2016 (8) TMI 1298 - AT - Central Excise

Penalty u/r 25 and 26 - misutilisation of benefit of N/N. 8/2006-C.E - Held that - it is undisputed and on record that FSPL had filed a declaration with the jurisdictional authorities of the appellant that they are functioning under N/N. 214/86-C.E. The said notification envisages manufacturing of goods in the hands of the job worker and receiving the same back and after doing some activity clear the same on payment of Central Excise duty - In the case in hand appellant could not have imagined or visualised that the said FSPL was not undertaking any manufacturing activity at his hand despite making a declaration under N/N. 214/86. In the absence of this the appellant was correct in pleading before the lower authorities that penalties cannot be imposed on them - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Duty liability and penalties imposed on the appellant.
2. Contesting penalty imposition under Rule 25 or Rule 26.
3. Misutilization of Central Excise Rules by FSPL.
4. Applicability of penalties on the appellant.

Analysis:
The appeal was against the Order-in-Appeal confirming duty liability, interest, and penalties imposed on the appellant, a job worker for a company. The appellant cleared goods without duty payment based on FSPL's declaration under Notification No. 214/86-C.E. Subsequent investigation revealed FSPL's misutilization of benefits under Notification No. 8/2006-C.E., leading to a demand for duty, interest, and penalties. The first Appellate Authority upheld duty, interest, and penalties except for the penalty on the Prop. The appellant contested only the penalty, not the duty liability or interest.

The appellant argued that no contravention warranted penalties under Rule 25 or Rule 26. The DR contended that FSPL's misutilization made the goods dutiable in the appellant's hands. The Tribunal upheld duty liability, interest, and penalties, as the appellant did not contest them. However, regarding penalties, the Tribunal accepted the appellant's argument. FSPL's declaration under Notification No. 214/86-C.E. indicated manufacturing activity, absolving the appellant of liability as they could not have known about FSPL's non-compliance. Rules 25 and 26 did not apply as the appellant manufactured and cleared goods based on FSPL's declaration.

The Tribunal found no contravention by the appellant and set aside the penalties imposed, allowing the appeal on that ground. The judgment emphasized the appellant's reliance on FSPL's declaration and the lack of evidence of any wrongdoing on their part. The penalties were deemed unjustified given the circumstances and the appellant's adherence to the law based on the information provided by FSPL.