2006 (8) TMI 392 - AT - Central Excise

Summary

Issues:
Imposition of penalty under Rule 26 for alleged evasion of duty by appellant.

Analysis:
The appeal challenged an Order-in-Appeal upholding a penalty imposed on the appellant under Rule 26 of the Central Excise Rules, 2002. The appellant, a brand owner supplying empty cartons to manufacturers of iron wooden screws, faced penalties for allegedly aiding manufacturers in wrongfully claiming Small Scale Industry (SSI) exemption. The authorities contended that the manufacturers were ineligible for the SSI benefit due to producing branded goods. The appellant argued against the penalty, claiming innocence and lack of evidence showing their awareness of the manufacturers' ineligibility.

The appellant's representative argued that the penalty under Rule 26 was unwarranted as there was no proof of the appellant fulfilling the conditions for such a penalty. The appellant claimed to have merely ordered iron wooden screws from manufacturers and requested them to pack the goods in the provided containers. On the other hand, the Departmental Representative (D.R.) contended that the supply of packing material bearing the appellant's brand indicated an intention to benefit from the SSI exemption by colluding with manufacturers to evade duty.

Upon reviewing the submissions and evidence, the Tribunal found that the appellant, as the brand owner, had indeed supplied boxes with their brand to the manufacturers who claimed SSI exemption. However, it was noted that there was no evidence suggesting the appellant's involvement in instigating the manufacturers to claim the exemption. The Tribunal emphasized that to impose a penalty under Rule 26, it must be proven that the appellant had reason to believe the goods were liable for confiscation, which was not established in this case. As per Rule 26, the appellant could only be penalized if aware of the goods' ineligibility for the exemption, which was not proven.

Consequently, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant. The judgment highlighted the necessity of proving the appellant's knowledge of the goods' ineligibility for exemption to impose penalties under Rule 26, ultimately ruling in favor of the appellant due to the lack of such evidence.