2023 (2) TMI 40 - AT - Central Excise

Penalty under rule 26 of Central Excise Rules, 2002 - SSI exemption - use of brand name - it is alleged that goods having brandname Zapak affixed that did not belong to them and had wrongly availed exemption available under notification no. 8/2003- CE dated 1st March 2003 - HELD THAT - In view of the decision of the Larger Bench of the Tribunal in STEEL TUBES OF INDIA LTD. VERSUS COMMISSIONER OF C. EX., INDORE 2006 (10) TMI 146 - CESTAT, NEW DELHI LB on the inapplicability of Rule 209A of Central Excise Rules, 1944 wherein it has been held that for imposition of penalty under Rule 209A of the Central Excise Rules, 1944, the person must have dealt with the excisable goods with knowledge that they are liable for confiscation. In a given situation, where an assessee is only issuing invoices wherein there is no movement of the goods, they cannot be visited with penalty under Rule 209A. The penalty imposed on the appellant in the impugned order is set aside - Appeal allowed.

Summary

Issues:
1. Penalty imposition under rule 26 of Central Excise Rules, 2002 on M/s Zapak Digital Entertainment Limited.
2. Applicability of Rule 209A of Central Excise Rules, 1944 on artificial persons.

Analysis:
1. The appeal by M/s Zapak Digital Entertainment Limited challenged the penalty of &8377; 1,50,000/- imposed under rule 26 of Central Excise Rules, 2002 by the Commissioner of Central Excise (Appeals), Mumbai-II. The appellant was accused of handling goods with a brandname 'Zapak' affixed, not belonging to them, and wrongly availing exemption under notification no. 8/2003- CE dated 1st March 2003, making them liable for confiscation under rule 25 of Central Excise Rules, 2002.

2. The appellant contended that penalty under rule 26 could not be invoked against artificial persons, citing the decision of the Larger Bench in Steel Tubes of India Ltd v. Commissioner of Central Excise, Indore. They referenced past disputes where the Tribunal's stance remained consistent. The appellant also relied on decisions in Apple Sponge and Power Ltd v. Commissioner of Service Tax, Audit-I and Kakateeya Fabs (P) Ltd v. Commissioner of Central Excise, Bhopal.

3. Referring to the decision of the Larger Bench on the inapplicability of Rule 209A of Central Excise Rules, 1944, the Tribunal highlighted the distinction between natural and artificial persons. The ruling emphasized that while a corporation is a legal entity, decisions made by individuals within the corporation cannot be attributed to the corporation itself. Drawing parallels to a scenario involving Indian Railways, the Tribunal concluded that the penalty imposed on the appellant under rule 26 was unwarranted, aligning with the principles laid down in the precedent.

Conclusion:
Based on the analysis of the limited issue of penalty imposition under rule 26 and the applicability of Rule 209A on artificial persons, the Tribunal set aside the penalty imposed on M/s Zapak Digital Entertainment Limited. The appeal was allowed, emphasizing the distinction between natural and artificial persons in the context of excise rules.