Beryl Drugs Ltd. Vs. Cce - Court Judgment

Excerpt:
1. this order will dispose of all the above captioned three appeals; one filed by the assessee and the two filed by the department.2. the facts are not much in dispute. the factory premises of the assessee were visited by the officers of the central excise on 7.10.1998 and certain invoices bearing no. 236 to 244 were found in their record through which the goods were removed involving central excise duty of rs. 67,683.15. on scrutiny of more records, it also revealed that they had removed the samples and also the goods against the private challans involving in all central excise duty of rs. 1,32,405 and this duty amount also included the duty payable on the goods found short in the stock. certain other goods were also found unaccounted for in the statutory records and those were also seized.similarly, some goods which were alleged to be defective were found lying in the factory premises unaccounted and those were also seized.the appellants, however, made the deposit of the entire duty amount, but still they were served with a show cause notice vide which the seized goods were proposed to the confiscated and penalty under section 11-ac of the act as well as rule 173-q of the rules was also proposed to be imposed on them in that notice. the appellants contested the notice and their liability to pay the penalty. they also contested the seizure and the confiscation of the unaccounted goods by alleging that certain goods were, in fact, received being defective and at the time of their earlier clearance these were already accounted for in the record. but the adjudicating authority had not accepted the version of the appellants and confirmed the duty demand of rs. 1,32,405 with equal amount of penalty under section 11-ac and also the penalty of rs. 1 lakh under rule 173-q of the rules. the adjudicating authority further ordered the confiscation of the goods with option to get the same redeemed on payment of redemption fine of rs. 5,000 as well as rs. 10,000 which were not accounted for in the record. the adjudicating authority also imposed penalty of rs. 10,000 on the director of the assessee company under rule 209-a.3. on appeal by the assessee, the commissioner (appeals) modified the above-said order of the adjudicating authority and dropped the penalty under section 11-ac and also under rule 209-a on the director of the assessee company. he had also set aside the redemption fines as imposed by the adjudicating authority in respect of the goods allegedly found excess and unaccounted in the factory premises.4. feeling dissatisfied, the assessee as well as the revenue both have come up in appeal against the impugned order of the commissioner (appeals). the revenue has filed two appeals; one against the assessee and the another against the director of the assessee against whom the penalty under rule 209-a of the rules had been dropped.5. i have heard both sides and gone through the record. in appeal no.e/479/02-nb (s) filed by the assessee the learned counsel has not contested the duty liability as the same was deposited by the assessee before the issuance of the show cause notice. what has been contested by the learned counsel is the imposition of penalty of rs. 1 lakh under rule 173-q of the rules. according to him, this penalty could not be imposed as there was no intention to evade the payment of duty on the part of the assessee who deposited the entire duty amount before issuance of the show cause notice.6. in appeal nos. e/1233 & 1234/02-nb (s), the learned sdr has questioned the validity of the impugned order of the commissioner (appeals) by contending that the penalty under section 11-ac could not be dropped as there was apparently an attempt on the part of the assessee to evade payment of duty. she has also contended that the redemption fine could not be set aside as the goods were found unaccounted in the factory premises. as regards the penalty imposed on the director of the assessee, the learned sdr has argued that the penalty under rule 209-a of the rules had been wrongly set aside by the commissioner (appeals) as he was directly involved in the removal of the goods without payment of duty.7. on the other hand, the learned counsel has contended that the penalty imposed against the director has been rightly dropped for want of any tangible evidence to prove his direct involvement in the removal of the goods without payment of duty. he being the employee of the company could not be even charged under rule 209-a 8. i have heard both sides and gone through the record. so far as the initial removal of goods by the appellants under the cover of invoices in question and otherwise as alleged in the show cause notice involving in all duty amounting to rs. 1,32,405 is concerned, the same remains undisputed. the assessee by conceding the lapse, deposited the entire duty amount before issuance of the show cause notice. having initially evaded the payment of duty, the penalty under section 11-ac of the act, which is a mandatory provision, could not be, in my view, legally dropped by the commissioner (appeals). the view of the commissioner (appeals) that there was no suppression of facts and that the documents were prepared later on, for dropping the penalty under the said provisions, in my view, is erroneous in law the section 11-ac does not create any exception in such a situation, for non-imposition of the mandatory penalty. therefore, the impugned order of the commissioner (appeals) in this regard cannot be sustained. keeping in view the facts and circumstances of the case, and the fact that the entire duty had already been paid before the issuance of the show cause notice, the assesses are burdened with a penalty of rs. 20,000 under section 11.the impugned order accordingly stands modified.9. regarding quantum of penalty of rs. 1 lakh imposed under rule 173-q of the rules; the plea of the learned counsel is that the same is exorbitant vis-a-vis the alleged evasion of duty, deserves to be accepted. the assessee had already deposited the duty, as is evident from the record, before the issuance of the show cause notice, and this fact should have been taken into account by the authorities below while deposing penalty under rule 173-q of the rules. it appears that they had over-looked this aspect and in my view the penalty imposed under rule 173-q of the rules on the assessee is exorbitant and the same is reduced to rs. 25,000 (rupees twenty-five thousand only). the impugned order of the commissioner (appeals) in this regard also stands modified.10. so far as the penalty imposed under rule 209-a of the rules on the director of the assessee company, the main contention of the learned sdr is that the same should not have been dropped. but in my view, this contention of the learned sdr cannot be accepted for want of any tangible evidence to prove the direct involvement of the director in the removal of the goods. the fact that he was an employee at that time itself is not enough to impose penalty on him as he had to act as per the direction of the assessee. so, for want of any evidence to prove his involvement, in my view, the penalty under rule 209-a of the rules had been rightly dropped against the director. similarly, for dropping the redemption fines, the commissioner (appeals) has recorded valid reasons for doing so. the goods were duty paid and the only lapse committed by the assessee was that he did not send d-3 intimation to the competent authority. therefore, the redemption fine of rs. 10,000 imposed by the adjudicating authority in respect of these goods had been rightly set aside by the commissioner (appeals).11. however, there was no sufficient ground available to the commissioner (appeals) for setting aside the redemption fine of rs. 5,000 in respect of the goods which were admittedly lying unaccounted for in the factory premises. the assessee did not dispute this fact even before the adjudicating authority. therefore, the commissioner (appeals) could not legally set aside the redemption fine of rs. 5,000 for the redemption of those goods as the goods were liable to be confiscated on accountal of non account of the same in the statutory record. therefore, the impugned order of the commissioner (appeals) in this regard cannot be sustained and is set aside. the order of the adjudicating authority in this regard is maintained.12. in view of the discussion made above, the impugned order of the commissioner (appeals) stands modified, as detailed above. all the three appeals accordingly disposed of in the above terms.

