2023 (11) TMI 6 - AT - Central Excise

Penalty u/r 26 of the Central Excise Rules, 2002 - appellant was Director during relevant period - denial of benefit of exemption notification for Magnesium Sulphate which was being manufactured by the main appellant firm - HELD THAT - Since the demand of the duty has already been settled under SVLDRS Scheme and there is no cause for imposition of penalty under Rule 26 of the Central Excise Rules, 2002 on the director of the company who has been a paid employee and issue of the demand was primarily of interpretation of the exemption notification. The decision in case of SHRI V.K. AGGARWAL AND SHRI J.K. AGGARWAL VERSUS COMMISSIONER OF CENTRAL TAX, CGST AND CENTRAL EXCISE, NEW DELHI 2023 (9) TMI 178 - CESTAT NEW DELHI followed where it was held that The judgements so referred clearly says that when the demand of duty has been settled under SVLDR Scheme, the imposition of penalty would fail on simple ground that if the appellants had applied under the said scheme, they would have paid 'nil' duty, in view of the relief available to them under Section 124(1)(b) of the Finance Act. Appeal allowed.

Summary

Issues:
The issues involved in the judgment are the imposition of penalty under Rule 26 of the Central Excise Rules, 2002 on the director of a company, the applicability of the Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 in resolving disputes related to duty demands, and the interpretation of exemption notifications regarding Central Excise Duty.

Imposition of Penalty:
The case involved a show cause notice issued to a company for denial of benefit of exemption notification for Magnesium Sulphate, resulting in a demand of Central Excise Duty. The main noticee, now a different company, faced confirmed charges and a penalty of Rs. 10,00,000 was imposed on the appellant under Rule 26 of the Central Excise Rules, 2002.

Applicability of SVLDRS Scheme:
The appellant contested the penalty imposed, stating that the main company had resolved the duty demand under the SVLDRS Scheme, 2019. The appellant, a former director, argued that as a paid employee, he should not be penalized under Rule 26. The appellant relied on precedents to support the contention that once the duty demand is settled under SVLDRS, there is no basis for imposing penalties on the director.

Judgment:
After considering the arguments, the Tribunal found that since the duty demand had been settled under the SVLDRS Scheme, there was no justification for imposing a penalty on the director, who was only a paid employee. The Tribunal referred to a previous decision and concluded that the penalty should be set aside, following the precedent that penalties should not be imposed when duty demands are resolved under the SVLDRS Scheme. Consequently, the appeal was allowed, and the penalty imposed on the appellant was set aside.