2025 (3) TMI 499 - AT - Central Excise

Transporter penalty upheld under Rule 26(1) for clandestine removal despite claiming lack of awareness

CESTAT Ahmedabad dismissed the appeal against penalty imposed under Rule 26(1) of Central Excise Rules, 2002 for clandestine removal. The ... Levy of penalty u/r 26(1) of the Central Excise Rules, 2002 - clandestine removal - transporting excisable goods without proper invoices - case of appellant is that the Revenue failed to prove that appellant were aware that the goods in question, which were transported by them, were liable for confiscation and excise duty was not paid on those goods - HELD THAT:- Non-carrying of invoices does not lead to presumption that goods are liable for confiscation. According to him the transporters are not supposed to be experts or well conversant with the excise law. Therefore, the adjudicating authority and the learned Commissioner have wrongly presumed the collusion in this case between the manufacturer and the appellant which has no basis and the impugned order based on this reason is not sustainable. It is pertinent to note that the transporter, who is engaged in transportation of excisable goods cannot escape from their responsibility to ask for invoices from their client for the goods which they used to transport. In the case of Shri Ajay S. Singhal, Shri Sandesh T Bhingrade, Shri Amrit Kumar Chauhan vs. CCE, Vapi [2013 (9) TMI 654 - CESTAT AHMEDABAD], the Tribunal held so far imposition of penalty upon Shri Amrit K. Chauhan (Transporter) is concerned, it is the case of the appellant that he was not knowing that the goods cleared clandestinely by the main party were liable to seizure and confiscation under the Central Excise law. However, it is evident from his statement recorded during the course of investigation that entries made in the note pad maintained for clandestine removals showed the transportation made by him in all such clearances. It is admitted by him that he did not know the exact address and name of concern where the ingots were delivered as he had not issued any lorry receipts. It is also accepted by him that freight charged by him from the main party was received in cash. Therefore, the conduct and act of the transporter is not free from doubt as he was not maintaining any written records like lorry receipt, register etc. so that clandestine activities done by the main party could not be detected by any agency. Thus, no error has been committed by the adjudicating authority and the learned Commissioner in arriving at the conclusion that the appellant was very much aware of the clandestine removal being undertaken by M/s. Moonlight Tube Industries and the plea of the appellant cannot be accepted that he was not aware of clandestine removal by the main appellant. Conclusion - The appellant was liable for the penalty under Rule 26(1) due to their knowledge of the clandestine nature of the goods. Appeal dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal issue considered in this judgment is whether the appellant, a transporter, is liable for a penalty under Rule 26(1) of the Central Excise Rules, 2002, for knowingly transporting excisable goods without proper invoices, which were liable for confiscation. The Tribunal examined whether the appellant had knowledge of the clandestine nature of the goods and whether the imposition of the penalty was justified under the legal framework.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe legal framework revolves around Rule 26(1) of the Central Excise Rules, 2002, which imposes penalties on any person who is involved in dealing with excisable goods that they know or have reason to believe are liable for confiscation. The rule stipulates that such a person shall be liable to a penalty not exceeding the duty on such goods or Rs. 2,000/-, whichever is greater.The appellant relied on several precedents, including Perfect Transport Company vs. CCE and others, where it was held that a penalty could only be imposed if the transporter was aware that the goods were liable to confiscation.Court's Interpretation and ReasoningThe Tribunal interpreted Rule 26(1) to mean that a transporter must have knowledge or reason to believe that the goods are liable for confiscation to be penalized. The Tribunal disagreed with the appellant's argument that mere transportation without invoices does not imply knowledge of the goods' clandestine nature. The Tribunal emphasized that the appellant's manager admitted to transporting goods without Central Excise invoices, indicating awareness of the potential for confiscation.Key Evidence and FindingsThe Tribunal found that the appellant's manager admitted to transporting goods without proper invoices and under 'Kacha Challans,' which are informal documents not recognized under excise law. The Tribunal noted that this admission, along with the lack of formal records, suggested the appellant's awareness of the goods' clandestine nature.Application of Law to FactsThe Tribunal applied Rule 26(1) to the facts, concluding that the appellant's actions fell within the scope of the rule. The Tribunal held that the appellant's knowledge of the goods being transported without invoices and the use of informal documentation indicated complicity in the clandestine activities of the manufacturer.Treatment of Competing ArgumentsThe Tribunal considered the appellant's argument that transporters are not expected to be experts in excise law and that the absence of invoices does not automatically imply knowledge of illicit activities. However, the Tribunal rejected this argument, citing the manager's admission and the lack of formal documentation as evidence of the appellant's awareness.ConclusionsThe Tribunal concluded that the appellant was aware of the clandestine nature of the goods and upheld the penalty imposed under Rule 26(1). The Tribunal found no error in the adjudicating authority's decision and rejected the appeal.SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal ReasoningThe Tribunal emphasized, 'The transporter, who is engaged in transportation of excisable goods cannot escape from their responsibility to ask for invoices from their client for the goods which they used to transport.'Core Principles EstablishedThe judgment reinforces the principle that transporters are liable under Rule 26(1) if they knowingly transport goods liable for confiscation. It underscores the responsibility of transporters to ensure that goods are accompanied by proper documentation.Final Determinations on Each IssueThe Tribunal determined that the appellant was liable for the penalty under Rule 26(1) due to their knowledge of the clandestine nature of the goods. The Tribunal upheld the penalty, finding that the appellant's actions met the criteria for liability under the rule.