Penalty on employees for excise and Cenvat irregularities was set aside when they acted only in official capacity.

Employees acting in managerial and excise-related roles were held not liable for penalty where they acted under superior instructions and the record showed no independent role in the manufacturer's alleged duty evasion or wrongful Cenvat credit availment. Applying earlier Tribunal decisions, the CESTAT held that mere performance of official functions does not attract penalty under the Central Excise Rules, 2002 or the Cenvat Credit Rules, 2004 absent pecuniary gain or separate culpable involvement. The penalties imposed on the appellants were therefore set aside.

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Issues: Whether penalty was imposable on employees of the manufacturer under Rule 26 of the Central Excise Rules, 2002 and Rule 15 of the Cenvat Credit Rules, 2004 for alleged evasion of duty and wrongful availment of Cenvat credit by the company.

Analysis: The appellants were found to be working as employees in managerial and excise-related capacities for the manufacturer and were acting under the instructions of their superior. The record did not show that they derived any pecuniary benefit or had independent involvement in the evasion beyond their official functions. Relying on earlier Tribunal decisions, the Tribunal accepted that employees carrying out orders in their official capacity do not become liable to penalty merely because the manufacturer committed the irregularity.

Conclusion: Penalty under Rule 26 of the Central Excise Rules, 2002 and Rule 15 of the Cenvat Credit Rules, 2004 was not sustainable against the appellants and was set aside.

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