2013 (2) TMI 194 - AT - Central Excise

Personal Penalty under Rule 26 - case of shortage of duty booked - Held that - There has to be knowledge for imposing penalty under Rule 26. Shri Ashok Jain in his statement stated that the appellant is looking after the finance and legal affairs of the company and the department could not bring out that he was looking after the day to day working of the factory and they could not bring out any knowledge on the part of the appellant in the shortage found in the factory. In these circumstances Commissioner(Appeals) s order is not sustainable in law as far as the penalty imposed against the appellant under Rule 26 is concerned. Thereforethe same is set aside and the appeal is allowed.

Summary

Issues:
Imposition of penalty under Rule 26 of Central Excise Rules, 2002 based on knowledge of the appellant regarding shortage found in the factory.

Analysis:

1. Imposition of Penalty under Rule 26:
The appellant filed an appeal against the Order-in-Appeal upholding the penalty imposed under Rule 26 by the lower adjudicating authority. The case involved a shortage booked against a company, of which the appellant was a Director, amounting to duty of Rs.4,99,068. The lower adjudicating authority confirmed the demand against the company and imposed a penalty of Rs.4,00,000 on the appellant, which was reduced to Rs.1,00,000 by the Commissioner(Appeals). The appellant contended that there was no evidence of his knowledge regarding the shortage and argued that he was responsible for finance and legal affairs, not the day-to-day operations. The department argued that as he was responsible for finance, he indirectly had knowledge of the shortage. The Tribunal noted that Rule 26 requires knowledge for imposing a penalty. The appellant's statement and the lack of evidence showing his involvement in the day-to-day operations led to the conclusion that the penalty imposed under Rule 26 was not sustainable. Therefore, the Tribunal set aside the penalty and allowed the appeal.

2. Rule 26 of Central Excise Rules, 2002:
The Tribunal referred to Rule 26, which pertains to penalties for certain offenses related to excisable goods. The rule specifies that a person concerned with excisable goods that are liable for confiscation shall be liable to a penalty not exceeding the duty on such goods or a specified amount, whichever is greater. The rule also outlines penalties for issuing excise duty invoices without delivering goods or issuing documents for ineligible benefits, with corresponding penalty amounts. The Tribunal emphasized the requirement of knowledge for imposing penalties under Rule 26, highlighting that in this case, the appellant's role in finance and legal affairs did not establish his knowledge of the shortage, leading to the decision to set aside the penalty.

In conclusion, the Tribunal's judgment focused on the lack of evidence proving the appellant's knowledge of the shortage, which was essential for imposing a penalty under Rule 26. The decision highlighted the importance of establishing knowledge to justify penalties under the Central Excise Rules, ultimately leading to the setting aside of the penalty imposed on the appellant in this case.