1986 (11) TMI 211 - AT - Central Excise

Summary

Issues:
Imposition of penalty on a firm for irregularities committed by its Technical Director.

Detailed Analysis:
The appeal before the Appellate Tribunal CEGAT, Bombay arose from an order passed by the Collector of Central Excise, Bombay-II, dated 26-7-82. The facts of the case were undisputed, involving the seizure of electric motors from the appellant's firm, Factual Electronics (Private) Ltd., due to irregularities in stock maintenance and clearance procedures. The Collector ordered the confiscation of 14 electric motors with redemption allowed on payment of a fine of Rs. 1600 and imposed a personal penalty of Rs. 500. The appellant challenged the penalty imposition, arguing that the penalty should have been levied on the Technical Director, not the firm, as the irregularities were committed solely by the Director without the knowledge of other Directors.

During the hearing, the appellant's advocate did not contest the confiscation but argued against the penalty on the firm. The respondent, representing the Collector, contended that as the licensee, the firm was responsible for the actions of its Directors under Rule 225 of the Central Excise Rules. The appellant's argument was centered on the contention that the penalty should not apply to the firm for the acts of its Directors, specifically the Technical Director who was solely responsible for the irregularities.

The Tribunal analyzed the situation and concluded that the firm, being the licensee, was accountable for the actions of its Directors unless it could prove that the Directors' actions were ultra vires of the Memorandum or Articles of Association. The Tribunal rejected the appellant's argument that the penalty should be imposed solely on the Technical Director, emphasizing that the firm could not evade responsibility by attributing the irregularities to individual Directors. The Tribunal upheld the Collector's order, stating that the penalty on the firm was legal and justified under Rule 173Q of the Central Excise Rules, which holds the manufacturer or licensee liable for penalties in case of contraventions.

In summary, the Tribunal dismissed the appeal, affirming the Collector's decision to impose a penalty on the firm for the irregularities committed by its Directors, emphasizing the firm's accountability as the licensee under the Central Excise Rules.