2018 (10) TMI 535 - AT - Central Excise

Penalty u/r 25 or 26 of CER - Mentioning wrong rule number - SSI Exemption - use of brand name of others - Demand based on statement of Shri Murali Krishna, Director of M/s Sada Healthcare Products Pvt. Ltd. - opportunity of being heard - principles of natural justice - scope of SCN - SCN proposed imposition of penalty under Rule 26 whereas the Order-in-Original has imposed the penalty under Rule 25 of Central Excise Rules, 2002 - Held that - The appellant was never given an opportunity to defend themselves against imposition of penalty under Rule 25 and therefore the penalty needs to be set aside on this ground alone. The first appellate authority was not correct in holding that mentioning Rule 25 was a typographical error and the intention was to impose penalty under Rule 26, because in para 15 of the Order-in-Original, the lower authority has discussed as to why penalty is liable to be imposed under rule 25, both on M/s Sada Healthcare Products Pvt. Ltd. and the appellant herein. Penalty u/r 25 - Held that - Penalty under rule 25 can be imposed on any producer, manufacturer, registered person of a Warehouse or a registered dealer for various contraventions. It is not the allegation in the show cause notice that the appellant is the manufacturer - penalty u/r 25 set aside. Penalty u/r 26 - Held that - Penalty u/r 26 is imposable on any person who acquires possession of or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or dealing in any other manner with any excisable goods which he knows or has reason to believe are liable to confiscation - Show cause notice does not bring out any facts which can support the allegation of both involvement of the appellant in any of the aforesaid activities nor the intention to do so except for the uncorroborated statement by the Director of M/s Sada Healthcare Products Pvt. Ltd. - penalty u/r 26 set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under Rule 25 instead of Rule 26 on the appellant.

Analysis:
The case involved the appellant selling mosquito repellent coils under their brand name, manufactured by supporting manufacturers. A show cause notice was issued to one of the manufacturers for wrongly availing exemption benefits by using the appellant's brand name. The appellant, although not the manufacturer, paid excise duty and interest upon being informed of the duty liability. Subsequently, a show cause notice was issued to the manufacturer seeking duty payment and proposing penalties. Seized coils were also involved, with penalties proposed on the director and the appellant under Central Excise Rules, 2002.

The original authority confirmed demands, confiscated goods, and imposed penalties, with a discrepancy in the penalty rule applied to the appellant. The appellant argued against the penalty imposition under Rule 25, as the notice proposed Rule 26. The appellant contended they were not involved in the alleged activities justifying Rule 26 penalty. The first appellate authority upheld the penalty under Rule 25, citing a typographical error in the original order.

The Tribunal analyzed the penalty imposition discrepancy and found the appellant was not given a chance to defend against Rule 25 penalty imposition. The show cause notice did not support the appellant's involvement in activities warranting Rule 26 penalty. The Tribunal concluded the penalty on the appellant should be set aside, as the notice did not establish their liability under Rule 26.

In conclusion, the Tribunal allowed the appeal, setting aside the penalty imposed on the appellant under Rule 25, as it was not supported by the evidence or the provisions of the Central Excise Rules, 2002.

This detailed analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's decision, ensuring a comprehensive understanding of the legal aspects involved in the case.