2010 (12) TMI 994 - HC - Central Excise

Penalty on the Director - Tribunal set aside penalty levy - Held that - Respondent is the active Director who is looking after the day to day working of the Unit and has admitted in his statements that the goods were cleared illicitly without payment of duty and was knowingly involved in the evasion of central excise duty. The Tribunal has merely recorded that it does not find any justifiable reason to impose the penalty upon the Director. While holding so what has weighed upon the Tribunal is that no provision section or rule of law under which the penalty has been imposed upon the Director has been specified in the impugned order of the Joint Commissioner. These observations of the Tribunal overlook the fact that in the body of the Order in-Original and more specifically in paragraph 23 thereof the Adjudicating Authority has in fact while considering the case against the respondent held that the respondent is liable to penalty under Rule 26 of the Central Excise Rules 2002. In the circumstances merely because there is no mention of Rule 26 in the operative part of the order it cannot be understood to mean that the adjudicating authority has not specified the provisions under which the penalty has been imposed upon the Director. It is settled legal position that an order has to be read as a whole. When the order made by the Adjudicating Authority is read as a whole it becomes apparent that the penalty has been imposed on the respondent under Rule 26 of the Rules.Against assessee.

Summary

Issues involved:
1. Justification of setting aside penalty imposed on the Director under Rule 26 of the Central Excise Rules, 2002.

Detailed Analysis:
The case involved a show cause notice issued to a company and its Director, calling for penalties under Rule 26 of the Central Excise Rules, 2002. The Order in-Original imposed a penalty on the Director, which was upheld by the Commissioner (Appeals) but set aside by the Tribunal. The Tribunal found no justifiable reason to impose a separate penalty on the Director, as the specific provision of law was not mentioned in the order of the Joint Commissioner. The appellant contended that the adjudicating authority had clearly specified the liability of the Director under Rule 26 in the order. The adjudicating authority had found the Director actively involved in the evasion of central excise duty and held him liable for the penalty under Rule 26.

The appellate authority concurred with the findings of the adjudicating authority, emphasizing the active involvement of the Director in clandestine activities. However, the Tribunal did not provide reasons for disagreeing with the Commissioner (Appeals) and setting aside the penalty. The Tribunal's decision was based on the absence of a specific provision, section, or rule of law mentioned in the order imposing the penalty on the Director. The Tribunal overlooked that the adjudicating authority had clearly specified the liability under Rule 26 in the body of the Order in-Original, even though it was not explicitly mentioned in the operative part.

The High Court held that an order must be read as a whole, and in this case, the penalty was imposed on the Director under Rule 26 as per the adjudicating authority's findings. The Court found the Tribunal's approach unreasonable and contrary to the record. Consequently, the Court concluded that the Tribunal was not justified in setting aside the penalty imposed on the Director. The appeal was allowed, setting aside the Tribunal's order related to the Director, with no order as to costs.