2006 (6) TMI 407 - AT - Central Excise

Summary

Issues:
- Appeal against setting aside penalty on the respondent by the Commissioner (Appeals).
- Liability of the Director for penalty in case of shortage of goods in the firm.

Analysis:
1. The appeal was filed by the Revenue against the order-in-appeal passed by the Commissioner (Appeals) setting aside the penalty imposed on the respondent, who is the Director of the firm. The Revenue contended that the respondent, being the Director, cannot absolve himself of the offense of clandestine removal of goods as he was overseeing all activities of the unit.

2. The premises of the firm were visited by a revenue officer, and a shortage in the final product was discovered. Duty was demanded from the firm, and penalties were imposed on both the firm and the respondent. However, the Commissioner (Appeals) set aside the penalty on the respondent citing lack of evidence to prove that the respondent physically dealt with the goods found short or had any specific role in evasion of Central Excise Duty.

3. The Tribunal referred to Rule 26 of the Central Excise Rules, which states that any person who deals with excisable goods he knows are liable for confiscation is liable to penalty. However, in the absence of evidence showing mens rea or personal belief by the Director that the goods were liable for confiscation, the penalty on the Director was not sustainable. The Tribunal cited a previous case where a penalty on a Director was set aside due to lack of evidence of intentional wrongdoing.

4. The Tribunal noted that there was no specific finding or allegation in the show cause notice against the respondent regarding any intentional commission to evade duty. The respondent had promptly objected to the method of weighment used by the revenue, indicating his lack of involvement in any wrongdoing. Therefore, the Tribunal found no infirmity in the order setting aside the penalty on the respondent and dismissed the appeal.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) to set aside the penalty on the respondent, the Director of the firm, due to lack of evidence showing his direct involvement or intentional wrongdoing in the case of shortage of goods, thereby dismissing the appeal filed by the Revenue.