Full Judgment
2. The respondent Monga Brothers Ltd. was engaged in manufacturing articles of iron and steel and was availing cenvat credit facility in respect of inputs and capital goods used in the manufacture of the finished goods. The respondent Mr. Rajiv Gupta was the Managing Director and the other respondent Mr. Sanjay Gupta, Director in the said company. When the Revenue officers visited the factory premises of the respondent company, it transpired on physical verification of stock of raw materials and finished goods, that there was a shortage of 76.055 MT of non-alloy ingots valued at Rs. 8,06,487/- involving cenvat duty of Rs. 1,29,038/-. It was also found that there was a shortage of 69 MTs of rounds involving cenvat duty of Rs. 1,40,054/- as well as also a shortage of flats involving cenvat duty of Rs. 53,797/-. When questioned about the shortage, the Revenue officers were informed that the goods were removed from the factory premises on cash payment at the factory gate without issuance of central excise invoices and without payment of cenvat duty during the last ten days. The respondent company deposited the duty amount along with mandatory penalty equivalent to 25% of the duty amount by TR.6 challan No. 49/02 dated 16.9.2002.
Thereafter, show cause notice dated 6.8.2003 was issued on the respondent.
3. On the basis of material on record, the adjudicating authority held that, the shortage which was noticed on 14.9.2002, was established. The Managing Director admitted the shortage. According to him, the goods were removed from the factory premises on cash payment during the previous ten days. He said that since they had faced a cash crunch, there was no other way for them to meet the same except by making distress sales without accountal in their records to meet their financial commitments. The shortages were admitted and the duty payable along with mandatory penalty was deposited as aforesaid on 16.9.2002.
Even the other Director Sanjay Gupta had stated that, record of the purchaser was not kept and the quantity was sold to certain persons on cash payment at the factory gate. The evidence on record led the adjudicating authority to come to a finding that both the Directors sold the goods on cash basis without issuing any invoice and without payment of excise and therefore they acted with an intention to evade payment of central excise duty leviable on the impugned goods. Both the Directors were responsible for day-to-day working of the unit and therefore, it was held by the adjudicating authority that they cannot escape the responsibility. The adjudicating authority, therefore, confirmed the demand and imposed penalties of the like amount on the respondent company and Rs. 25,000/- on each of the Directors. It was ordered that the amount, which was already deposited on 16.9.2002 towards duty should be adjusted. It was also ordered that the 25% of the amount of penalty as provided under the proviso to Section 11AC, which was also deposited, should be adjusted towards the penalty imposed on the respondent company.
4. The Appellate Commissioner found that, there was a shortage in the stock involving total duty of Rs. 3,22,899/-. In view of the admission of shortage and deposit of duty along with 25% of duty towards mandatory penalty under Section 11AC, the Commissioner (Appeals) confirmed the order of the adjudicating authority. However, relying on the decision of the Tribunal in Commissioner of Central Excise, Delhi-III v. Machino Montell, , it was held that, since the respondent company had deposited the entire duty amount on 16.9.2002, and the show cause notice was issued thereafter on 6.8.2003, the penalty could not be imposed on the respondent company.
Since no penal action was taken against the respondent company, the Commissioner (Appeals) found no logic in imposing penalties on the Directors who are the respondents in the other two appeals. The penalties were, therefore, set aside and the order-in-original was modified to that extent.
5. The learned authorized representative for the department has strongly contended that merely because the amount was deposited prior to the issuance of the show cause notice, the respondents were not absolved from paying penalties. It was submitted that the amount of duty and mandatory penalty of 25% of the duty determined were deposited only after the authorities detected the defaults. He submitted that the part played by the Directors in evasion of duty was clearly established from their own admissions. Both the Directors were fully aware about the clandestine sales at the factory gates effected without issuance of any invoices, on cash basis, and without reflecting them in the books.
Therefore, the penalties were correctly imposed by the adjudicating authority upon them. He also submitted that full penalty ought to have been imposed on the respondent company. The learned authorized representative for the department contended that, since the duty and mandatory penalty of 25% of duty determined were paid prior to the making of the order of adjudication, it cannot be said that they were paid within thirty days from such order. He, therefore, submitted that such earlier payment will not entitle the assessee to get the benefit of the reduced penalty of 25% of the duty determined and penalty equal to the amount of duty determined, was required to be imposed.
6. The evidence on record clearly discloses that, shortage of goods as alleged in the show cause notice was detected and that clandestine removal of goods was admitted. The statements of the Managing Director and the Director are eloquent to establish that the goods were removed on cash payment without issuing invoices and without payment of duty.
