2015 (11) TMI 40 - AT - Central Excise

Evasion of duty - Penalty under Rule 26 for abetment - Held that - Rule 26 speaks about imposition of penalty in the case where a person has knowledge or reason to believe that the goods are liable for confiscation. There are no documents or record to establish that the appellant had knowledge that M/s.B.S.Enterprises was evading duty. M/s.B.S.Enterprises sold goods to M/s.G & D Incorporation from where the appellants procured the products. Some of the G&D brand footwears were above ₹ 250/- and were excisable goods. The Commissioner (Appeals) has vaguely concluded that the appellant has abetted the omission and commission of act in contravention of provision of Central Excise Act and has proceeded to impose penalty. The participation of the appellant firm is not established by cogent evidence. There is no evidence to link the appellant firm with the clandestine activities of M/s.B.S.Enterprises. Penalty was imposed upon the partner Shri Virender Kumar which was paid by him. Shri Virender Kumar did not file appeal. - evidence placed and the judicial decisions, the penalty of ₹ 80,000/- imposed on the appellant under Rule 26 is unsustainable and the same is set aside. Taking into consideration, the argument of the learned counsel for appellant that after abatement the duty liability of the seized goods would only come to ₹ 21,365/-, the levy of redemption fine of ₹ 80,000/- in my view, is on the higher side - Decided partly in favour of assessee.

Summary

Issues:
Imposition of penalty under Rule 26 of Central Excise Rules, 2002 on a partnership firm for involvement in the act of evading duty committed by another entity.

Analysis:
The case involved a partnership firm acting as a distributor of 'Guys & Dolls' brand footwear manufactured by M/s.B.S. Enterprises. The officers of Anti-Evasion, Central Excise, Delhi-I detained footwear from the appellant's premises due to missing MRP details on the invoices issued by M/s.B.S. Enterprises. A show cause notice was issued proposing confiscation of goods and penalty under Rule 26. The Commissioner (Appeals) later ordered confiscation of goods, imposed penalties, and levied redemption fines. The appellant challenged the penalty and redemption fine, arguing lack of conscious involvement in the duty evasion.

The core issue revolved around whether the appellant had conscious involvement in the duty evasion by M/s.B.S. Enterprises. The appellant, being a dealer/distributor, claimed no knowledge of duty payment status by M/s.B.S. Enterprises. The invoices lacked MRP details, leading to the seizure of goods. The appellant contested the heavy penalties and redemption fine, emphasizing lack of awareness about duty evasion by the manufacturer.

The appellant's counsel argued that the penalties were unjustified as they were based on the high MRP value without considering abatement, resulting in inflated duty liability calculations. The appellant's involvement in duty evasion was disputed, highlighting the lack of evidence linking them to M/s.B.S. Enterprises' activities. The Commissioner (Appeals) imposed penalties based on vague conclusions, disregarding the appellant's limited role as a distributor.

The judgment set aside the penalty imposed on the appellant firm and reduced the redemption fine considering the abatement and duty liability calculations. Citing legal precedents, the judgment emphasized the lack of evidence establishing the appellant's active participation in duty evasion. The penalties were deemed unsustainable, leading to modifications in the impugned order to alleviate the financial burden on the appellant.

In conclusion, the appeal was partly allowed by setting aside the penalty on the appellant firm and reducing the redemption fine. The judgment highlighted the importance of concrete evidence and legal standards in imposing penalties related to duty evasion, ensuring fairness and accountability in such cases.