ORDER
M.V. Ravindran, Member (J)
1. All these appeals are directed against Order-in-Appeal dated 1.8.2005 and 22.8.2005 which upheld the Orders-in-Original confirming the demand, imposition of penalties and confiscation of the seized goods.
2.1 In appeal No. C/1543/05 the assessee is in appeal against confirmation of the demand and imposition of equivalent amount of penalty under Section 112(b) read with Section 114(a) of the Customs Act, and also against redemption fine imposed.
2.2 In appeal No. C/1545/05 the assessee is in appeal against confirmation of the demand of Rs. 6,28,983/- and imposition of equivalent amount of penalty under Section 112(b) and 114(a) and also against redemption fine.
2.3 Appeal No. C/1544/05 and C/1548/05 relate to the employees of the firm and they are in appeal against imposition of penalty under Section 112(b) of the Customs Act, 1962.
2.4 Appeal No. C/1546/05 is filed by the partner of the firm against imposition of the penalty under Section 112(b) of the Customs Act, 1962.
2.5 Appeal No. C/1547/05 is filed by one individual against imposition of penalty under Section 112 (b) of the Customs Act, 1962.
3. Since all the appeals are interconnected they are being disposed of by a common order.
4. The issue involved is regarding demand of duty on the appellants in respect of clearance of imported yarn which was to be used in their 100% E.O.U. The allegations are that they appellants have not accounted for receipt and the consumption of the duty free yarn imported by them in the Export Oriented Unit, and seizure of the yarn. The appellant firm in appeal No. C/1543/05 deposited the entire amount of duty involved before the issuance of the show cause notice and also have paid the redemption fine imposed on them. In appeal No. C/1545/05 the appellant firm has deposited almost entire amount of duty involved barring Rs. 66,641/- before issuance of show cause notice but has not paid the redemption fine imposed. The adjudicating authority confirmed the demand, imposed the penalties on the appellants. Learned Commissioner (Appeals) upheld the order-in-original. Hence, these appeals.
5. Learned Advocate appearing on behalf of the appellant submits that the appellant firm, in order to end litigation, has instructed him not to challenge the amount of duty involved in these appeals. As regards the balance amount of duty payable in appeal No. C/1545/05 it is his submission that they are ready to discharge that duty liability. It is his further submission that the penalties imposed on the firm are unwarranted as the firm have already deposited the entire amount of duty involved in this case. He submits that the Tribunal has been holding consistently that once the entire amount of duty is deposited before the issuance of the show cause notice, no penalty is imposable. As regards the penalties imposed on the employees it is his submission that there was no reason to impose any penalty on these employees. As regards the penalty imposed on the partner of the firm it is his submission that the penalty being imposed on the firm, no separate penalty is imposable on the partner. As regards the penalty, in case of the appellant in appeal No. C/1547/05 it is his submission that nothing is brought on record so as to implicate the appellant. Hence imposition of penalty on this applicant is unwarranted. He relies upon the decision of the Tribunal in the case of Al-falah (Exports) v. CCE, Surat-I as reported at 2006 (74) RLT 342 (CESTAT-LB), Jaybee Industries v. CCE, Gurgaon as reported at and Z.U. Alvi v. CCE, Bhopal as reported at (Tribunal) for the above proposition.
6. Learned SDR on the other hand contends that the firm have been engaged in removal of duty free imported yarn clandestinely, and hence, penalty imposed on them are correct and does not require any interference. He relies upon the judgment and order of the Tribunal in the case of CCE, Indore v. Deepak Spinners Ltd. as reported at , and in the case of Vikas Shipping Agency v. CC, Mumbai as reported at for the proposition that penalties are imposable on the partners, as well as on the firm. He submits that the penalties imposed on others are also sustainable in view of the fact that they have played an active role in removal of the goods from E.O.U.
7. Considered the submissions made at length by both sides and perused the record. As submitted by the learned Advocate since they are not challenging the amount of duty, confirmation of duty amount is upheld. It is undisputed that the appellant firm have discharged the entire amount of duty liability before the issuance of show cause notice excepting an amount of Rs. 66,641/-. The penalties imposed on the appellant firm are under the provisions of Section 114(a)/112(B). Since the penalties imposed on the appellants is a composite penalty, to my mind, the penalties imposed on them can be considered as penalty imposed under Section 114(a) of the Customs Act, 1962 as the penalty is equal to the amount of duty. Since the appellants have accepted their liability and discharged the entire duty liability before the issuance of the show cause notice, there cannot be any penalty on the appellants under Section 114(a) of the Customs Act, 1962. The Larger Bench of the Tribunal in the case of Al-Falah (Exports) (supra) have clearly held as under:
2.1 In view of the findings hereinabove we would answer the reference as follows:
There is no reason to differ from the findings of the L.B. in case of Machino Montell & uphold the penal consequences of Section 114A when duty short paid are deposited before the issue of a show cause notice. However, penalty consequences liability emerging from other provisions of Customs Act, 1962 can be separately attracted, on the facts of each case.
