2003 (10) TMI 542 - AT - Central Excise

Summary

Issues: Waiver of penalty under Rule 26 of Central Excise Rules, 2001.

In the judgment delivered by the Appellate Tribunal CESTAT, Mumbai, the issue at hand was the application for the waiver of a penalty of Rs. 2 lakhs imposed on the applicant under Rule 26 of the Central Excise Rules, 2001. The applicant, a sugar mill, had cleared a quantity of sugar to an exporter without payment of duty based on a bond executed by the purchaser as per Rule 19. 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.

The Tribunal considered Rule 26, which imposes a penalty on any person involved in the possession, transportation, or dealing with excisable goods. The Tribunal noted that this rule is typically applicable to individuals handling excisable goods after acquiring them from a manufacturer. Moreover, for a penalty to be imposed, the individual must have knowledge or reason to believe that the goods are subject to confiscation. In this case, the Tribunal found it challenging to establish that the manufacturer, in this instance the applicant, had the requisite mens rea as there was no evidence to suggest that they knew or had reason to believe that the goods would not be exported.

After hearing arguments from both sides and examining the facts presented, the Tribunal concluded that the requirement of mens rea specified in Rule 26 had not been met in this case. Therefore, the Tribunal decided to waive the deposit of the penalty and stayed its recovery, ruling in favor of the applicant.