CESTAT confirms Composite Penalty When Charges pertain to period prior to and after introduction of Section 11 AC of Central Excise Act [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), confirmed composite penalty when charges pertained to period prior to and after introduction of Section 11 AC of the of the Central Excise Act, 1944. RameshChandra Shah, is the appellant in the present case.

The Counsel pointed out that the appellants are engaged in manufacture of various varieties of yarn like Woollen Yarn, Woollen Viscose, Polyester Viscose Yarn etc and pointed out that the Central Excise Officers visited appellant’s factory andseized various books of accounts records etc.

The officer also seized 44497.250 kgs of yarn which were lying in the factory premises on the ground that it was not entered in RG -1 which was last updated on 19.08.1996. Consequently, the SCN (Show Cause Notice) was issued to the appellant proposing toconfiscate the seized yarn and to recover excise duty. Notice also included a demand of Rs 3 lakhs of excise duty on shortage of yarn amounting to 15781.25 kgs.

The SCN also sought to impose penalties on appellant company and Rameshchandra Shah. The said SCN was confirming demand of central excise duty of Rs. 24 lakhs and Rs. 3 lakhs on the appellant company and personal penalties of Rs 5 Lakhs each on Ashik R Shah and R. B Shah. The appellant challenged the order before the Tribunal and the Tribunal remanded the matter for fresh adjudication as the Adjudicating Authority had failed to consider certain submissions made by the appellant.

The matter was again challenged by the appellant before the Tribunal and held that the appellant was liable to pay Rs. 14 lakhs on the goods cleared as hank yarn and the appellant was required to pay 5 lakhs on the goods which were cleared without payment of duty .

As regard the penalties, the matter was remanded back to the Adjudicating Authority for re-quantification in view of the Tribunal’s order. The matter was again decided by the Adjudicating Authority and the Adjudicating Authority has imposed penalty of Rs 21 lakhs under Section 11AC of the Central Excise Act, 1944 read with 173Q of the Central Excise Rules, 1944.

The Adjudicating Authority has imposed penalty of Rs. 2 Lakhs on the Managing Director of the Appellant Company under Rule 209A of the central Excise Rules, 1944. The present appeals is against the said imposition of penalties.

In the said case the period in dispute was 20.03.1992 to 13.07.1995. Section 11 AC came into statute book with effect from 28.09.1996 i.e. after the disputed period. In this circumstance it was held that no penalty could have been imposed under section 11 AC.

The Bench comprising Raju, Technical Member observed that “In view of the I do not find any error in imposition of composite penalty under Rule 173 Q read with Section 11 AC as in the instant case all the charges have been confirmed and the charges pertains to both the period prior to introduction of Section 11 AC and thereafter.”

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