2016 (11) TMI 990 - AT - Central Excise

Judge allows penalties under Rule 26 without confiscation order. Penalties not waived by manufacturer's payment.

M/s Diamond Roadways, Shri Mahendra K. Agarwal, Shri Manish R Agarwal, Shri Ramavtar K. Agarwal Versus Commissioner of Central Excise, Nashik

The judge ruled that penalties could still be imposed under Rule 26 of the Central Excise Rules, 2002, even if no confiscation order was issued, based on ... Levy of penalty in the absence of confiscation - Invocation of Rule 26 and not sub-rule 2 of Rule 26 - Held that: - the issue regarding sub-rule (2) of Rule 26 raised by the learned Counsel is irrelevant as Rule 26 has been invoked and not sub-rule 2 of Rule 26. As regards non-imposition of penalty in case where there is no proposal for confiscation of goods, the Hon'ble Supreme Court in the case of Sanjay Vimalbhai Deora [2015 (1) TMI 537 - SUPREME COURT] has upheld the decision of Hon'ble High Court of Gujarat. In the said case, the Hon'ble Supreme Court had upheld the penalty under Rule 26 of the Central Excise Rules, 2002 even in case where there is no proposal for confiscation. The third contention raised by the appellant relates to invocation of provision of sub-section (2A) of Section 11A, I find that the said provisions can be invoked only in respect of such persons on whom notices are served under sub-section (1) of Section 11A. In this case, notice under Rule 26 of the Central Excise Rules, 2002 has been served to all the appellants. The penalties are reduced from ₹ 1 lakh to ₹ 75,000/- on Shri Mahendra K Agrawal, Manish R Agrawal & M/s Diamond Roadways and from ₹ 25,000/- to ₹ 20,000/- on Shri Ramavtar K Agrawal - appeal disposed off - decided against appellant. Issues:Wrong availment of credit, imposition of penalties under Rule 26 of Central Excise Rules, invocation of provisions of sub-section (2A) of Section 11A, applicability of penalty when no confiscation is ordered, interpretation of Rule 26 for penalties, relevance of circular No. 831/08/2006-CX.Analysis:The case involved a situation where a demand was confirmed against a company for wrong availment of credit, leading to penalties imposed under Rule 26 of Central Excise Rules, 2002. The main appellants paid the duties and part of the penalty, but penalties were also imposed on other individuals and a transporter. The appellants argued that proceedings should be deemed conclusive due to the payment made, citing relevant tribunal decisions. They also contended that no confiscation order meant no penalty could be imposed under Rule 26. The Revenue argued that penalties could still be levied based on knowledge of dealing with excisable goods. The judge noted that the invocation of Rule 26 was independent of Section 11A, and penalties were not automatically concluded by the main manufacturer's payment. The judge referred to previous tribunal and Supreme Court decisions to support this interpretation.The judge also analyzed the provisions of Section 11A and Rule 26 in detail. The judge highlighted that the proviso to Section 11A only concludes proceedings for those who have paid duty under sub-section (1A) or to whom notices under sub-section (1) have been served. The judge emphasized that the legislative intent did not extend immunity to all connected persons automatically. The judge further discussed a circular issued by the Board, clarifying that the payment by the main manufacturer did not necessarily stop proceedings against all persons involved. The circular provided an optional scheme for voluntary payment of duty and penalties to settle disputes early, but it did not mandate the conclusion of proceedings against all parties.In the final decision, the judge reduced the penalties imposed on the other individuals and the transporter, considering the role of the main appellants and the payment made by them. The penalties were reduced from Rs. 1 lakh to Rs. 75,000 on some individuals and from Rs. 25,000 to Rs. 20,000 on another individual. The appeals were disposed of based on these terms.