amount, was warranted in this case even under Rule 25 of the Central Excise Rules, 2001. It was also submitted that, the entitlement to reduce penalty of 25% of the duty determined was not established, because payment of the interest amount was not shown to have been made as required by the first proviso to Section 11 -AC of the Act.

(3.) THE learned Counsel appearing for the respondents in these two appeals, argued that, there was no allegation of any intention to evade duty made in the show cause notice and in which penalty was proposed to be imposed under Rule 25 of the said Rules, which prescribes a minimum penalty of only Rs. 10,000/ -. It was submitted that, the entire duty amount and penalty calculated at 25% of the duty determined was, admittedly, paid up before the issuance of the show cause notice dated 30.12.2002. He submitted that, there was no demand of interest made in the show cause notice and even no separate demand of interest was required to be made under Section 11 -AB, since there was no direction to pay interest in the order -in -original. The interest under Rule 11 -AB was required to be paid from "the first date of the month succeeding the month in which duty ought to have been paid under the Act." Since duty liability was detected on 12.01.2002 and there was no allegation that it ought to have been paid earlier, no interest amount was required to be paid as contemplated by the proviso to Section 11 -AC. He, therefore, submitted that, the maximum liability to pay penalty cannot exceed in respect of the respondent firm to anything more than 25% of the duty determined which was already paid up. He placed reliance on the decision of this Tribunal in the case of Avery Cycles Inds. Ltd. v. CCE, Ludhiana , more particularly, on paragraph 5 of the judgment, in which it was held that, when the amount was deposited earlier than the issuance of a show cause notice, adjustment of such amount, made in the adjudication order determining the duty, should be treated as payment made within 30 days from the date of the commencement of the order. The evidence on record discloses that, the partner of the respondent firm, who is the respondent No. 2 in Appeal No. E/2648/05 -SM, had admitted that, the firm had indulged in the act of clandestine manufacture of the excisable goods. It is also proved from the record that, on physical verification of the stocks lying in the factory premises, a shortage of 40.396 MT of raw material and 0.810 MT of scrap was detected. These shortages were admitted by the partner of the firm, who also signed the verification charts prepared on the spot, on 12.01.2002. The said partner (Shri Kamal Singla), in terms, admitted that, the said raw material was sold by them in the local market without entering the same in the statutory records and without issuing invoices and also without paying the Central Excise Duty of Rs. 77,721/ -, which was payable thereon. He agreed to deposit the duty amount of Rs. 78,841/ -, which came to be deposited, as noted above. Since the manufacture of the excisable goods was not accounted for in the Daily Stock Accounts and the goods were clandestinely cleared without issuance of any invoice and without subjecting the same to assessment and payment of Central Excise Duty, this was a clear case of clandestine manufacture and clearance with intent to evade payment of duty, as rightly held by the adjudicating authority. The facts admitted by the partner of the firm were reproduced in the show cause notice, and the allegations contained therein clearly implied intention to evade duty. When the facts alleged in the show cause notice were sufficient to put the noticees to guard that they had clandestinely removed the excisable goods without issuing invoice and without payment of excise duty, it is obvious that, such action was with intent to evade duty. In the show cause notice the following Rule 25 of the said Rules was invoked: