2009 (3) TMI 711 - AT - Central Excise

Summary

Issues Involved:
1. Waiver of pre-deposit of penalties and stay of recovery.
2. Applicability of Rule 26 of the Central Excise Rules, 2002.
3. Confiscation of goods and imposition of penalties.
4. Interpretation of "person" under Rule 26 and its applicability to firms.

Detailed Analysis:

1. Waiver of Pre-deposit of Penalties and Stay of Recovery:
The applications for waiver of pre-deposit of penalties and stay of recovery arose from two orders-in-original issued by the Commissioner of Central Excise, Thane. The appellants, including M/s. Gauri Creation and M/s. Siddhi Creative, were found to have availed Cenvat credit fraudulently without actual manufacturing activities. The Tribunal considered whether the appellants made a prima facie case for waiver of penalties and stay of recovery.

2. Applicability of Rule 26 of the Central Excise Rules, 2002:
The Tribunal examined whether Rule 26, which imposes penalties on persons dealing with excisable goods liable to confiscation, applied to the appellants. The Vice President noted that Rule 26 was not attracted against a person who has not dealt with any goods, thereby waiving the pre-deposit of penalties for M/s. Harish Silk Industries and the merchant exporters. However, the Member (Technical) disagreed, emphasizing that Rule 26's broad language includes any manner of dealing with excisable goods, thereby supporting the imposition of penalties.

3. Confiscation of Goods and Imposition of Penalties:
The Commissioner's findings indicated that the appellants issued invoices without actual clearance of goods, which were used to cover excisable goods cleared from elsewhere. These goods, presented for export with fraudulent documents, were liable to confiscation. The Tribunal evaluated whether penalties under Rule 26 could be imposed on individuals and firms involved in such fraudulent activities. The Vice President granted total waiver of pre-deposit, whereas the Member (Technical) directed a partial pre-deposit of 30% of the penalties.

4. Interpretation of "Person" under Rule 26 and Its Applicability to Firms:
The Tribunal discussed whether the term "person" in Rule 26 includes firms and corporate entities. The Vice President relied on Tribunal decisions stating that penalties under Rule 26 could only be imposed on individuals. In contrast, the Member (Technical) referred to the Supreme Court's judgment in Agarwal Trading Corporation, which held that a firm is a "person" under the General Clauses Act, thus liable under Rule 26. The Member (Judicial) agreed with the Vice President, stating that the correctness of previous Tribunal decisions should not be questioned at the stay stage.

Separate Judgments:
The Tribunal delivered separate judgments due to differing opinions among the members. The Vice President and Member (Judicial) favored granting total waiver of pre-deposit for the appellants, while the Member (Technical) recommended a partial pre-deposit. The final order by majority dispensed with the pre-deposit and allowed the stay of recovery for the merchant exporters, with Mr. Rajendra Doshi directed to report compliance by a specified date.

Final Order:
The final order, pronounced in court, dispensed with the pre-deposit and granted a stay of recovery until the final disposal of appeals for the merchant exporters. Mr. Rajendra Doshi was instructed to report compliance on a specified date.