Tribunal Overturns Rs. 10 Lakhs Penalty for Finance Director Not Involved with Excisable Goods.

The Appellate Tribunal CESTAT Ahmedabad set aside the Rs. 10 Lakhs penalty imposed on the appellant under Rule 26 of the Central Excise Rules, 2002. The Tribunal determined that the appellant, a director in a finance company, was not involved with the excisable goods but was only connected to the discounting of cheques. The Tribunal emphasized that Rule 26 penalties apply only if the assessee dealt with the goods, which was not the case here. Citing a similar precedent, the Tribunal concluded that the penalty was unjust, allowing the appellant's appeal and pronouncing the decision in open court on 07.02.2023.

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Issues: Penalty imposition under Rule 26 of Central Excise Rules, 2002 in connection with fraudulent availment of advance licenses.

In the judgment delivered by the Appellate Tribunal CESTAT AHMEDABAD, the appellant was penalized with Rs. 10 Lakhs under Rule 26 of the Central Excise Rules, 2002. The appellant, a director in a finance company, argued that the penalty was unjust as the fraudulent activity was related to advance licenses and not the goods themselves. The appellant's counsel contended that the cheques discounting activity, which was the core issue, was an independent activity and the appellant was not involved in the source of funds for the cheques. It was highlighted that the appellant's role was limited to discounting cheques and not dealing with the goods in question. The appellant cited a previous case where a similar issue was decided in their favor by the Tribunal and subsequently upheld by the Gujarat High Court.

Upon reviewing the submissions from both sides and examining the records, the Tribunal analyzed Rule 26, under which the penalty was imposed. The rule specifies penalties for certain offenses related to excisable goods. The Tribunal noted that the penalty could only be imposed if the assessee had dealt with the goods in any manner. In this case, it was established that the appellant had no involvement with the goods but was only connected to the discounting of cheques. The Tribunal emphasized that the appellant's role in the fraudulent advance license case was limited to the financial aspect and not the goods themselves. Therefore, it was concluded that the penalty under Rule 26 could not be imposed on the appellant. The Tribunal also referenced a previous case with similar circumstances where the penalty was set aside in favor of the appellant.

In light of the above analysis and precedents, the Tribunal declared that the issue was no longer open to debate and set aside the penalty imposed under Rule 26. Consequently, the appellant's appeal was allowed, and the decision was pronounced in open court on 07.02.2023.

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