2016 (1) TMI 965 - HC - Central Excise

Whether penalty is sustainable upon a dealer when demand of duty stands dropped? - Whether penalty can be imposed for abetment when main party is held not guilty? - Held that - In view of the fact that the order demanding duty and penalty in the case of the main assessee has been set aside and this fact was brought to the notice of the Tribunal and the same has not been dealt with, it would be appropriate to remand the matter back to the Tribunal.

Summary

Issues:
1. Whether penalty is sustainable upon a dealer when demand of duty stands dropped?
2. Whether penalty can be imposed for abetment when the main party is held not guilty?
3. Whether 100% penalty upon a dealer is justified in view of the decision of the Hon'ble Court?

Issue 1:
The appellant filed an appeal under Section 35G of the Central Excise Act against the order passed by the Tribunal. The case involved the imposition of penalty on the appellant, a dealer in iron and steel products, despite the demand of duty being dropped. The appellant argued that penalty cannot be sustained when the duty demand is no longer applicable. The Commissioner (Appeals) had confirmed the penalty, leading to the appeal before the High Court. The Court considered the judgment in another case and concluded that since the duty demand and penalty for the main assessee had been dropped, the matter needed to be sent back for reconsideration. The Court set aside the order and remanded the case to the Tribunal for fresh consideration after hearing both parties.

Issue 2:
The second issue raised was whether penalty could be imposed for abetment when the main party was found not guilty. The appellant contended that the penalty on the dealer was unjustified since the main assessee had been exonerated. The Tribunal had upheld the penalty on the appellant despite the circumstances. The appellant cited a specific judgment in support of their argument. On the other hand, the revenue's counsel referred to a different judgment. Ultimately, the High Court decided to remand the matter back to the Tribunal for a fresh decision, considering the dropped duty demand and penalty for the main assessee.

Issue 3:
The final issue pertained to the justification of imposing a 100% penalty on the dealer. The appellant challenged the levy of penalty, emphasizing that the duty demand for the main assessee had been set aside. The Tribunal's decision to uphold the penalty was contested by the appellant, leading to the appeal before the High Court. The Court, after considering the arguments and relevant judgments, concluded that the matter needed to be reconsidered in light of the dropped duty demand and penalty for the main assessee. The High Court set aside the Tribunal's order and remitted the case for fresh consideration, directing the Tribunal to hear arguments from both parties before making a new decision.