The ratio as laid down by the Larger Bench is squarely applicable in the cases of appeal No. C/1543/05 & C/1545/05 but for an amount which remained outstanding. This decision of the Larger Bench of the Tribunal has not yet been set aside and is binding on me. The amount of Rs. 66,641/- which has not been paid by the firm has to be paid forthwith. Since this amount of Rs. 66,641/- is not paid before the issuance of show cause notice the provisions of Section 114(a) would be applicable and the appellants are liable to pay the equivalent amount of penalty of Rs. 66,641/-. As regards redemption fine imposed on the confiscation of the goods it is seen that in appeal No. C/1543/05, the same is not being challenged, and hence, the impugned order to that extent is upheld and no interference is called for. As regards redemption fine imposed on the appellants in appeal No. C/1545/05, the same seems to be excessive, and hence, in the facts and circumstances of the case is reduced to Rs. 1,50,000/- to meet the ends of justice.
8. As regards the penalties imposed on the partners of the firm, I find that the issue involved in this case is covered by the decision of the Division Bench in the case of Jaybee Industries (supra) wherein the Tribunal has held as under:
It is settled law that, where a penalty is imposed on a partnership firm, no separate penalty shall be imposed on any of its partners. Accordingly, we set aside the penalty on the partners.
In this case the partner of the firm has been penalized for the account of the firm in appeal No. C/1545/05. Since I have already penalized the firm for the outstanding duty not paid by them, the penalty imposed on the partner is also unwarranted as held by the Division Bench in the case of Jaybee Industries (supra). Respectfully following the division bench’s decision in the case of Jaypee Industries (supra) penalty imposed on the partner (in appeal No. C/1546/05) is set aside.
9. As regards penalties imposed on the employees of the firm (in appeal Nos. C/1544/05 and C/1548/05) I find from the record that they were not aware of the provisions of the law, and hence, provisions of Section 112(b) may not get attracted in these cases. I am also guided by the Division Bench decision in the case of Z.U. Alvi (supra) wherein it was held as under:
Appellant has been proceeded against as an employee of BHEL. A reading of the impugned order would show that the appellant was responsible for effecting payment of Central Excise duties to the Government which was payable by BHEL. So the Commissioner appears to have proceeded against the appellant to impose penalty on account of his misfeasance and malfeasance as an employee of BHEL. Appellant as an employee could not have an existence independent of BHEL as far as Central Excise law is concerned. Appellant was only an employee of BHEL. He was not the person In-charge or was responsible for the conduct of the business of BHEL. Rightly the Commissioner has not proceeded against the appellant as a person who was In-charge and responsible for the conduct of the business at the time when BHEL committed default in paying the duties as adjudicated upon by the earlier orders. Commissioner proceeded against the appellant under Rule 209A, which can apply only to a person who dealt with the contraband article, not as manufacturer. Appellant had no dealings with the contraband article otherwise than in his official capacity as an employee of BHEL, the manufacturer. So, by no stretch of imagination can the appellant fall within the purview of Rule 209A of the Central Excise Rules. Therefore, the Commissioner was clearly in error in thinking that penalty contemplated by Rule 209A could be imposed on the appellant who was only an employee of the manufacturer, namely BHEL.
Respectfully following the decision of the Division Bench I do not find any reason to sustain the penalties imposed on the employees, and the same is set aside.
10. As regards the penalty imposed on individual in appeal No. C/1547/05, it is seen from the records that the penalty has been imposed on this person just for directing the transporter to load the vehicle from the factory premises. It is accepted fact that the appellants in this appeal had no knowledge that the goods are liable for confiscation. Nothing contrary is on record. In the facts and circumstances of the case penalty is not imposable. Hence, the impugned order is liable to be set aside, and I do so.
11. Accordingly, all the appeals are disposed of as indicated in above paragraphs.
(Pronounced on 05/06/07)