Whether personal penalty on Managing Director should be imposed in case of clandestine removal.

PJ/Case Laws/2012-13/1421

Case:- RANJEET GUPTA Vs. C.C.E., ALLAHABAD

Citation:- 2012(284) E.L.T. 725 (Tri.-Del.)

Brief Facts:-The appellant is engaged in the manufacture of catenary copper wire. Their factory premises were visited by the officers and 8 drums of copper catenary wire containing 14,400 MTs were found lying unaccounted outside the factory premises in fully packed and ready for sale condition. Inasmuch as the said goods were not entered in RG-1 register, officers entertained a view that the same were meant for clandestine removal. Statement of Managing Director of the Unit was recorded wherein he admitted that the said 8 drums were not entered in RG-I register. However, he clarified that as there was no space inthe factory, the same were kept outside the factory on the road. He accepted that there is no permission from the Revenue for keeping the goods outside the factory. On the above basis, proceedings were initiated against the appellant proposing confiscation of the goods as also for imposition of penalty. The Show Cause Notice (SCN) resulted in passing of an order by the original adjudicating authority confirming the demand of duty in respect of the said goods, confiscating the goods with an option to redeem the same on payment of redemption fine of Rs. 1 lakh. In addition, penalty of Rs. 4,74,517/- i.e., equal amount of duty was imposed on the firm u/s 11AC as also on Shri Ranjeet Gupta, MD under Rule 26 of Central Excise Rules, 2002. Appeal against the above order did not succeed before Commissioner (Appeals). Hence the present appeal.

Appellant’s Contention:-The appellants' main contention is that the wire in question was the production of the previous day and though the same was rounded on wooden drums, the same was required to go through some further processes to make them marketable like testing, packing of drums, franking the no. of buyers/manufacturers and purchase order no., description and weight of the goods, etc., were yet to be undertaken. They have also taken a plea that the goods were meant for the railways as they have no other place of consumption. As such there can be no motive for the appellants to clear the goods clandestinely.

Reasoning of Judgment:- The Tribunal heard both the parties and considered that the short question required to be decided in the present appeals is as to whether the non-entry of copper catenary wire in RG-I register was with any malafideintention. Admittedly the goods were found outside the factory premises near the gate of the factory. The appellants have submitted that the same was dead end of the road, which is between the appellants' two premises situated on both the sides of the road. The fact was placed before the adjudicating authority by drawing a sketch.

The Tribunal finds that apart from the fact that the 8 containers of wire were found on the road which is dead end of the road between the two premises of the appellants, there is no other evidence to reflect upon the fact that non-entry in RG-1 was with any intention to evade duty. Admittedly the goods must have beenmanufactured from some raw material. It is not the Revenue's case that such raw material was not reflected in the accounts. If that be so, the appellants are duty bound to show the production of the final product out of the said raw material duly entered in records.

The Tribunal further note that Shri Ranjeet Gupta (Managing Director) in his on the spot statement, though has admitted that the goods were kept outside the factory gate but has nowhere agreed that the same were meant for clandestine removal. Tribunal also take cognizance of the appellants submission that the said copper catenary wire was meant for supplies to railways and as such the clandestine removal of the same is a non-possibility. As such by taking into account the overall facts and circumstances of the case, Tribunal hold that the wire in question is not liable to confiscation for their non-entry in RG-1 register.

As regards the penalty imposed on the manufacturing unit, Tribunal find that admittedly the goods were removed from the factory premises to near the factory gate. Though the same might be on account of constraint of space in the factory premises but fact remains that such removal is not permissible. Admittedly there was violation of provisions of law, though technical. For such violation, The Tribunal holds that the appellant is liable to penalty. Accordingly penalty is reduced to Rs. 10,000/-.

Having held that the goods were kept outside the factory premises without any intention to evade payment of duty and having already penalised the manufacturing unit for technical violation of rules, the Tribunal finds no justification for imposition of separate penalty on Shri Ranjeet Gupta (Managing Director). Accordingly penalty imposed upon him is set aside. Both the stay petitions as also appeals are disposed of in above manner. Needless to say that the appellants would pay duty on the said goods after making an entry in RG-1 register as and when the same are cleared.

Decision:-Penalty imposed on Managing Director is set aside.

Comment:-The analogy drawn from this case is that permission should be taken even in case of goods being kept out of the factory premises due to space constraint in the factory as it may amount to suspicion of clandestine removal and proceedings may be initiated against the assessee for the same.

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PJ/Case Laws/2012-13/1421

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