2017 (3) TMI 1200 - AT - Central Excise

Imposition of penalty u/r 26 of CER 2002 on transporters - clandestine removal - The allegations against the respondents are that they did not carry the way bill/invoice in regard to the goods carried in the vehicle - Held that - there is no proper evidence to establish the fact that the goods were clandestinely removed. It may be a fact that the drivers of the lorries did not carry the invoices at the time of interception. The Commissioner has observedthat there is no evidence to prove that the lorry drivers or the owners had involved themselves in clandestine clearance. The goods were accepted and carried by the drivers on the assurance that they would be issued invoices - For imposing penalty u/r 26 of CER, 2002 mens rea is essential, which is not there in the present case - penalty rightly set aside - appeal dismissed - decided against Revenue.

Summary

Issues:
Non-imposition of penalty under Rule 26 of Central Excise Rules 2002 on lorry owners.

Analysis:
The Department filed appeals against the Commissioner's order that did not impose penalties under Rule 26 of Central Excise Rules 2002 as initially proposed in the show cause notice. The case involved the interception of four lorries near a factory suspected of clandestine production and clearance of goods. The original authority confiscated sponge iron carried by the lorries, with an option for redemption on payment. Penalties were imposed on some individuals, but not on the lorry owners, leading to the current appeals.

The Department argued that the lorry owners/drivers violated provisions by not carrying necessary documents. Despite notice, no one appeared for the Respondents. The allegations centered on the absence of way bills or invoices. The Respondents contended that proper stock records were maintained, and invoices were delayed due to interception soon after leaving the factory. They argued that excise duty had been paid promptly, and the vehicles were dispatched based on instructions from a manager.

The Tribunal had previously reduced fines and penalties for the Respondents. The Department's failure to invoke Rule 10 suggested no dispute over proper accounting. The Commissioner found no evidence of clandestine activities by the lorry owners. For penalty under Rule 26, mens rea was crucial, requiring proof of knowledge of liability for confiscation. In this case, the lorry owners acted on instructions and assurances of timely invoicing, lacking the necessary mens rea for penalties.

The Tribunal upheld the Commissioner's decision, citing the absence of grounds for interference. The appeals were dismissed, affirming the non-imposition of penalties on the lorry owners under Rule 26 of Central Excise Rules 2002.