2009 (6) TMI 546 - AT - Central Excise

Penalty- A show cause notice was also issued to the current appellant who was the Managing Director of the said RTPL as to why penalty should not be imposed on him under Rule 26 of the Central Excise Rules, 2001. Adjudicating Authority without granting a personal hearing came to the conclusion that the said M/s. RTPL are liable to pay the differential duty. Coming to such a conclusion he confirmed the demand on said RTPL, imposed penalty and interest. He also imposed penalty on the current appellant under provisions of Rule 26 of the Central Excise Rules (No. 2) Rules, 2001. Aggrieved by such an order, the appellant has filed this appeal. Held that- The provisions of Rule 26 of Central Excise (No. 2) Rules, 2001 are pari materia with the provisions of Rule 209A. We also find that the judgment and order of the Hon ble High Court of Mumbai in the case Jayantilal Thakkar & Company (supra) also covers the issue in favour of the appellant. Accordingly, in view of the foregoing reasons, we find that the impugned order is not sustainable and liable to be set aside and we do so. The impugned order is set aside and the appeal is allowed with consequential relief, if any.

Issues:
1. Misutilization of benefit under Notification No. 3/2001-CE.
2. Imposition of penalty under Rule 26 of Central Excise Rules, 2001 on the Managing Director.
3. Allegations of involvement in clandestine activities and evasion of duty.

Issue 1: Misutilization of benefit under Notification No. 3/2001-CE.
The case involved M/s. Rangoli Texdye Ltd. availing exemption under Notification No. 3/2001-CE for clearing goods at a concessional rate of duty. The investigation revealed that non-duty paid raw materials were used, leading to a demand for duty payment. The Managing Director contested the show cause notice, claiming innocence and resignation from the company before the alleged misutilization. The Adjudicating Authority confirmed the duty demand, imposed penalties, and interest. The appellant challenged this decision in the appeal.

Issue 2: Imposition of penalty under Rule 26 of Central Excise Rules, 2001 on the Managing Director.
The key contention revolved around the imposition of a penalty of Rs. 10,00,000 on the Managing Director under Rule 26 of Central Excise Rules, 2001. The Adjudicating Authority based its decision on incriminating documents found in the appellant's vehicle and briefcase, linking him to the evasion of duty by the company. The appellant argued that the documents were unrelated to the company's activities and cited legal precedents to support his case. The Departmental Representative emphasized the Managing Director's responsibility and knowledge of the company's operations during the alleged misdeeds.

Issue 3: Allegations of involvement in clandestine activities and evasion of duty.
The Tribunal scrutinized the incriminating documents found in the appellant's possession and the Adjudicating Authority's findings. It was observed that the Authority failed to establish a direct link between the recovered documents and the goods cleared by the company. The Tribunal highlighted the requirement for penal action under Rule 26 to involve knowledge of goods liable for confiscation, which was not proven in this case. Legal precedents and judgments were referenced to support the conclusion that the penalty imposed on the Managing Director was unjustified. Consequently, the Tribunal set aside the impugned order and allowed the appeal, providing consequential relief if applicable.

This detailed analysis of the judgment highlights the issues of misutilization of benefits, imposition of penalties on the Managing Director, and allegations of involvement in clandestine activities and duty evasion, culminating in the Tribunal's decision to overturn the initial order.

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