2025 (1) TMI 1255 - AT - Central Excise

Confiscation of seized goods - provisional release on payment of redemption fine - penalty under Rule 25 of Central Excise Rules 2002 - HELD THAT - Since the main appellant has settled the issue under SVLDR Scheme penalty imposed on co-noticees being the CEO and Managing Director of the main noticee is unsustainable. Similar issue decided in decision of the Tribunal in the matter of V K Agarwal Vs. CC New Delhi 2023 (9) TMI 178 - CESTAT NEW DELHI wherein it is held that without considering the directions given in the remand order and allowing cross examination Commissioner has imposed penalties on the appellant just for reason that the appellant did not settle the issue along with others under SVLDRS. Such approach of Commissioner cannot be justified. Even if the appellant has not approached under SVLDRS Commissioner should have adjudicated as directed by Tribunal. No justification for imposition of penalty on reconsideration as per order of Tribunal is forthcoming. Conclusion - When a demand is settled under the SVLDR Scheme penalties on co-noticees should not be sustained. Since the issue is squarely covered by the decision of the Tribunal in the matter of VK Agarwal there are no reason to differ - appeal allowed.

ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment are:

Whether the confiscation of seized goods and their clearance upon imposition of a redemption fine and penalty is justified.
Whether the penalties imposed on Shri Shashi Kumar, CEO, and Shri R. G. Venkatesh, M.D. of M/s. Diamond Display Solutions Pvt. Ltd. are sustainable.

ISSUE-WISE DETAILED ANALYSIS

Confiscation and Clearance of Seized Goods

Relevant Legal Framework and Precedents: The confiscation and clearance of goods are governed by the Central Excise Rules, 2002, which allow for the imposition of redemption fines and penalties in cases of non-compliance. The Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) also provides a framework for settling disputes related to excise duties.
Court's Interpretation and Reasoning: The Tribunal noted that the issue of confiscation and clearance of goods was already settled under the SVLDR Scheme. Therefore, the appeal concerning the imposition of redemption fine and penalty for the release of seized and confiscated goods was rendered infructuous.
Key Evidence and Findings: The main appellant, M/s. Diamond Display Solutions Pvt. Ltd., had settled the demand under the SVLDR Scheme, which resolved the issues related to past clearances and seized goods.
Application of Law to Facts: Since the demand was settled under the SVLDR Scheme, the Tribunal concluded that the appeal regarding the seized goods was moot.
Treatment of Competing Arguments: The Tribunal did not find any competing arguments that warranted a different conclusion, as the settlement under the SVLDR Scheme addressed the core issues.
Conclusions: The appeal regarding the confiscation and clearance of seized goods was dismissed as infructuous.

Penalties Imposed on Company Executives

Relevant Legal Framework and Precedents: Penalties on individuals in their capacity as company executives are often assessed under Rule 26 of the Central Excise Rules, 2002. The Tribunal referenced a precedent in the case of V K Agarwal Vs. CC, New Delhi, where penalties were set aside when the main noticee settled under the SVLDR Scheme.
Court's Interpretation and Reasoning: The Tribunal emphasized that when the main demand is settled under the SVLDR Scheme, the imposition of penalties on co-noticees becomes unsustainable. The Tribunal highlighted the relief available under section 124(1)(b) of the Finance Act, which supports the non-imposition of penalties when the primary demand is resolved.
Key Evidence and Findings: The Tribunal found that the penalties on the CEO and M.D. were not justified since the main appellant had resolved the issue under the SVLDR Scheme.
Application of Law to Facts: The Tribunal applied the legal principles from the V K Agarwal case, determining that the penalties on the executives should be set aside due to the settlement of the main demand.
Treatment of Competing Arguments: The Tribunal considered the arguments from both the appellant's counsel and the Revenue's representative, ultimately favoring the precedent that supported the dismissal of penalties.
Conclusions: The penalties imposed on Shri Shashi Kumar and Shri R. G. Venkatesh were overturned, and their appeals were allowed.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reinforced the principle that when a demand is settled under the SVLDR Scheme, penalties on co-noticees should not be sustained. This decision aligns with the precedent set in the V K Agarwal case.
Final Determinations on Each Issue:
- The appeal concerning the confiscation and clearance of seized goods was dismissed as infructuous due to the settlement under the SVLDR Scheme.
- The penalties imposed on the CEO and M.D. were set aside, and their appeals were allowed based on the precedent that penalties should not be sustained when the main demand is resolved under the SVLDR Scheme.