Order Date – 16 December 2022

Facts –

• The Appellants M/s Mohata Coal Company Pvt. Ltd. was qualified for tender from M/s DSP for removing the goods for machining to other job workers. However, the Appellant was finding it difficult to undertake the entire job work. 
• Accordingly, the appellant entered into a Hire Agreement dated 24.09.2015 with M/s Vardhaman Products (the Appellant No.2 herein) for getting the machining job done from them since M/s Vardhaman Products was having suitable workshop with machine for undertaking machining of Wheels & Axles.
• On 02.06.2016, the Officers of the Department visited the premises of the appellant and found shortages of stock of Wheels & Axles, which were sent to their hired premises. And the goods were seized by the officers. The seized goods were subsequently released to M/s DSP. 
• The Department was of the view that sending of goods to M/s Vardhaman Products by the Appellant without giving intimation to the Department was not proper and amounts to violation of Rule 16B of the Central Excise Rules, 2002. It was also alleged that M/s Vardhaman Products contravened the provisions of Rule 16B of the Rules, 2002 since they were receiving the goods for job work purposes but they were not permitted by the Department to receive such semi-finished goods of M/s DSP.
• Accordingly penalty of Rs.1,00,000/- each under Section 25(1) of the Central Excise Rules, 2002 was imposed for contravention of Rule 16B of the Central Excise Rules, 2002

Issue –

• Whether the appellants are required to get permission from the Department to transfer the Wheels & Axles?

Order –

• The Tribunal finds that there is no evidence on record to show that Wheels & Axles sent to the hired premises was with mala fide intention or that the appellant was in preparation to remove the goods subsequently. If the same were to be removed subsequently, the appellant could have removed the same from its own premises and there was no reason for them to first shift the goods to the hired premises and then remove them without payment of duty.
• Tribunal observed that for the purpose of invoking Section 11AC of the Act, the condition precedent is that duty has not been levied paid or short-levied or short-paid or the refund is erroneously granted by reasons of fraud, collusion or any willful misstatement or suppression of facts. If these ingredients are not present, penalty under Section 11AC cannot be levied.
• Since Rule 25 can be invoked subject to the provisions of Section 11AC of the Act, as a natural corollary, the ingredients mentioned in Section 11AC are also required to be considered while determining the question of levying of penalty under Rule 25 of the Central Excise Rules.
• The Tribunal find that since Appellant No.1, had transferred the semi-finished goods for machining the Appellant No.2, without permission from the Department, it is a procedural and technical lapse on the part of the appellants and the same requires imposition of token penalty in terms of Rule 27, which provides a maximum penalty of Rs.5,000/-.
• In view of the above, both the appeals are partly allowed and disposed of by reducing penalty on both the appellants to Rs.5,000/-.