2018 (8) TMI 161 - AT - Central Excise

Penalty u/r 26 of CER - Clandestine removal - no confiscation order - case of appellant is that in the absence of any order of confiscation of goods, the provisions of Rule 26 cannot be invoked - Held that - The said Rule can be invoked when a person deals with the excisable goods in the manner as mentioned in the said Rules and has reasons to believe that the goods are liable to confiscation - As such the only criteria for invocation of said rule is the belief/knowledge of the person as regard the liability of the goods to confiscation. There is no requirement in the said rule 26 as regards the proposal in the Show Cause Notice to confiscate the goods or order of the Adjudicating Authority for confiscation. Admittedly in the present case Shri Suraj Prakash has dealt with the goods in a manner which has made the goods liable to confiscation - In a situation where the clandestinely removed goods are no longer available, there can be no proposal to confiscate the same or no order confiscating the same. It does not mean that the person, who is otherwise liable to penalty, would escape the same on the sole ground that he has been successful in the past to clandestinely remove the goods without any interception by the Revenue Authorities. Penalty upheld - appeal dismissed - decided against appellant.

Summary

Issues:
Challenge to penalty under Rule 26 of Central Excise Rules.

Analysis:
The judgment revolves around the challenge to a penalty of ?20 lakhs imposed on the appellant under Rule 26 of the Central Excise Rules. The appellant, a former director of a manufacturing company engaged in the production of M.S. Bars, faced the penalty due to alleged evasion of duty amounting to ?2.44 crore through clandestine removal. The company failed to comply with a Tribunal's direction to deposit ?30 lakhs, leading to the dismissal of their appeal. However, the appellant, who had followed the Tribunal's directive by depositing ?7.50 lakhs, pursued an appeal against the penalty.

The appellant's argument centered on the technicality that Rule 26 could not be invoked as there was no proposal or order for confiscation of goods in the Show Cause Notice. Additionally, the appellant highlighted his resignation from the directorship in 2008, post the period of alleged clandestine activities. Conversely, the Revenue contended that the appellant's resignation did not absolve him of liability, especially considering his admission during the investigation regarding the company's clandestine practices. The Revenue emphasized the director's role in the illicit activities, asserting that despite the company's actions, the profits from illegal activities benefitted the director directly.

The Tribunal analyzed Rule 26, emphasizing that the rule applies when a person deals with excisable goods believing them to be liable for confiscation. The Tribunal noted that the appellant, as a director, was involved in the clandestine removal of goods, establishing his culpability. The Tribunal rejected the appellant's argument that the absence of a confiscation proposal or order precluded penalty imposition, emphasizing that the director's knowledge and involvement sufficed for penalty enforcement. Ultimately, the Tribunal upheld the penalty of ?20 lakhs on the appellant, concluding that his appeal lacked merit.

In conclusion, the judgment underscores the director's accountability for dealing with goods subject to confiscation, irrespective of the absence of a specific confiscation proposal or order. The Tribunal's decision reaffirms that a person's knowledge and involvement in clandestine activities can warrant penalty imposition under Rule 26, emphasizing the individual's responsibility in such circumstances.