Moheb Ali M., Member (T)
1. These appeals arose out of the order of the Commissioner (Appeals) who in the impugned order confirmed the order of the lower authority demanding central excise duty of Rs. 42,730/-, appropriating Rs. 95,000/-from the bank guarantee executed when the seized goods were released provisionally, imposing a penalty of Rs. 1,00,000/- under Rule 173Q(1) on M/s. Rinkoo Processors Pvt. Ltd. and imposing a penalty of Rs. 50,000/- on the director of the appellant company under Rule 209A.
2. Briefly the facts are that on verification of fabrics lying in the factory premises of the appellant, it was found that a quantity of 4409 1.mtrs. of spun x spun fabrics valued at Rs. 66,135/- and 25 packed bales admeasuring 22,842 1. mtrs. valued at Rs. 3,42,630/- were found unaccounted. As the goods have reached the RG1 stage and not accounted for in any of the statutory records, they were seized and were later provisionally released on execution of a bond. The officers also found a quantity of 18,381.60 1. mtrs. of the same fabrics in the folding house alleged to have been removed without payment of duty. The aforementioned quantity was, therefore, placed under seizure as the same was liable for confiscation. The appellant company paid central excise duty amounting to Rs. 27,572/- in respect of the duty involved on the seizure at the folding house on two different dates in the year 1994. Shri M.M. Garg, director of the appellant company, in his statement, deposed that excisable goods were cleared without central excise formalities for the reason that the excise clerk was absent and also due to urgency involved in delivering the finished goods to their customers.
3. Heard both sides.
4. The learned advocate pleaded that insofar as the confirmation of duty that had already been paid, the appellants do not make a serious contention of it. The only plea raised was imposition of penalty under Rule 173Q(1) on the appellant company and penalty under Rule 209A on the director of the company. He submitted that in the case of Rashtriya Ispat Nigam Ltd v. CCE, Visakhapatnam (2003  ELT 285 which has been later confirmed by the Supreme Court, the Tribunal held that penalty under Section 11AC cannot be imposed when the duty under dispute was paid before the issue of show cause notice. He also submitted that in the case of CCE, Delhi-III v. Machino Montell (I) Ltd. (2004  RLT 709), a larger bench in its order held that penalty under Section 11AC cannot be imposed when the duty is discharged before the issue of show cause notice. He argued that in this case also duty has been paid even before the issue of show cause notice and so no penalty should have been imposed.
5. I have gone through the records and the submissions made by both sides. The two cases cited above refer to penalty under Section 11AC of the Central Excise Act. I find that the Commissioner imposed penalty under Rule 173Q(1). It is an admitted fact that the goods have been removed without payment of duty for one reason or the other. There is a clear contravention of the Rules with an intent to evade payment of duty. A penalty under Section 173Q(1) can be imposed under these circumstances. The director on whom a penalty is imposed seemed to have been aware of the fact that the goods were removed without payment of duty. A penalty under Rule 209A, under these circumstances, can be imposed. Further, the officers also found unaccounted goods in the factory premises. Such non-accountal of finished goods also attracts the provisions of Rule 173Q(1). I observe that the duty burden has been discharged only after the case was detected. The case law cited by the advocate does not cover a situation of this type. However, having regard to the fact that duty has been paid before the issue of show cause notice, I reduce the penalty on the company to Rs. 15,000/- and that on the director to Rs. 10,000/-.
6. The appeals are thus partly allowed.
(Operative part pronounced in court)