2024 (2) TMI 1014 - AT - Central Excise

Levy of penalty u/r 26 of the Central Excise Rules, 2002 - clandestine manufacture of Pan Masala - recovery of duty alongwith interest and penalty - HELD THAT - The penalty under Rule 26 can be imposed if one is concerned in a manner indicated in the Rule with goods which were liable for confiscation or was in any way concerned such goods or any person who is connected with issue of invoices without delivering goods so as to enable the person to enable the other person to avail CENVAT credit incorrectly. In this appeal, no penalty has been imposed with respect to the confiscation of the goods (first SCN). The second SCN was only concerned with recovery of duty. It is in this SCN, penalty of Rs. 10,00,000/- was imposed on the appellant under Rule 26. This Rule does not provide for imposing penalty on the ground that no excise duty was not paid or short paid. In the first SCN, where there was confiscation of goods, no penalty was imposed on the appellant by the adjudicating authority and in the proceedings related to the second SCN, where duty is to be demanded, penalty was imposed under Rule 26 which is clearly beyond the scope of this Rule - Since there is no basis for imposing penalty on the appellant under Rule 26 in the second SCN (which neither involved confiscation of goods nor issue of invoices without supplying goods), the penalty cannot be sustained. Appeal allowed.

Summary

Issues involved: Appeal against penalty imposed under Rule 26 of the Central Excise Rules, 2002.

Summary:
1. The appellant contested the Order in Appeal dated 16.11.2017, upholding the order passed by the Additional Commissioner, which imposed a penalty of Rs. 10,00,000 under Rule 26. The case involved clandestine manufacture of Pan Masala, leading to the issuance of two Show Cause Notices (SCNs) proposing penalties and confiscation of goods and machinery.

2. The Additional Commissioner, through a common order dated 18.4.2017, confirmed duty demand and imposed penalties, including the Rs. 10,00,000 penalty on the appellant under Rule 26. The main noticee did not appeal, leaving the penalty as the only issue before the Tribunal.

3. The Tribunal examined Rule 26, which allows penalties for dealing with goods liable for confiscation or issuing invoices without delivering goods for CENVAT credit. The penalty in question was imposed solely under the second SCN for duty recovery, not for confiscation or invoice-related offenses.

4. Since the penalty under Rule 26 was not justified in the absence of goods confiscation or invoice issues in the second SCN, the Tribunal set aside the penalty, allowing the appeal and providing consequential relief to the appellant.

[Order pronounced on 13/02/2024]