There is no dispute about the correctness of the quantity of shortage detected on 14.9.2002, when physical verification was done, of the stock of raw material and the finished goods in the presence of Managing Director and the Director as well as the other staff of the company. The physical verification report was duly signed by the Managing Director and the Director in token of its correctness. The respondent company has not challenged its duty liability nor has it challenged its liability to pay 25% of the duty determined by way of penalty, which amounts were deposited prior to the issuance of the show cause notice.
7. It is evident from the record that the amount of duty was paid only after the defaults were detected by the Revenue officers and these were not voluntary payments. Moreover, there was no valid reason to waive the penalty merely on the ground that the amounts were deposited prior to the issuance of the show cause notice, when the penalty was clearly imposable on the assessee, on the facts established, under the provisions of Section 11AC of the Act. Reliance on the decision of the Tribunal in Machino Montell (supra) placed by the Commissioner (Appeals) for setting-aside the penalty is not now justified in view of the fact that the said decision of the Tribunal was reversed by the Hon'ble High Court of Punjab and Haryana in CCE, Delhi v. Machino Montell (I) Ltd. reported in 2006 (4) STR 177. The Hon'ble High Court of Punjab and Haryana held in para 7 of the judgment: "Once a case is covered by the situation mentioned in the section, mere deposit prior to issuance of show cause notice under Section 11A of the Act will not necessarily negate the situation mentioned in the said Act".CCE and C, Aurangabad v.Padamashri VV Patil Sahakari Sakhar Karkhana Ltd. reported in 2007-TIOL-419-HC-MUM-CX, held in the context of the provisions of Section 11AC of the Act that, there was no discretion with the authorities to impose any lesser penalty than 100%, and 25% in case duty after being determined under Section 11A(2), the assessee pays it within thirty days. The Full Bench of this Tribunal in CCE, Delhi-IV v.ILPEA Paramount Pvt. Ltd. reported in 2007 (213) ELT 500, held in paragraph 15 of the judgment that, once it was held that imposition of penalty under Section 11AC of the Act is warranted, the wordings of Section 11AC do not leave any option for imposing a reduced penalty, except as specifically provided for in the amended provisions of Section 11AC, under the first proviso of which, it was only when the duty is paid, along with interest and penalty as determined, within thirty days, that the person concerned will be entitled to the benefit of paying penalty at the rate of 25% of the duty determined. The Hon'ble High Court of Punjab and Haryana in Commissioner of Central Excise, Delhi-IV v. ILLPEA Paramount Pvt. Ltd. reported in 2006 (2040 ELT 22 (P&H), while considering the penalty provisions under Section 11AC of the said Act, held in paragraph 20 of the judgment: " We are of the view that the language of the statute is clear. If the situation demands imposition of penalty, the same has to be equal to the amount of duty".CCE, Ludhiana v. Punjab Comber Ltd. in Excise Appeal No. 3112 of 2005 decided on 2.8.2007 and in CCE, Jaipur-II v. Agarwal Cotton Mills in Excise Appeal No. 3234 Of 2005 decided on 7.8.2007.
10. For the foregoing reasons, there was no justification for Commissioner (Appeals) to set-aside the penalties imposed on these respondents. The adjudicating authority has already given the benefit of the proviso to Section 11AC to the respondent-assessee by requiring the amount of duty and 25% of the duty determined by way of penalty, to be adjusted against the liability determined by the adjudicating authority. No appeal was filed by the Commissioner against the adjudicating order giving benefit of the proviso to Section 11AC to the respondent-assessee and therefore, it is not open for the Revenue now to contend that the maximum amount of penalty should have been imposed.
The contention that the amount earlier deposited cannot be considered to be payment within thirty days of the date of the communication of the order, has been negatived by this Tribunal in Avery Cycles Indus.
Ltd. v. CCE, Ludhiana, 11. Since the Commissioner (Appeals) had set-aside the penalties on the other appellants who are the Directors merely on the ground that there was no justification for imposing the penalties on them in view of the fact that penalty on the assessee was set-aside, the penalties on the Directors are required to be restored. The Directors were fully aware of the clandestine removal of the goods without issuance of the invoices and against cash payments. They have admitted all the relevant facts, which indicated that, the removal of the goods was clandestine and done with a view to evade payment of duty.
12. In the above view of the matter, the impugned order of the Commissioner (Appeals) to the extent that it had set-aside the penalties imposed on the respondents is hereby set-aside and the order of the adjudicating authority imposing penalties on all the respondents stands restored. All the appeals are, accordingly, allowed.