2014 (2) TMI 869 - AT - Central Excise

Waiver of pre deposit - Imposition of interest, penalty under Rule 15(2) of CENVAT Credit Rules, 2002 read with Section 11AC and penalty under Rule 26(2) of CENVAT Credit Rules, 2002 - Held that - It transpires that though the show cause notice is directing the current appellants to show cause as to why a penalty should not be imposed upon them under Rule 26 (2) of Central Excise Rules, 2002, we find that the adjudicating authority has not imposed any individual penalties on the two appellants before us. Be that as it may, on a specific query from the Bench as to the provision for recovery of interest, penalties which are imposed on a proprietor/ concern, from others, it was informed that there is no such provision for recovery. On the face of it, we find that the amounts which are confirmed against M/s Aaishwarya International as dues, at the utmost, can be recovered from the proprietor of M/s Aaishwarya International and not from individuals who are, prima facie, in no way connected with the activities of such firms. In our view, the appellants herein have made out a prima facie case for waiver of pre-deposit of the amounts attributable to them by the adjudicating authority in his Order-in-Original - Applications for waiver of pre-deposit of amounts involved are allowed and recovery thereof stayed till the disposal of appeals - Stay granted.

Summary

Issues:
Waiver of pre-deposit of confirmed amounts under Rule 15(2) of CENVAT Credit Rules, 2002 and Rule 26(2) of CENVAT Credit Rules, 2002.

Analysis:
The judgment by the Appellate Tribunal CESTAT AHMEDABAD involved the issue of waiver of pre-deposit of confirmed amounts sought to be recovered from the appellants. The adjudicating authority confirmed the amounts as interest, penalty under Rule 15(2) of CENVAT Credit Rules, 2002, along with penalty under Rule 26(2) of CENVAT Credit Rules, 2002. The appellant's counsel argued that the case was made against another entity and its proprietor, alleging that the appellants only helped in the process. The counsel pointed out that despite the show cause notice directing penalties under Rule 26, the authority did not impose individual penalties on the appellants, which was challenged citing a Kerala High Court decision. On the other hand, the Additional Commissioner argued that the appellants were the main brains behind the entity in question and were involved in fraudulent activities, justifying the recovery of amounts from them.

Upon considering both sides' submissions and reviewing the records, the Tribunal noted that while the show cause notice mentioned penalties under Rule 26(2) of Central Excise Rules, 2002 for the appellants, the adjudicating authority did not impose individual penalties on them. The Tribunal highlighted that there is no provision for recovering interest and penalties imposed on a proprietor or concern from others not directly connected to the firm's activities. Therefore, the Tribunal found that the amounts confirmed against the entity could be recovered from the proprietor, not individuals seemingly unrelated to the firm's operations. Consequently, the Tribunal concluded that the appellants established a prima facie case for the waiver of pre-deposit of the amounts attributed to them by the adjudicating authority in the Order-in-Original.

In the final decision, the Tribunal allowed the applications for the waiver of pre-deposit of the amounts involved and stayed the recovery until the disposal of the appeals. The judgment emphasized the lack of provision for recovering amounts from individuals not directly involved in the fraudulent activities of the concerned entity, supporting the appellants' request for a waiver of pre-deposit.