2024 (7) TMI 181 - AT - Central Excise

Levy of penalty under Rule 209 and Rule 26 of the Central Excise Rules, 1944 and 2002 - Scope of SCN - impugned order assailed on the ground that the provisions of erstwhile Rule 209 ibid and Rule 26 ibid shall not be invoked inasmuch as no proposals were made in the showcause notice for confiscation of the goods, which were not available in the factory. HELD THAT - Rule 209A ibid and Rule 26 ibid were similarly worded, concerning imposition of personal penalty. Since, the period of dispute involved in these appeals is from February, 2000 to September, 2003, both the provisions are attracted herein for consideration of the issue as to whether, the Department s action for imposition of penalty under Rule 209 and 26 ibid was proper or otherwise. It transpires that question of imposition of personal penalty would arise only in the eventuality, when the person concerned on whom the penalty is sought to be imposed, was having the knowledge that the offending goods were liable for confiscation. On reading of the show-cause notice as well as the impugned order, it is found that the authorities below nowhere had mentioned that the appellants had a pre- knowledge that the goods which were not received in the factory were liable for confiscation. Since the show-cause notice in this case, had not proposed for confiscation of the goods and the said aspect has not been dealt with in the adjudication order, the imposition of penalty under Rule 26 ibid on the appellants cannot stand judicial scrutiny. There are no merits in the impugned order, insofar as it has imposed penalty on the appellants under Rule 209/26 of the Rules, 1944/2002 - impugned order is set aside - appeal allowed.

Summary

Issues Involved:
1. Imposition of penalty under Rule 209 and Rule 26 of the Central Excise Rules, 1944 and 2002.

Analysis:
The case involved the manufacture of Aluminium Alloy Ingots and Zinc Alloy Ingots by a company, which availed CENVAT Credit of Central Excise duty on inputs. The Central Excise Department conducted an investigation based on intelligence that the company was availing MODVAT/CENVAT Credit without actual receipt of inputs and utilizing it on finished products. Show-cause proceedings were initiated, resulting in an adjudication order confirming duty demand, interest, and penalties on the company and its directors. The company appealed the decision, leading to a remand by the Tribunal for fresh fact-finding. Subsequently, a new adjudication order confirmed the earlier proposals, imposing penalties on the company and its directors. The directors appealed the decision, challenging the invocation of Rule 209 and Rule 26 for penalty imposition.

The Tribunal analyzed the provisions of Rule 209 and Rule 26 of the Central Excise Rules, noting that both rules were similarly worded concerning personal penalty imposition. The period under consideration was from February 2000 to September 2003. The Tribunal specifically examined Rule 26, which outlined penalties for certain offenses related to excisable goods. It highlighted that penalty imposition required the person to have knowledge that the goods were liable for confiscation. The Tribunal observed that neither the show-cause notice nor the adjudication order mentioned the appellants' pre-knowledge of goods liable for confiscation, rendering the penalty imposition under Rule 26 unjustified. Citing a previous tribunal order, the Tribunal emphasized the necessity of proving knowledge of goods liable for confiscation for penalty imposition. Consequently, the Tribunal found no merit in the penalty imposition under Rule 209/26 and allowed the appeals in favor of the appellants.

In conclusion, the Tribunal's detailed analysis focused on the lack of evidence regarding the appellants' knowledge of goods liable for confiscation, which was essential for penalty imposition under Rule 26. By referencing relevant legal provisions and precedents, the Tribunal concluded that the penalty imposition was unjustified and set aside the impugned order, thereby ruling in favor of the appellants.