2014 (9) TMI 70 - AT - Central Excise

Duty demand on employee of Company - Suppression of production and clandestine removal - Held that - Penalty has been imposed on the Managing Director of the assessee firm under Rule 26 of Central Excise Rules, 2002. Rule 26 provides that for imposition of penalty on any person, if such person had dealt with goods which he knew was liable for confiscation. In the present case, neither in the show-cause notice nor in the adjudication order, is there any proposal or findings to the effect that the goods are liable to confiscation. In the absence of such a proposal or finding imposition of penalty under Rule 26 cannot be prima facie sustained - waiver from pre-deposit of penalty adjudged against the appellant and stay recovery thereof during the pendency of the appeal is granted - Stay granted.

Summary

Issues:
Imposition of penalty under Rule 26 of the Central Excise Rules, 2002 on the Managing Director for suppression of production and clandestine removal.

Detailed Analysis:

1. Imposition of Penalty:
The appeal and stay application were filed against the penalty imposed on the Managing Director of the company for an amount of Rs. 5,03,112 under Rule 26 of the Central Excise Rules, 2002. The penalty was affirmed in the Order-in-Appeal, which confirmed a duty demand along with interest and an equivalent penalty on the company. The appellant, who admitted the case of suppression of production and clandestine removal, was the Managing Director during the investigation. The main appellant had already paid the duty liability, interest, and 25% of the penalty.

2. Legal Consideration:
In the absence of representation from the appellant, the Addl. Commissioner reiterated the findings of the lower appellate authority. However, upon reviewing the submissions, the Tribunal noted that Rule 26 allows for the imposition of penalty if the person dealt with goods known to be liable for confiscation. In this case, there was no proposal or finding in the show-cause notice or the adjudication order indicating that the goods were liable for confiscation. Therefore, the imposition of penalty under Rule 26 could not be sustained without such a proposal or finding.

3. Judgment and Relief:
Considering the legal provisions and the lack of evidence regarding the liability of the goods for confiscation, the Tribunal granted a waiver from the pre-deposit of the penalty imposed on the appellant. The recovery of the penalty was stayed during the pendency of the appeal. The decision was dictated and pronounced in court, providing relief to the appellant against the penalty under Rule 26 of the Central Excise Rules, 2002.

This detailed analysis of the judgment highlights the issues surrounding the imposition of penalties under Rule 26 of the Central Excise Rules, 2002 on the Managing Director for alleged suppression of production and clandestine removal, and the legal considerations leading to the relief granted by the Tribunal.