2019 (7) TMI 721 - AT - Central Excise

Imposition of penalty u/r 26 of Central Excise Rules 2002 - Clandestine removal or not - supply of packing material and loose Gutkha - HELD THAT - Apart from the fact that supply of loose Gutkha and packing material by itself cannot be held to be a crime or any illegal activity so as to call for imposition of penalty, the entire case of the Revenue is primarily based upon the statement of Shri Sanjay Rathore, who was a co-noticee as also on the statement of M/s.Kanti Chemicals. The said two deponents have not been examined by the Commissioner in terms of the provisions of section 9-D of the Central Excise Act and as is the well settled law, the said statements cannot be admitted as an evidence. If the said two statements are taken out of consideration, nothing survives with the Revenue so as to hold against the appellant. The adjudicating authority has not given any reason to doubt or reject the said statement of the appellant, which also stands recorded in terms of the provisions of section 14 of the Central Excise Act. In the absence of any positive, tangible and sufficient evidences against the appellant, there are no reasons to uphold the penalty upon him - appeal allowed - decided in favor of appellant.

Summary

Issues:
Penalty imposed under Rule 26 of Central Excise Rules 2002 on the appellant.

Analysis:
The judgment deals with the challenge to a penalty of ?1.25 Crores imposed on the appellant under Rule 26 of the Central Excise Rules 2002. The case originated from a search conducted at the residential premises of an individual where packing machines for Pan Masala and Gutkha were found, along with packed pouches of 'Dilbahar' brand. Subsequent investigations revealed that the appellant was allegedly supplying loose Gutkha and packing material to the individual involved in manufacturing Gutkha. The Central Excise department initiated proceedings resulting in the confirmation of duty demands and penalties against both individuals. However, the present appeal only involved the appellant challenging the penalty imposed on him.

The Tribunal noted that the Commissioner did not consider the appellant as the manufacturer of Pan Masala/Gutkha. The case against the appellant was primarily based on statements from the individual involved in manufacturing and a packing material supplier, which were not examined by the Commissioner as required by the law. The Tribunal emphasized that oral statements alone cannot be relied upon as evidence without documentary corroboration. The appellant's statements during the investigation were exculpatory, asserting his innocence and lack of involvement in the manufacturing activities. The Tribunal found no tangible evidence against the appellant to uphold the penalty, leading to the penalty being set aside, and the appeal being allowed with consequential relief.

In conclusion, the judgment highlights the importance of substantial evidence and adherence to legal procedures in imposing penalties under the Central Excise Rules. It emphasizes the need for corroborative material to support oral statements and the significance of considering exculpatory statements of the accused during investigations. The decision underscores the principle that penalties should only be imposed based on concrete evidence, ensuring fairness and justice in legal proceedings.