TaxTMI 
TaxTMI 
2024 (5) TMI 1053
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.... the First schedule of the Central Excise Tariff Act, 1985. The appellants have placed various purchase orders for purchase/replication of CDs of different titles. The purchase orders placed by the appellants with the manufacturer M/s KRCD (India) Pvt. Ltd. inter alia indicated that the prices are inclusive of excise duty as a part of the terms and conditions of such supply. However, M/s KRCD (India) Pvt. Ltd. did not pay central excise duty and cleared the goods without payment of applicable duty. Based on information, necessary inquiry was conducted by the Department and show cause proceedings were initiated against M/s KRCD (India) Pvt. Ltd. and the appellants for demand of central excise duty and imposition of penalty on the manufacturer as well as on the appellants, as co-Noticee, under Rule 26 ibid. Upon adjudication of the same, the learned Commissioner had confirmed the adjudged demands proposed in the SCN dated 29.12.2011 and imposed penalties on the notices viz., M/s KRCD (India) Pvt. Ltd., Shri R. Agarwal, Director of M/s KRCD (India) Pvt. Ltd., M/s Zapak Digital Entertainment Ltd. and M/s Red Hat India Private Limited. As against the confirmation of adjudged demands aga....
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....pak Digital Entertainment Ltd. being large structured corporate entity having Licensor in USA it was their obligation to educate the replicators about the liability to pay central excise duty on 'Packaged Software' marketed by them especially when the software CDs were received by them in duly packed ready to sell condition (a fact confirmed by the statements of Shri Vaibhav Odhekar, Associate Vice President of M/s Zapak Digital Entertainment Ltd. , recorded on 30.07.2009, 31.07.2009 and 25.03.2011, Shri Narendra Kamat, Chief Financial Officer of M/s Zapak Digital Entertainment Ltd., recorded on 14.09.2009, 28.07.2010 and 14.11.2011.) (2) The purchase orders of M/s Zapak Digital Entertainment Ltd. did not mention anything about Central Excise duty payment and this fact made it convenient for M/s KRCD to evade payment of Central Excise duty. Therefore, they have rendered themselves liable for penalty under rule 26 of the said Rules." 6.2 The above proposal for imposition of penalty against the appellants was decided by the learned Commissioner in the following manner: - "61. As regards to the penalty proposed on Shri Rajiv G. Agarwal. Director of M/s KRCD., M/s Zapak and M....
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....ule 26 of the Central Excise Rules. 2002. The contentions made by Shri Rajiv G. Agarwal, M/s Zapak Digital Entertainment Limited and M/s Red Hat India Private Limited with regard to penalty proposed on them are not tenable for the reasons mentioned above. Even the ease laws cited do not support the case. xx xx xx xx xx (6) I impose penalty of Rs.5,00,000/- (Rupees five lakhs only) on M/s Zapak Digital Entertainment Ltd. under the provisions of Rule 26 of the Central Excise Rules, 2002." 7. From the above, I find that the issue for decision in the present appeal is to determine whether the penalty under Rule 26 of the Central Excise Rules, 2002 can be imposed on the appellants as company. In this regard, the legal provisions under Rule 26 ibid is extracted and reproduced as under: - "RULE 26. - (1)Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or [two thousand ....
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....llants with the manufacturer- M/s KRCD (India) Pvt. Ltd., specifically stated that the prices contracted for supply are inclusive of Excise duty by mentioning condition No.4 of the Terms and Conditions as: "Taxes - Inclusive of all Excise and any other levies/cesses applicable". Thus, on the basis of the facts of the present case, I do not find it appropriate to impose penalty under Rule 26 ibid on the appellants. 8.2 Further, in the present case, the appellants are not the person, who are issuing excisable invoices for the CDs/DVDs. The only allegation on the appellants is that they did not verify the payment of excise duty in the invoice. It is seen from the contract entered with M/s M/s KRCD (India) Pvt. Ltd., that the price is inclusive of all excise duty and other taxes. Inasmuch as the appellants have specifically indicated in contract that the price is inclusive of excise duty, there does not appear to be any ground for the appellants to believe that the DVDs or CDs have been supplied without payment of excise duty. Thus, on the above basis also, the imposition of penalty under Rule 26 is not sustainable. 9.1 In this regard, I find that the issue is no more in dispute as i....
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....Excise Rules, 1944 wherein it has been held that '9. As regards the second issue in reference it can be noticed that the Rule 209A pre-supposes a knowledge as to the liability of the confiscation of the goods which being transported etc. It was argued extensively by the authorized representative for the department that the expression "Any person" would include any company or association or body of individual, whether incorporated or not. Reliance was also placed on the definition of the word person in Section 3(42) of The General Clauses Act, 1897, for this proposition. Undoubtedly the expression "Any person" would include a natural and unnatural person i.e. it would include in its ambit any company or corporation or body of individual/s. The moot question is that whether such unnatural body corporate has its own mind, to have knowledge that the goods are liable for confiscation. It is common knowledge that a corporation/company is run by a Board of Directors, who are individuals. They are the trustees of the shareholders of the corporation/company. The decisions taken by the Board of Directors would be for the company but it will not be a decision of the corporation/company. In....