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TMI Blog2024 (5) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... sition of such knowledge is related to individual persons, it is apparent that such penalty under Rule 26 ibid is applicable on individual persons and not on legal person. Further, in the present case, the appellants are not the person, who are issuing excisable invoices for the CDs/DVDs. The only allegation on the appellants is that they did not verify the payment of excise duty in the invoice. It is seen from the contract entered with M/s M/s KRCD (India) Pvt. Ltd., that the price is inclusive of all excise duty and other taxes. Inasmuch as the appellants have specifically indicated in contract that the price is inclusive of excise duty, there does not appear to be any ground for the appellants to believe that the DVDs or CDs have been supplied without payment of excise duty. Thus, on the above basis also, the imposition of penalty under Rule 26 is not sustainable. The issue is no more in dispute as in a number of orders, the Tribunal has held that penalty under Rule 26 can be imposed only on individuals and not on company - in the case of Kakateeya Fabs (P) Ltd. [ 2017 (9) TMI 13 - CESTAT NEW DELHI ], the Tribunal has held that that penalty under Rule 26 cannot be imposed on com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri R. Agarwal, Director of M/s KRCD (India) Pvt. Ltd., they have opted for SVLDR Scheme, 2019 to settle the dispute and upon obtaining the SVLDRS-4 certificates, the respective appeals pending before Tribunal were also dismissed as deemed withdrawal vide Final Order No. A/86205/2011 and A/86205/2011 both dated 07.04.2021. In the impugned order, penalty of Rs.5 lakhs alone was imposed on the appellants under Rule 26 ibid. Being aggrieved with the above order, the appellants have filed this appeal before the Tribunal. 3. Learned Advocate appearing for the appellants mainly contended that penalty under Rule 26 of Central Excise Rules, 2002 can be imposed only on individuals and not on company form of organizaton. In support of his stand, he cited the decision of the Tribunal in the following cases: - (i) Kakateeya Fabs (P) Ltd., Simplex Infrastructures Ltd. Vs. CCE, Bhopal 2018 (150) G.S.T.L. 350 (Tri.-Del.) (ii) Zapak Digital Entertainment Ltd. Vs. CCE, Mumbai 2023 (2) TMI 40 CESTAT Mumbai (iii) Apple Sponge and Power Ltd. Vs. Commissioner of Service Tax, Audit-I, Mumbai 2018 (362) E.L.T. 894 (Tr.i-Mum.) In view of the aforesaid decisions of the Tribunal, he prayed that the penalty i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Packaged Software without payment of Central Excise Duty. Shri Agarwal has played active role in the evasion of Central Excise Duty, as stated above, which has been admitted in his statements recorded on various dates. The facts of the case and evidence on record clearly show that Shri Rajiv G. Agarwal, M/s Zapak and M/s Red Hat were aware that the CDs/DVDs manufactured by M/s KRCD were Packaged Software attracting Central Excise Duty. There was no ambiguity in the Central Excise Tariff so far as classification of Packaged Software and levy of Central Excise Duty thereof, during the relevant period. Besides. admittedly. M/s KRCD was paying Central Excise Duty on selective basis and had not paid any Central excise Duty on the clearances of identical goods to M/s Zapak and M/s Red Hat. This is clearly a case of planned and systematic evasion of duty resorted by Shri Rajiv G. Agarwal. M/s Zapak and M/s Red Hat. Shri Rajiv G. Agarwal in his reply dated 21.02.13 has stated that the company had claimed exemption from payment of Central Excise Duty in terms of Notification No.6/2006 dated 01,03.2006. However, no such claim is found on the ER-1 returns filed by the assessee. M/s KRCD. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under clause (a) or clause (d) of sub-section (1) of section 11AC of the Act in respect of duty, interest and penalty, all proceedings in respect of penalty against other persons, if any, in the said proceedings shall also be deemed to be concluded. (2) Any person, who issues (i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or (ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater. 8.1 From plain reading of the legal provisions contained in Rule 26, it transpires that the penalty under this rule can be imposed in specified situations given therein. One such situation is, that a person who does any act in acquiring possession or who in any manner deals with, the excisable goods which he knows that these are liable to confiscation can be imposed with penalty. The second situatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Kakateeya Fabs (P) Ltd. (supra), the Tribunal has held that that penalty under Rule 26 cannot be imposed on company firm or organization. The relevant paragraph is reproduced as under: - 15. The second appellant has contested the imposition of penalty under Rule 26 of CE Rules, 2002. We have perused the findings of the original authority. First of all, we note that the second appellant is a limited company. In various decisions, the Tribunal has held that penalty under Rule 26 can be imposed only on individuals and not on companies. Even otherwise, we note that the original order did not bring out the existence of required ingredients attracting the provisions of the said rule. The original authority recorded that the second appellant did not contest the case. We note that the order has been passed ex parte and the appellant had claimed that due opportunity has not been provided to them to defend their case. In fact they claimed that they have filed reply to the SCN 24-12-2011 which was not considered. The original authority is required to decide the case of penalty, afresh. 9.2 The Tribunal has also held in the case of Zapak Digital Entertainment Ltd. (supra) that penal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould be an act of individuals who did so for their personal gain. The corporation/company, stands to no gain out of misdemeanors of the individuals i.e. Board of Directors. In the eyes of law, the corporate entity being a person would be held responsible for the act of the natural persons. But in order to punish the guilty individuals, the veil of corporate entity had to be lifted to understand the correct 4 E/1660/2012 picture. Precisely for these reasons only the provisions of Rule 209A came in to statute, in order to punish the guilty acting behind the veil of corporation/company. If in a given situation a parcel booking clerk of the Indian Railways, in order to have some personal gain, colludes with others to book the goods without any duty paying documents (though he has knowledge that the goods have to be booked on the basis of duty paying documents) and the goods are seized by the authorities at the destination point, can the Indian Railways be penalized under the provisions of Rule 209A of the Central Excise Rules, 1944? The resounding answer would be NO as Indian Railways is not having any knowledge that the goods so booked are liable for confiscation. The booking clerk is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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