2017 (11) TMI 1038 - AT - Central Excise

Penalty on Managing Director of M/s. Reliance Engineers Ltd. - recovery of CENVAT credit - Held that - the delayed payment of duty/reversal of credit in terms of Rule 3(5) and 3(5A) of the CCR, 2004 was due to the fact that the company was not in the possession of any of the records to pay the dues/reverse the credit and immediately after the receipt of the records from the Bench the company has paid/reversed the credit in terms of Rule 3(5) and 3(5A) of the CCR, 2004 - the clearance of goods was not at all in the hands of the appellant to invoke Rule 26 - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against the imposition of a penalty on the Managing Director of a company for non-payment of Central Excise duty.
- Validity of the penalty imposed by the Commissioner (Appeals) against the Order-in-Original.
- Interpretation of Rule 8(3A) of the Central Excise Rules, 2002.
- Applicability of the extended period for recovery of duty.
- Imposition of penalty under Rule 26 in the absence of mens rea.

Analysis:
The appeal challenged the penalty of ?4,00,000 imposed on the Managing Director of a company for not remitting Central Excise duty collected from customers. The company was engaged in manufacturing wires and cables and availed cenvat credit on inputs and capital goods. The investigation revealed that the company collected ?23,65,322 as central excise duty from customers but did not pay it to the Government. The Managing Director was accused of contacting customers to evade duty. The original authority dropped the penalty, but the Department appealed. The Commissioner (Appeals) imposed the penalty, leading to the present appeal.

The appellant argued that the impugned order was contrary to judicial precedent and that the demand based on Rule 8(3A) of the Central Excise Rules was unsustainable. They cited cases declaring Rule 8(3A) unconstitutional. The appellant contended that there was no recovery mechanism for cenvat credit used for duty payment under Rule 8(3A) and that the demand was time-barred. They also claimed that penalty under Rule 26 required mens rea, citing relevant decisions.

The AR supported the findings of the impugned order. The Tribunal noted that the company was closed due to labor unrest, and the demand related to capital goods. The goods were cleared under excise invoices, but duty was paid belatedly using credit. The delayed payment/reversal of credit was due to lack of records, which were paid/reversed upon receipt. The Tribunal found no malafide intent on the appellant's part and that the impugned order was unsustainable, dropping the penalty on the appellant.

In conclusion, the Tribunal set aside the penalty imposed on the appellant, finding the impugned order not sustainable in law. The appeal was allowed, emphasizing the lack of malafide intent and the absence of evidence to support the penalty under Rule 26.