2014 (11) TMI 620 - HC - Central Excise

Tribunal Upheld Penalty for Excise Rule Violation

The High Court upheld the Tribunal's decision to confirm the penalty imposed on the appellant under Rule 26 of the Central Excise Rules, 2002. The ... Penalty under Rule 26 of the Central Excise Rules, 2002 - liability where goods are liable for confiscation - knowledge or reason to believe in relation to dealing with excisable goods - requirement of a speaking order - appellate tribunal's factual appreciation and perversity standardPenalty under Rule 26 of the Central Excise Rules, 2002 - knowledge or reason to believe in relation to dealing with excisable goods - Imposition of penalty on the appellant under Rule 26 was sustainable on the facts and evidence before the Tribunal. - HELD THAT: - Rule 26 penalises any person who acquires possession of, or is concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing excisable goods which he knows or has reason to believe are liable to confiscation. The Tribunal and Commissioner examined seized records, statements of employees and associates, note books, files and other private records, and found that clandestine removals were effected with active participation and knowledge of the appellant in his capacities as director and authorised signatory. The Tribunal also rejected the Chartered Engineer's certificate on production capacity after comparing accounted production and found the certificate not trustworthy. On this factual matrix the Tribunal concluded that the appellant had knowledge/connivance in dealings with excisable goods and therefore liability under Rule 26 was attracted. The appellate court held that these findings of fact, being based on evidence placed before the Tribunal and its appreciation, did not suffer from error or perversity warranting interference.Penalty under Rule 26 as confirmed by the Tribunal against the appellant is upheld.Liability where goods are liable for confiscation - penalty under Rule 26 of the Central Excise Rules, 2002 - Non-requirement of express allegation of confiscation in the show cause notice for invoking Rule 26. - HELD THAT: - Although Rule 26 refers to goods 'liable to confiscation', the Court held that invocation of Rule 26 does not strictly depend upon the show cause notice expressly proposing confiscation, nor upon actual confiscation having been effected. The provision is attracted by dealing with excisable goods which the person knows or has reason to believe are liable to confiscation; thus penalty can be imposed where evidentiary material establishes such liability and the person's involvement, even if the formal notice did not recite confiscation.Absence of an express proposal of confiscation in the show cause notice does not invalidate imposition of penalty under Rule 26 when the evidence establishes dealings with goods liable to confiscation.Requirement of a speaking order - appellate tribunal's factual appreciation and perversity standard - Complaint that the Tribunal's order was non-speaking and thereby invalid was rejected; the Tribunal's brief confirmation of the penalty, read with the detailed findings of the Commissioner (Appeals) and the material considered, sufficed. - HELD THAT: - The Court recognised that while the Tribunal's discussion on confirmation of penalty was brief, it expressly concurred with the Commissioner (Appeals) whose reasoning and findings on the appellant's role were elaborated. The Tribunal need not have reiterated all factual details; concurrence with and adoption of the Commissioner's reasoning, together with the record of evidence and the Tribunal's own findings on clandestine removals and reduction of demand, meant the order was not a non-speaking one. The appellate court will not interfere with concurrent findings of fact unless there is perversity or lack of evidence - neither of which was shown.The challenge based on the order being non speaking is rejected; the Tribunal's confirmation of penalty is maintainable.Final Conclusion: The High Court dismissed the appeal and upheld the Tribunal's confirmation of penalty against the appellant under Rule 26 of the Central Excise Rules, 2002, finding the levy sustainable on the evidence and that absence of an express proposal for confiscation in the notice or a more elaborate exposition by the Tribunal did not vitiate the decision. Issues:1. Imposition of penalty under Rule 96 of Central Excise Rules, 20022. Upholding penalty under Rule 26 of Central Excise Rules, 20023. Interpretation of Rule 26 regarding penalty impositionAnalysis:1. The appellant challenged the penalty imposed under Rule 96 of the Central Excise Rules, 2002. The counsel argued that there was a lack of discussion in the Tribunal's judgment regarding the nature of the alleged investment, making the order non-speaking and thus should be quashed. The counsel contended that there was no basis to show the appellant's knowledge of the alleged activities, and since the show cause notice did not propose confiscation of goods, the penalty under Rule 26 was incorrect.2. The Tribunal confirmed the penalty under Rule 26 on the appellant after extensive examination of the case. The rule states that penalty can be imposed if excisable goods are liable for confiscation under the Act or rules. The Tribunal noted the clandestine removal of goods based on seized records and statements. It also rejected the Chartered Engineer's report on production capacity, finding discrepancies in the production figures. The Tribunal individually examined the quantity of goods removed clandestinely for each buyer, reducing the total duty demand significantly.3. The appellant, as a director of multiple firms involved, was found to have an extensive role in the activities related to the excisable goods. The Commissioner rightly imposed the penalty for contravening statutory provisions, which was confirmed by the Tribunal. The Tribunal's brief discussion on the confirmation of penalty was deemed sufficient, considering the detailed analysis by the lower authorities. The Tribunal's decision was based on the evidence presented by the Revenue, and there was no error or perversity in its findings. The penalty was reduced in line with the reduction in duty demand, showing a reasonable approach by the Tribunal.In conclusion, the appeal challenging the penalty imposition under Rule 26 was rejected by the High Court, affirming the Tribunal's decision based on the factual matrix and evidence presented during the proceedings.