2025 (3) TMI 1341 - AT - Central Excise

Managing Director not personally liable for company's excise duty mis-declaration without proof of direct involvement in suppression

Shri. Dinesh Shahra, Managing Director, M/s. Ruchi Soya Industries Ltd. Versus Commissioner of Central Excise and Service Tax, Mangalore

CESTAT Bangalore set aside penalty imposed on Managing Director under Rule 26 of Central Excise Rules, 2002 for company's mis-declaration of manufactured ... Levy of penalty on Managing Director u/r 26 of Central Excise Rule, 2002 for the omission on the part of the company in mis-declaring the goods manufactured by them - HELD THAT:- It is found that other than being the Managing Director of M/s. Ruchi Soya Industries Ltd., there is no direct involvement of the appellant and there is no allegation regarding his personal involvement. The penalty was imposed only on the ground that the Managing Director is ultimately responsible for all the affairs of the company and hence, he is also liable to be penalized. There are strong force in the contention raised by the appellant that there is no finding showing involvement of the appellant in mis-declaring the goods. Moreover, the issue is on classification of goods and as submitted by appellant during the investigation, the aspect of payment of central excise duty, classification etc., cannot be held as the personal responsibility and being the Managing Director, it cannot be alleged that he is personally involved without substantial evidence regarding his active involvement in the alleged suppression of facts. Conclusion - The imposition of a penalty on the appellant under Rule 26 of the Central Excise Rules, 2002, was unsustainable due to the lack of evidence of personal involvement. Appeal allowed. ISSUES PRESENTED and CONSIDEREDThe primary issue in this appeal was whether the appellant, as the Managing Director of M/s. Ruchi Soya Industries Ltd., is liable for a penalty under Rule 26 of the Central Excise Rules, 2002, due to the company's alleged mis-declaration of goods to evade central excise duty.ISSUE-WISE DETAILED ANALYSISRelevant Legal Framework and PrecedentsThe case revolves around the application of Rule 26 of the Central Excise Rules, 2002, which deals with penalties for individuals involved in the evasion of duty. The appellant's liability is questioned based on his role as the Managing Director and the extent of his involvement in the alleged mis-declaration of goods.Court's Interpretation and ReasoningThe Tribunal examined whether the appellant had any direct involvement in the mis-declaration of goods. The Tribunal noted that the penalty was imposed on the appellant solely due to his position as Managing Director, without evidence of his personal involvement in the alleged activities. The Tribunal emphasized that the mere position of Managing Director does not automatically imply personal liability without substantial evidence of active involvement.Key Evidence and FindingsThe Tribunal reviewed the records and noted the lack of evidence indicating the appellant's personal involvement in the mis-declaration. The Tribunal highlighted that no statement was recorded from the appellant, and his absence from personal appearances was noted. The Tribunal found that the Assistant Manager's statement, which was binding on the company, did not implicate the appellant personally.Application of Law to FactsThe Tribunal applied Rule 26 of the Central Excise Rules, 2002, to assess whether the appellant's actions or omissions warranted a penalty. The Tribunal concluded that without evidence of personal involvement, the imposition of a penalty solely based on the appellant's position was unjustified.Treatment of Competing ArgumentsThe appellant argued that the penalty was based on assumptions and lacked evidence of his involvement. The Tribunal found merit in this argument, noting the absence of evidence linking the appellant to the alleged mis-declaration. The respondent's position that the appellant was responsible due to his role was not supported by evidence of personal involvement.ConclusionsThe Tribunal concluded that the imposition of a penalty on the appellant under Rule 26 of the Central Excise Rules, 2002, was unsustainable due to the lack of evidence of personal involvement. The Tribunal set aside the penalty, allowing the appeal with consequential relief as per the law.SIGNIFICANT HOLDINGSThe Tribunal held that mere designation as Managing Director does not automatically entail liability under Rule 26 of the Central Excise Rules, 2002, without evidence of personal involvement. The Tribunal stated, 'there is no finding showing involvement of the appellant in mis-declaring the goods.' This principle underscores the necessity of substantial evidence for personal liability in cases of alleged duty evasion.The final determination was that the penalty imposed on the appellant was unsustainable, and the appeal was allowed, setting aside the penalty under Rule 26 of the Central Excise Rules, 2002.