PRAKASH SPINNING MILLS Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) The appellants are manufacturers of cotton yarn. Officers of Central Excise, who visited their factory in January, 1998, found that the party had clandestinely removed 163 bags of 40's cotton yarn without payment of duty and that 5 bags of 40's cotton yarn and 39 loose cones were ready for removal without accountal in RG I Register. The quantity of yarn found in excess of RG I stock, valued at Rs. 25,432/ -, was seized. On the basis of investigative results, the department issued a show cause notice to the party demanding duty on the above quantity of 163 bags of cotton yarn and proposing to confiscate the excess stock of yarn and also proposing penalty under Section 11AC of the Central Excise Act, 1944 and Rule 173Q etc. of the Central Excise Rules, 1944. By the time this notice was issued, the party had already paid duty of Rs. 14,950/ - on a part of the quantity of cotton yarn found clandestinely removed. The original authority confirmed demand of duty of Rs. 41,239/ - on the cotton yarn clandestinely removed during 25 -11 -1997 to 6 -1 -1998 and appropriated the above payment of Rs. 14,950/ - towards this demand. It also confiscated the excess stock of yarn under Rule 173Q with a redemption fine of Rs. 6,000/ -. It also imposed a penalty of Rs. 41,239/ - on the party under Section 11AC of the Central Excise Act. The order of adjudication was affirmed by the first appellate authority. After the appellate order was passed, the party paid the balance amount of duty of Rs. 26,289/ -. In Appeal No. E/628/2004, the challenge is against the quanta of redemption fine and penalty only.

(2.) When the officers, again, visited the factory in October, 1998, it was found that 5724 kgs. of 40's cone yarn and that 15 bags (750 kgs) of cotton yarn remained in excess of RG I balance, believed to have been kept for clandestine removal. Hence proceedings similar to the above were initiated by the department. The adjudicating authority confirmed demand of duty of Rs. 28,422/ - against the party in respect of the 5724 kgs. of cotton yarn found to have been clandestinely removed during the period 9 -1 -1998 to 29 -10 -1998. It also confiscated the excess stock of yarn (valued at Rs. 63,000/ -) under Rule 173Q with redemption fine of Rs. 9,000/ -. The authority also imposed a penalty of Rs. 28,422/ - on the party under Section 11AC and Rules 9(2), 52A, 173Q and 226 of Central Excise Rules, 1944. The order of the original authority was affirmed by the Commissioner (Appeals). Hence Appeal No. E/629/2004. In this case, the duty on 5724 kgs. of Cotton yarn was paid only at or around the time of filing of this appeal, though the penalty imposed by the original authority was paid at the lower appellate stage.

(3.) After examining the records and hearing both sides, I find that, in respect of 163 bags and 5724 kgs. of 40's cone yarn, there is no dispute of duty liability and the duty on these goods has already been paid by the appellants. Clandestine removal of these goods, thus, is an admitted fact. The only plea raised by the appellants is that they were not aware of the Central Excise law and procedure during the relevant period. The appellants started manufacturing activity only in 1997. By the time the Central Excise Officers visited the factory, the appellants had not acquired adequate awareness of the provisions. This plea of ignorance of law cannot be accepted inasmuch as manufacture of excisable goods could have been started only after obtaining the requisite registration from the department. As the clandestine removal of cotton yarn stands admitted, any penalty under Section 11AC cannot be resisted. A penalty of Rs. 41,239/ - (equal to duty on 163 bags of cotton yarn) has been imposed on the assessee under Section 11 AC. This is the maximum penalty imposable under Section 11 AC. It has been prayed by the appellants that this penalty be reduced in the above circumstances. Ld. SDR has opposed this plea. In my view, no valid ground has been raised for a lower penalty. I have already rejected the plea of ignorance of law. In the circumstances, the penalty of Rs. 41,239 / - imposed on the assessee under Section 11 AC will stand. However, the redemption fine of Rs. 6.000/ - in lieu of confiscation of cotton yarn valued at Rs. 25,432/ - does not seem to be reasonable. Section 34 of the Central Excise Act, which provides for imposition of redemption fine in lieu of confiscation, does not lay down any guidelines in relation to quantum of such fine. On the other hand, Section 125 of the Customs Act, which provides for confiscation of goods offending any provision of the said Act, has laid down guidelines for determination of redemption fine in lieu of confiscation. The guidelines under the Customs Act can be mutatis mutandis followed under the Central Excise Act. On these norms, Rs. 6,000/ - is on the higher side and the same is reduced to Rs. 4,000/ -, Appeal No. E/628/2004 is allowed only to this extent.