Director's penalty under Rule 26 set aside as no goods confiscated and CENVAT credit dispute involved interpretation

CESTAT Ahmedabad allowed the appeal and set aside penalty imposed under Rule 26 of Central Excise Rules, 2002 on the company director. The penalty was imposed following confirmation of CENVAT credit demand against the company for steel items. The tribunal held that penalty under Rule 26(1) cannot be imposed without confiscation of goods, and penalty under Rule 26(2) was not applicable as the case involved interpretation of CENVAT Credit Rules on input admissibility. The department failed to establish grounds for imposing penalty on the director.

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Issues:
1. Denial of CENVAT credit availed by the company.
2. Imposition of personal penalty on the director under Rule 26 of Central Excise Rules, 2002.
3. Appeal against the order dated 26.04.2017.

Analysis:

Issue 1: Denial of CENVAT Credit
The company was issued a show cause notice proposing to deny CENVAT credit availed on steel items and inputs used in immovable structures outside the factory. The Ld. Commissioner confirmed the demand of CENVAT credit and imposed a penalty on the Appellant. The company and the Appellant filed appeals before the Tribunal challenging the order.

Issue 2: Imposition of Personal Penalty
The Appellant argued that since there was no proposal for confiscation of goods in the show cause notice or the order, the penalty under Rule 26 could not be imposed. The Appellant also contended that the CENVAT credit was admissible based on various judgments, and therefore, the penalty was unjustified. The Tribunal noted that the penalty was imposed based on the confirmation of demand against the company, but since no goods were confiscated, Rule 26 could not be invoked. Additionally, the Tribunal found that the judgments cited by the Appellant supported the admissibility of CENVAT credit on similar materials, making the penalty unsustainable.

Issue 3: Appeal Against the Order
The Tribunal, after considering the submissions and perusing the records, set aside the penalty imposed on the Appellant. The Tribunal concluded that the department failed to establish a case for imposing penalty under Rule 26 on the Appellant, as the goods were not confiscated, and the CENVAT credit issue was supported by relevant judgments. Therefore, the appeal was allowed with consequential relief, and the penalty was overturned.

This judgment highlights the importance of establishing grounds for imposing penalties under specific rules and the relevance of legal precedents in determining the admissibility of credits. The Tribunal's decision focused on the lack of confiscation of goods and the applicability of previous judgments in supporting the Appellant's position regarding the CENVAT credit.

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