2013 (1) TMI 502 - HC - Central Excise

Penalty under Rule 25 - storing and selling zarda of a brand name Ratna manufactured by Prabhat Zarda Factory who alleged to have clandestinely cleared the said quantities Zarda - Held that - Rule 25 does not apply to the respondents as it was not the case of the prosecution that the respondents were producers manufacturers registered persons of a warehouse or registered dealers. The respondents are neither producers nor manufacturers of the said Prabhat Zarda nor are they the registered persons of a warehouse in which the said zarda had been stored. The respondents are also not the registered dealers. That being the case no penalty can be imposed on the said respondents. Rule 25(1)(c) would be applicable - Held that -Do not agree with this contention because sub-clause (c) would apply only in respect of the four categories of persons mentioned in the earlier part of Rule 25(1) of the said Rules. That is clearly not the case - in favour of assessee.

Summary

Issues:
Appeal under Section 35G of the Central Excise Act, 1944 against the order of Customs, Excise & Service Tax Appellate Tribunal imposing penalties under Rule 25 of the Central Excise Rules, 2002 on respondents for storing and selling zarda with a brand name manufactured by another company.

Analysis:
The Commissioner imposed penalties on the respondents under Rule 25 of the Central Excise Rules, 2002, for storing and selling zarda with a brand name manufactured by a different company, alleging clandestine clearance. The Tribunal allowed the appeals of the respondents, stating that Rule 25 does not apply as the respondents were not producers, manufacturers, registered persons of a warehouse, or registered dealers, as specified under the rule. The Tribunal correctly interpreted that the penalty can only be imposed on the specific categories mentioned in Rule 25(1), which did not include the respondents. The prosecution did not establish that the respondents fell within any of the four categories mentioned in the rule, leading to the conclusion that no penalty could be imposed on them.

The appellant contended that Rule 25(1)(c) would be applicable to the case, but the court disagreed. Sub-clause (c) of Rule 25(1) applies only to the four categories of persons mentioned earlier in the rule, which was not the situation in this case. Therefore, Rule 25(1)(c) had no relevance to the present scenario. The court found no substantial question of law to consider and dismissed the appeal. The judgment reaffirmed that penalties under Rule 25 can only be imposed on specific categories of persons mentioned in the rule, and in the absence of such categorization, penalties cannot be levied.

In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decision that Rule 25 did not apply to the respondents in this case as they did not fall within the specified categories mentioned in the rule for penalty imposition. The judgment emphasized the importance of adhering to the specific criteria outlined in the law for penalizing individuals or entities under Rule 25 of the Central Excise Rules, 2002.