2003 (9) TMI 459 - AT - Central Excise

Summary

Issues: Waiver of penalty under Rule 26

Analysis:
The case involves an application for the waiver of a penalty of Rs. 5 lakhs imposed on the applicant under Rule 26. The applicant, a sugar mill, cleared a quantity of sugar without payment of duty to an exporter based on a bond executed by the purchaser as per Rule 19 of the Central Excise Rules, 2001. Subsequently, a notice was issued demanding duty from both parties as the sugar was not exported, leading to the imposition of a penalty on the applicant by the Commissioner.

Upon hearing both sides, it was noted that Rule 26 imposes a penalty on any person involved in acquiring possession, transporting, or dealing with excisable goods. It was observed that this rule is primarily intended for individuals handling goods after obtaining them from a manufacturer, rather than the manufacturer itself. Additionally, for a penalty to be imposed, the individual must have knowledge or reason to believe that the goods are liable to confiscation. The order lacked evidence to establish that the applicant, at the time of selling the goods, knew or had reason to believe that the exporter would not export them, thereby not meeting the requirement of mens rea as stipulated in the rule.

As a result of the above analysis, the Appellate Tribunal decided to waive the deposit of the penalty and stayed its recovery, considering that the provisions of Rule 26 were not applicable to the manufacturer in this scenario.