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2010 (1) TMI 229 - HC - Central ExcisePenalty- Personal penalty on Directors. Penalty imposable under Rule 13 of Cenvat Credit. Credit availed by company and not by petitioners who were directors. Penalty under said rule imposable on company as manufacturer availing credit. Pre-deposit of personal penalty not payable. Impugned order set aside. Appeal to be heard by Tribunal without pre-deposit.
Issues:
Challenge against order directing pre-deposit of penalty on directors for availing CENVAT credit. Analysis: The petitions challenged an order by the Customs Excise & Service Tax Appellate Tribunal directing the directors of a company to pre-deposit 25% of the penalty imposed on them for availing CENVAT credit. The petitioners argued that as directors, they did not avail the credit, which was done by the company, and therefore, the penalty under Rule 13(1) of the Cenvat Rules should only apply to the person who availed the credit. The Tribunal's order was criticized for not considering this legal position before directing the directors to pre-deposit the penalty. On the other hand, the respondents' counsel struggled to counter this argument effectively. Considering Rule 13 of the Cenvat Rules, it was noted that the penalty is intended for the person who takes CENVAT credit. Since the directors did not avail the credit, but the company did, the penalty should only be imposed on the company as the manufacturer availing the credit. Referring to the strict construction of penal provisions by the Apex Court, it was emphasized that in the absence of specific words, no person other than the one taking CENVAT credit can be held liable. The comparison with provisions of the Central Excise Act highlighted that where the legislature intended to include other persons or agents, specific language was used, unlike in Rule 13 of the Cenvat Rules. Based on the analysis of Rule 13, the judgment concluded that the directors should not be subject to a pre-deposit of the personal penalty. The impugned order was quashed, allowing the appeal to proceed without requiring the directors to pre-deposit the penalty. As a result, both petitions were allowed, with no costs imposed on either party.
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