2013 (1) TMI 279 - HC - Central Excise

Penalty u/s 11AC - Penalty on directors - Rule 26 of the Central Excise Rules - Rule 26 of the Central Excise Rules is prima facie ultra vires of Section 11AC of the Central Excise Act, 1944 - It is well settled that no penalty can be levied save by authority of law. Rule 26 is prima facie in excess of the Rule making power conferred under the Central Excise Act, 1944

Summary

Issues:
Challenge against imposition of penalty under Section 11AC of the Central Excise Act, 1944 and Rule 26 of the Central Excise Rules.

Analysis:
The judgment delivered by the High Court of Calcutta pertains to a writ petition challenging an order imposing penalties on a company and its directors under the Central Excise Act, 1944. The main contention revolved around the validity of the penalties imposed under Section 11AC of the Act and Rule 26 of the Central Excise Rules. The Court observed that Section 11AC allows for penalties on individuals liable to pay duty as per Section 11A, while Rule 26 extends penalties to those involved in various activities related to excisable goods. However, the Court found Rule 26 to be prima facie ultra vires of Section 11AC, stating that penalties can only be levied as authorized by law. It was held that Rule 26 exceeds the rule-making power granted under the Central Excise Act, 1944.

The Court issued an interim order restraining the respondents from implementing the impugned letter dated 13th December, 2011, which was part of the writ petition. Additionally, timelines were set for the filing of affidavits, with the affidavit in opposition to be filed by 4th October, 2012, and any reply affidavit by 18th October, 2012. The matter was scheduled for a hearing on 20th November, 2012. The interim order was to remain in force until 17th December, 2012, or until further orders, whichever was earlier. All parties were instructed to act based on a signed photocopy of the order, subject to the usual undertakings.

In conclusion, the judgment highlighted the importance of adherence to legal provisions while imposing penalties under the Central Excise Act, emphasizing that penalties must be in accordance with the law and the rule-making authority granted by the Act. The Court's decision to issue an interim order and set timelines for further proceedings demonstrated a structured approach to resolving the issues raised in the writ petition.