2007 (7) TMI 83 - AT - Central Excise

Penalty - revenue contended that appellant is liable for personnel penalty on the ground that appellant is the chairman of the company and engaged in clandestine removal - Held that revenue contention was not valid and set aside personnel penalty

Summary

Issues:
Imposition of personal penalty under Rule 209A on the appellant.

Analysis:
The appellant, as the Chairman of the company, faced a personal penalty of Rs. 50 lakhs under Rule 209A. The duty of Rs. 4.50 crores was confirmed against the company for clandestine removal, with a similar penalty imposed. The appellant asserted non-involvement in the company's affairs, stating his position was merely titular to enhance goodwill. He argued that no evidence linked him to the clandestine activities, emphasizing his physical absence from the company's operations. The appellant challenged the adjudicating authority's reliance on a statement linking him to the signatures on incriminating documents, presenting a hand-writing expert's opinion refuting the claim. The authority's presumption that the appellant's lack of direct involvement implied consent for clandestine activities was deemed speculative and lacking legal basis.

The Tribunal highlighted the necessity of positive evidence demonstrating a director's personal knowledge or belief for penalty under Rule 209A. Citing precedents, the Tribunal emphasized that mere chairmanship does not imply awareness of all company activities, especially in cases where the chairman is not directly involved in day-to-day operations. Rulings in similar cases underscored the requirement for evidence of a guilty mind or conscious act on the part of the director or chairman to justify penalties. The absence of such evidence shifts the onus to the Revenue to establish mens rea, emphasizing that knowledge cannot be automatically attributed based on one's position.

Ultimately, the Tribunal found no grounds for upholding the penalty against the appellant, setting it aside and allowing the appeal with consequential relief. The decision underscored the importance of concrete evidence linking an individual to unlawful activities before imposing personal penalties, especially in cases where the individual's role is primarily titular and not directly involved in the company's operations.