2006 (12) TMI 23 - AT - Central Excise

Penalty Alleged that manipulation of export document by the appellant with the intent of encashing Cenvat credit and accordingly penalty were imposed on him After considering the fact penalty were set aside by authority

Summary

Issues:
- Waiver of pre-deposit of penalty
- Imposition of penalty under Rule 26 of the Central Excise Rules, 2002
- Interpretation of Rule 26 regarding confiscation of goods
- Applicability of penalty on the director for manipulation of records

Analysis:

1. Waiver of Pre-Deposit of Penalty:
The Tribunal proceeded to hear and dispose of the appeal without requiring pre-deposit of the penalty of Rs. 1,00,000 imposed on the director of the company. Both sides consented to this approach, leading to a swift resolution of the matter.

2. Imposition of Penalty under Rule 26:
The case involved M/s. Inox Wares Pvt. Ltd., engaged in the manufacture of stainless steel utensils. The issue revolved around the manipulation of export documents to encash Cenvat credit by claiming rebates. The Assistant Commissioner imposed a penalty of Rs. 1,00,000 under Rule 26 of the Central Excise Rules, 2002. However, the Tribunal found that Rule 26 was not applicable in this case since no goods were held liable to confiscation, and the director did not physically deal with excisable goods. The penalty was set aside based on this analysis.

3. Interpretation of Rule 26 regarding Confiscation of Goods:
The Tribunal emphasized that Rule 26 does not apply unless goods are liable to confiscation and the individual physically handles such goods. In this case, the director's involvement was limited to record manipulation without direct dealing in goods, leading to the conclusion that Rule 26 was incorrectly invoked for imposing the penalty.

4. Applicability of Penalty on the Director for Manipulation of Records:
The Tribunal noted that no penalty was imposed on the company under Rule 13(2) of the Cenvat Credit Rules, 2002, indicating a lack of merit for penalty imposition on the director as well. The authorities confirmed that the director's actions were limited to record manipulation and not direct involvement in handling excisable goods. Consequently, the penalty imposed on the director was deemed unwarranted, leading to the allowance of the appeal and setting aside of the penalty.

In conclusion, the Tribunal found that the penalty imposed on the director of M/s. Inox Wares Pvt. Ltd. was not justified under Rule 26 of the Central Excise Rules, 2002, as the director did not handle excisable goods physically. The manipulation of export documents did not warrant the penalty, especially considering no penalty was imposed on the company itself. The appeal was allowed, and the penalty on the director was set aside.