Judgment:
1. This order will dispose of all the above captioned three appeals; one filed by the assessee and the two filed by the Department.

2. The facts are not much in dispute. The factory premises of the assessee were visited by the Officers of the Central Excise on 7.10.1998 and certain invoices bearing No. 236 to 244 were found in their record through which the goods were removed involving Central Excise Duty of Rs. 67,683.15. On scrutiny of more records, it also revealed that they had removed the samples and also the goods against the private challans involving in all Central Excise Duty of Rs. 1,32,405 and this duty amount also included the duty payable on the goods found short in the stock. Certain other goods were also found unaccounted for in the statutory records and those were also seized.

Similarly, some goods which were alleged to be defective were found lying in the factory premises unaccounted and those were also seized.

The appellants, however, made the deposit of the entire duty amount, but still they were served with a show cause notice vide which the seized goods were proposed to the confiscated and penalty under Section 11-AC of the Act as well as Rule 173-Q of the Rules was also proposed to be imposed on them in that notice. The appellants contested the notice and their liability to pay the penalty. They also contested the seizure and the confiscation of the unaccounted goods by alleging that certain goods were, in fact, received being defective and at the time of their earlier clearance these were already accounted for in the record. But the adjudicating authority had not accepted the version of the appellants and confirmed the duty demand of Rs. 1,32,405 with equal amount of penalty under Section 11-AC and also the penalty of Rs. 1 lakh under Rule 173-Q of the Rules. The adjudicating authority further ordered the confiscation of the goods with option to get the same redeemed on payment of redemption fine of Rs. 5,000 as well as Rs. 10,000 which were not accounted for in the record. The adjudicating authority also imposed penalty of Rs. 10,000 on the Director of the assessee company under Rule 209-A.3. On appeal by the assessee, the Commissioner (Appeals) modified the above-said order of the adjudicating authority and dropped the penalty under Section 11-AC and also under Rule 209-A on the Director of the assessee company. He had also set aside the redemption fines as imposed by the adjudicating authority in respect of the goods allegedly found excess and unaccounted in the factory premises.

4. Feeling dissatisfied, the assessee as well as the Revenue both have come up in appeal against the impugned order of the Commissioner (Appeals). The Revenue has filed two appeals; one against the assessee and the another against the Director of the assessee against whom the penalty under Rule 209-A of the Rules had been dropped.

