2001 (1) TMI 338 - AT - Central Excise

Summary

Issues:
- Appeal against setting aside of penalties imposed on respondents by Deputy Commissioner.
- Challenge to the order in appeal by Commissioner setting aside penalties.
- Interpretation of penalty liability against employees when company settles dues under KVS Scheme.
- Applicability of Rule 225 of the Central Excise Rules in the case.

Analysis:
1. The appeals were filed by the Revenue against the order setting aside penalties imposed on the respondents by the Deputy Commissioner. The penalties were imposed due to clandestine removal of goods without duty payment, detected during a raid on the company's factory premises.

2. The Deputy Commissioner had ordered confiscation of goods, imposed fines for release of trucks and goods, and penalties on the company and respondents under various rules. The Commissioner (Appeals) set aside these penalties, citing lack of evidence connecting the respondents to the removal of goods, especially after the company settled its dues under the KVS Scheme.

3. The respondents argued that once the company settled its duty and penalties under the KVS Scheme, no penalty liability should remain against the employees. This argument was supported by precedents like Quality Fabricators & Erectors v. CCE, Baroda and Anil K. Arora and Ravi K. Arora. The Tribunal found merit in this argument, stating that penalties against employees do not survive when the main entity settles its obligations.

4. The Tribunal observed that the respondents, as employees, were acting on behalf of the company and their penalty liability ceased to exist once the company resolved its dues. Additionally, the Tribunal agreed with the Commissioner that Rule 225 of the Central Excise Rules was adequately addressed by penalizing the company, and there was no direct evidence linking the respondents to the illicit activities.

5. Consequently, the Tribunal upheld the order of the Commissioner (Appeals), dismissing the appeals filed by the Revenue. The judgment emphasized that the penalties against the respondents were not sustainable after the company resolved its duty liability, and there was no justification to overturn the findings of the lower authority regarding Rule 225 compliance and lack of evidence against the respondents.