Director's penalty under Rule 26 overturned due to lack of evidence for clandestine supply and natural justice violations

CESTAT Ahmedabad allowed the appeal against penalty imposed under Rule 26 of Central Excise Rules, 2002. The appellant Director was charged with supplying raw materials clandestinely to another company for duty evasion. The tribunal found that revenue failed to establish clandestine removal as no specific quantity, value, or payment details were provided as evidence. The adjudicating authority violated natural justice principles by not cross-examining witnesses despite appellant's objections. Since no duty evasion was proven, the penalty for abetment was held unsustainable.

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Issues involved: Appeal against penalty imposed under Rule 26 of Central Excise Rules, 2002 for alleged abetment of evasion of Excise Duty.

Summary:
Issue 1: Settlement under Sab Ka Vishwas Legacy Dispute Resolution Scheme, 2019 (SVLDRS)
The appellant argued that since the main party involved had settled their case under SVLDRS, the penalty should be waived for all co-noticees, including the present appellant. It was contended that the procedural lapse of not applying for SVLDRS should not deprive the appellant of the waiver entitled to them.

Issue 2: Lack of evidence for clandestine supply
The appellant disputed the allegation of supplying raw materials clandestinely without issuing invoices. The appellant's representative cited various judgments to support their argument. The Tribunal noted that the statement of a partner of M/s. Silver Techno Cast did not specifically implicate the appellant's company in any clandestine activities. The lack of concrete evidence such as quantity, value, or payment for the alleged supplies weakened the case against the appellant.

Issue 3: Failure to cross-examine witnesses
The Tribunal highlighted the failure of the adjudicating authority to cross-examine the employee of the appellant's company, as required under Section 9 (d) of the Central Excise Act, 1944. Without proper cross-examination, the verbal admission of the employee could not be relied upon as conclusive evidence. The Tribunal concluded that the department failed to establish the case of goods removal without invoices, leading to the penalty being deemed unsustainable.

In conclusion, the Tribunal set aside the penalty imposed on the appellant, ruling in favor of the appellant and allowing the appeal.

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