5. I have heard both sides and gone through the record. In Appeal No.E/479/02-NB (S) filed by the assessee the learned counsel has not contested the duty liability as the same was deposited by the assessee before the issuance of the show cause notice. What has been contested by the learned counsel is the imposition of penalty of Rs. 1 lakh under Rule 173-Q of the Rules. According to him, this penalty could not be imposed as there was no intention to evade the payment of duty on the part of the assessee who deposited the entire duty amount before issuance of the show cause notice.

6. In Appeal Nos. E/1233 & 1234/02-NB (S), the learned SDR has questioned the validity of the impugned order of the Commissioner (Appeals) by contending that the penalty under Section 11-AC could not be dropped as there was apparently an attempt on the part of the assessee to evade payment of duty. She has also contended that the redemption fine could not be set aside as the goods were found unaccounted in the factory premises. As regards the penalty imposed on the Director of the assessee, the learned SDR has argued that the penalty under Rule 209-A of the Rules had been wrongly set aside by the Commissioner (Appeals) as he was directly involved in the removal of the goods without payment of duty.

7. On the other hand, the learned counsel has contended that the penalty imposed against the Director has been rightly dropped for want of any tangible evidence to prove his direct involvement in the removal of the goods without payment of duty. He being the employee of the company could not be even charged under Rule 209-A 8. I have heard both sides and gone through the record. So far as the initial removal of goods by the appellants under the cover of invoices in question and otherwise as alleged in the show cause notice involving in all duty amounting to Rs. 1,32,405 is concerned, the same remains undisputed. The assessee by conceding the lapse, deposited the entire duty amount before issuance of the show cause notice. Having initially evaded the payment of duty, the penalty under Section 11-AC of the Act, which is a mandatory provision, could not be, in my view, legally dropped by the Commissioner (Appeals). The view of the Commissioner (Appeals) that there was no suppression of facts and that the documents were prepared later on, for dropping the penalty under the said provisions, in my view, is erroneous in law The Section 11-AC does not create any exception in such a situation, for non-imposition of the mandatory penalty. Therefore, the impugned order of the Commissioner (Appeals) in this regard cannot be sustained. Keeping in view the facts and circumstances of the case, and the fact that the entire duty had already been paid before the issuance of the show cause notice, the assesses are burdened with a penalty of Rs. 20,000 under Section 11.

The impugned order accordingly stands modified.

9. Regarding quantum of penalty of Rs. 1 lakh imposed under Rule 173-Q of the Rules; the plea of the learned counsel is that the same is exorbitant vis-a-vis the alleged evasion of duty, deserves to be accepted. The assessee had already deposited the duty, as is evident from the record, before the issuance of the show cause notice, and this fact should have been taken into account by the authorities below while deposing penalty under Rule 173-Q of the Rules. It appears that they had over-looked this aspect and in my view the penalty imposed under Rule 173-Q of the Rules on the assessee is exorbitant and the same is reduced to Rs. 25,000 (rupees twenty-five thousand only). The impugned order of the Commissioner (Appeals) in this regard also stands modified.

10. So far as the penalty imposed under Rule 209-A of the Rules on the Director of the assessee company, the main contention of the learned SDR is that the same should not have been dropped. But in my view, this contention of the learned SDR cannot be accepted for want of any tangible evidence to prove the direct involvement of the Director in the removal of the goods. The fact that he was an employee at that time itself is not enough to impose penalty on him as he had to act as per the direction of the assessee. So, for want of any evidence to prove his involvement, in my view, the penalty under Rule 209-A of the Rules had been rightly dropped against the Director. Similarly, for dropping the redemption fines, the Commissioner (Appeals) has recorded valid reasons for doing so. The goods were duty paid and the only lapse committed by the assessee was that he did not send D-3 intimation to the competent authority. Therefore, the redemption fine of Rs. 10,000 imposed by the adjudicating authority in respect of these goods had been rightly set aside by the Commissioner (Appeals).

11. However, there was no sufficient ground available to the Commissioner (Appeals) for setting aside the redemption fine of Rs. 5,000 in respect of the goods which were admittedly lying unaccounted for in the factory premises. The assessee did not dispute this fact even before the adjudicating authority. Therefore, the Commissioner (Appeals) could not legally set aside the redemption fine of Rs. 5,000 for the redemption of those goods as the goods were liable to be confiscated on accountal of non account of the same in the statutory record. Therefore, the impugned order of the Commissioner (Appeals) in this regard cannot be sustained and is set aside. The order of the adjudicating authority in this regard is maintained.

12. In view of the discussion made above, the impugned order of the Commissioner (Appeals) stands modified, as detailed above. All the three appeals accordingly disposed of in the above terms.