2017 (6) TMI 577 - AT - Central Excise

Tribunal overturns penalties on employees for excise duty evasion & Cenvat credit fraud

Shri Manohar Singh Rana, Shri Vijay Soni Versus Commissioner of Central Excise Customs, & Service Tax, Indore

The Tribunal set aside the penalties imposed on the appellants, Joint Managing Director and Manager (Excise), for evasion of Central Excise duty and ... Penalty u/r 26 of the CER and Rule 15 of CCR, 2004 - Held that: - the appellants namely, Shri Vijay Soni, Joint Managing Director and Shri M S Rana, Manager (Excise) are not responsible for evasion of duty of Excise including fraudulent availment of Cenvat Credit by the company M/s.MIL - these appellants were working merely as employees with the manufacturer assessee M/s. MIL - reliance placed in the case of O.P. Agarwal V/s CC, Kandla [2005 (4) TMI 326 - CESTAT, NEW DELHI] wherein it was observed that employees carrying out orders given to them are not liable to penalty - appeal allowed - decided in favor of appellant. Issues involved: Imposition of penalty under Rule 26 of Central Excise Rules and Rule 15 of Cenvat Credit Rules, 2004 on the appellants for evasion of Central Excise duty and fraudulent availment of Cenvat credit by the manufacturing company.Detailed Analysis:1. The appellants, Joint Managing Director and Manager (Excise) of the manufacturing company, were appealing against the penalty imposed on them under Rule 26 of Central Excise Rules and Rule 15 of Cenvat Credit Rules, 2004. The company was found involved in evasion of Central Excise duty and fraudulent availment of Cenvat credit. The appellants were directly involved in the day-to-day activities and affairs of the company, which led to the imposition of penalties on them.2. The appellants argued that they were merely employees following orders and had no personal interest in the company. They claimed they did not have knowledge of deliberate non-payment of duty or involvement in activities violating Central Excise Rules. They also contended that there was no evidence linking them to dealing in contraband excisable goods, thus challenging the basis for imposing penalties under Rule 26.3. After hearing both parties, the Tribunal found that the appellants, as employees of the manufacturing company, were not responsible for the evasion of excise duty or fraudulent Cenvat credit availment. The Tribunal referred to previous decisions where employees carrying out orders were not held liable for penalties. Citing cases like Z U Alvi v/s CCE and O.P. Agarwal v/s CC, the Tribunal emphasized that employees working under superiors cannot be penalized for the company's actions.4. Based on the above analysis and precedents, the Tribunal set aside the penalties imposed on the appellants, concluding that they were working as employees under the command of their superiors and did not personally benefit from the evaded duty. The impugned order was modified, and the appeals were allowed, in line with the Tribunal's decisions in similar cases.This detailed analysis outlines the issues involved in the legal judgment, the arguments presented by the appellants, the Tribunal's assessment based on legal precedents, and the final decision to set aside the penalties imposed on the appellants.