Clandestine Removal – Whether the penalty is imposable on the Director when company paid duty along with interest and 25% penalty?

PJ/Case Laws/ 2012-13/ 1195

Case:COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, RAIPUR V/S M/S MANISH KUMAR AGARWAL

Citation: 2012-TIOL-999-CESTAT-DEL

Issue:- Clandestine Removal – Whether the penalty is imposable on the Director when company paid duty along with interest and 25% penalty?

Brief Facts: - The Appellant (revenue) preferred the present appeal by aggrieved with the order passed by Commissioner (Appeals) vide which he has set aside the penalty on the present respondent, who is director of Nandan Steel & Power Ltd. The case of clandestine removal was booked against Nandan Steel & Power Ltd. who deposited the duty along with interest and 25% of penalty, within a period of 30 days from the issuance of show cause notice. By taking into account the Board's circular No.831/08/2006-CX dated 26.7.06, Commissioner has held that as manufacturing unit has paid the entire dues, there is no justification for imposition of separate penalty on the Director.

Reasoning of Judgment: - The CESTAT held that the facility of depositing the entire duties along with 25% of penalty stand given to industry so as to reduce the litigation. The Circular of the Board is reproduced below:-

“2 Section 11A of the Central Excise Act, 1944 has been amended to introduce an optional scheme for enabling voluntary payment of duty by assesses, in full or in part, in cases involving fraud, mis-statement etc. along with interest and 25% of the duty amount as penalty within 30 days of the receipt of the SCN thereby dispensing with the rigours of adjudication procedures. This is an additional facility given to the Trade to settle the dispute at an early stage to reduce litigation and also aid in collection of tax dues more expeditiously. The scheme is optional and not compulsory. The assessee has the further option of using the proposed facility in full or in part. In case of part payment, the remaining amount will be subject to regular proceedings as per the law.

CESTAT found that the revenue is contributing to increase the litigation by filling such frivolous appeals before Tribunal. Admittedly, the benefit of reduced penalty stand given to the manufacturing unit. As such there in no justification to impose a separate penalty on the Director.

Decision: - The appeal was rejected.

Comment:- This is very good decision wherein the personal penalty is also waived when 25% penalty plus interest and demand is paid within 30 days of adjudication order. Earlier it was normal thinking that 75% penalty under Section 11AC will be waived. But this decision has held that the personal penalty will also be waived.

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PJ/Case Laws/ 2012-13/ 1195

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