2026 (3) TMI 12 - AT - Central Excise

Penalty conditioned on confiscation: absent a confiscation proposal, personal penalties cannot be imposed on officers in tax proceedings.

Penalty under Rule 26 cannot be imposed on individual office-bearers where the show-cause notice contains no proposal for confiscation; the penalty regime ... Penalty under Rule 26 contingent on confiscation - personal penalty requires allegation of financial enrichment Penalty under Rule 26 contingent on confiscation - personal penalty requires allegation of financial enrichment - Penalty under Rule 26 of the Central Excise Rules, 2002 imposed on the individual respondents is unsustainable. - HELD THAT: - The show cause notice did not propose confiscation of the goods. Rule 26 permits imposition of penalty only where the goods are held liable for confiscation; absent any confiscation proposal, the statutory precondition for imposing penalty under Rule 26 is not satisfied. Further, the allegations against the individual respondents are confined to their official positions (Assistant General Manager and Director) and do not include any pleading or finding of personal financial enrichment arising from the alleged evasion. In those circumstances, personal penalty cannot be sustained. The Tribunal noted that the adjudication on classification and limitation as regards the manufacturer was remanded earlier, but that remand does not supply the missing statutory basis for penalising the individuals named in the show cause notice. [Paras 6, 7] The penalty imposed on the individual respondents is unsustainable and the Revenue's appeals are dismissed insofar as they seek imposition of penalty on those individuals. Final Conclusion: The Tribunal dismissed the Revenue's appeals insofar as they concerned imposition of penalty on the individual respondents, holding that absence of a confiscation proposal and absence of any allegation of personal financial enrichment precluded penalty under Rule 26. Issues: Whether penalty under Rule 26 of the Central Excise Rules, 2002 can be imposed on the individual respondents (Assistant Manager and Director) in the absence of a proposal for confiscation of goods.Analysis: The appeals relate to allegations that certain goods were clandestinely cleared without payment of duty and that the individual respondents participated in such clearances. The Tribunal has already remanded classification and demand issues for de novo adjudication in respect of the manufacturer; the question of extended limitation was left to be determined on remand. The present issue examined in detail is whether personal penalties under Rule 26 can be sustained against the individual respondents where the show cause notice does not propose confiscation of the goods. The Tribunal notes Rule 26 of the Central Excise Rules, 2002 conditions imposition of the penalty on the goods being held liable for confiscation; the show cause notice in this matter contains no proposal for confiscation and there is no pleading or finding of financial enrichment of the individual respondents by reason of the alleged evasion.Conclusion: Penalty under Rule 26 of the Central Excise Rules, 2002 is unsustainable against the individual respondents in the absence of any proposal for confiscation of goods; the Revenue appeals seeking imposition of penalty on the individuals are dismissed in favour of the assessee.