Judgment:
1. The appellants procured Staple Fibre for conversion into yarn and subsequent export under the provisions of Rule 191B of the Central Excise Rules. The Department noticed that the yarn manufactured out of the staple fibre was not exported. Accordingly, a show cause notice was issued to the appellants asking them to explain as to why duty should not be demanded on the staple fibre and why penalty should not be imposed. In reply to the Show Cause Notice, the Appellants submitted that they had already paid duty involved on the staple fibre and submitted that since it is a mere irregularity, the case maybe decided on merits. After perusing the submissions of the Appellants, the Collector confirmed the demand of Rs. 14,62,657.70 and also imposed a penalty of Rs. 2.00 Lakh. Against this order, the Appellants have filed the present appeal.
2. Shri K.K. Anand, ld. Advocate, appearing for the appellants, submits that the appellants had already deposited the entire amount of duty of Rs. 14,62,657.70 even before the issue of the Show Cause Notice. He submits that the only point that he would like to agitate is the imposition of penalty. The ld. Counsel submits that the appellants had opted for working under provisions of Rule 191B; that Rule 191B provides for procurement of inputs without payment of duty for use in the manufacture of finished product proposed to be exported. He submits that the provisions of this Rule are clear inasmuch as levy of penalty is concerned. He submits that the Government of India, in pursuance of these Rules, issues notification and a Notification prescribes certain conditions. Thus, by diverting the goods from export to home consumption, and realisation of duty on the input used in the manufacture of the final product, it is a breach of the provisions of the Notification. He submits that the Notification itself provides that with the permission of the Collector, the diversion can be allowed. He submits that the appellants by mistake or through ignorance did not take permission of the Collector; but the moment it realised that duty is required to be paid, the entire amount of duty was paid. He submits that Rule 191B(6) provides for imposition of penalty not exceeding Rs. 2,000/-. He submits that since the entire procurement of the raw materials, its conversion into final product and export thereof is governed by the provisions of Rule 191B and therefore for the purpose of penalty, this rule should be taken into account. He submits that according to this rule, the maximum penalty cannot be more than Rs. 2,000/-. He, therefore, prays that the amount of penalty may be reduced to Rs. 2,000/-.
3. Shri Y.R. Kilaniya, ld. JDR appearing for the respondent Commissioner, submits that it is a case pertaining to duty amounting to Rs. 14,62,657.70. Admittedly this duty was not paid at the time of removal of the goods and, therefore, the violation is not a simple violation of Rule 191B, but a general violation. He submits that in this view, the lower authorities have rightly imposed penalty under Rule 209 of the Central Excise Rules, 1944. He justified the imposition of penalty as also the quantum thereof.
4. Heard the submissions of both sides. We find that Rule 191B(6) provides for imposition of penalty and confiscation of the goods. In the instant case we find that the goods were not available for confiscation. Therefore, there should have been an order that since the goods were not available for confiscation, the amount of penalty higher than Rs. 2,000/- provided under Rule 191B(6) is imposable. On a scrutiny of the Order-in-Original, we do not find any such finding of the ld. Collector. In the absence of this type of finding, we do not see any reason to go beyond the requirement of Rule 191B(6). Since Rule 191B(6) is very specific, we reduce the amount of penalty to Rs. 2,000/-.
5. The impugned order is modified to the above extent and the appeal is disposed of accordingly.