2009 (11) TMI 477 - HC - Central Excise

Tax Appeal Dismissed: Subordinate Role, Limited Authority Lead to No Penalties

The Court dismissed the Tax Appeal challenging the setting aside of a personal penalty under Rule 209A of the Central Excise Rules. Despite the ... Penalty - Whether, in the facts and circumstances of the case, the tribunal is justified in setting aside the personal penalty imposed on the respondent under Rule 209A of the Central Excise Rules, 1944 presently Rule 26 of the Central Excise Rules, 2002 despite the respondent having admitted to have knowingly concerned himself in the illicit and clandestine production, non accountal and removal of excisable goods and evasion of Central Excise duty and having admitted to the commission of the contravention and offences under the Act and the Rules on the directions of the Chairman cum Managing Director of the assessee? Held that - respondent only a excise clerk having four years service when alleged clandestine removal took place. Statement of respondent that he was acting as per instructions of managing director. Penalty imposed was ₹ 25,000/-. Case of present respondent distinguishable from that of MD. Question of law not formulated and appeal dismissed. Issues:- Justification of setting aside personal penalty under Rule 209A of Central Excise Rules despite admission of involvement in illicit activities.- Bar on issuing show cause notice after six months.- Distinction in penalty imposition based on role and involvement in the illicit activities.Analysis:1. The Central Excise department filed a Tax Appeal under Section 35(G) of the Central Excise Act, 1944, questioning the setting aside of a personal penalty under Rule 209A of the Central Excise Rules, 1944 (now Rule 26 of the Central Excise Rules, 2002). The issue at hand was whether the tribunal was justified in nullifying the penalty despite the respondent admitting to knowingly engaging in illicit production, non-accounting, and removal of excisable goods, along with evading Central Excise duty, all under the direction of the company's Chairman cum Managing Director.2. The Senior Standing Counsel for the Excise Department argued that the CESTAT's decision to set aside the penalty was based on the delayed issuance of the show cause notice, which was beyond six months from the date of the officers' visit and completion of the investigation. This delay led to the notice being deemed time-barred according to various precedents cited by the CESTAT. The Counsel highlighted that similar appeals against the company and its Managing Director had already been admitted by the Court.3. Regarding the respondent, who was an Excise Clerk with four years of service during the incident, it was noted that he admitted following instructions from the Managing Director, resulting in a penalty of Rs. 25,000. The Court differentiated his case from that of the Managing Director, emphasizing the respondent's subordinate role and lack of significant authority or decision-making power within the company.4. After considering the arguments and reviewing the lower authorities' orders, the Court concluded that the respondent's case did not warrant the framing of a substantial question of law. Given the respondent's limited involvement and subordinate position compared to the Managing Director, the Court found no justification for admitting the appeal or formulating the proposed substantial question of law.5. Consequently, the Court summarily dismissed the appeal, maintaining that the circumstances did not merit further legal examination or the imposition of additional penalties on the respondent based on his subordinate role and actions as an Excise Clerk following instructions from superiors.