R.K. Agarwal vs Commissioner of C. Ex., Meerut-II

Alok Singh, J.—Petitioner R.K. Agarwal was, at the relevant time, working as Deputy General Manager (Finance) in M/s. Kashipur Sugar Mills Ltd., Kashipur while petitioner S.K. Bhatnagar was, at the relevant time, working as whole time Director of M/s. Kashipur Sugar Mills Ltd., Kashipur. Both the petitioners feeling aggrieved by the impugned order dated 23-10-2009, passed by the Commissioner, Central Excise, Commissionerate Meerut-II have filed present writ petitions. M/s. Kashipur Sugar Mills Limited, in view of the Notification No. 50/2003-C.E. , dated 10-6-2003 applied for exemption of the Central Excise saying manufacturing capacity of the unit has been increased by 25 per cent.

Learned Commissioner, Central Excise, vide impugned order, was pleased to observe that routine maintenance and renovation or repair would not amount to enhancement of the manufacturing capacity, therefore, was pleased to impose the Excise duty against M/s. Kashipur Sugar Mills Ltd.

While doing so, learned Commissioner was further pleased to impose personal penalty of Rs. 10,00,000/- against Mr. S.K. Bhatnagar and personal penalty of Rs. 2,00,000/- against Mr. R.K. Agarwal by invoking Rule 26 of the Central Excise Rules, 2002.

Rule 26 of the Central Excise Rules, 2002 reads as under:

"26. Penalty for certain offences : (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 rupees, whichever is greater.

(2) Any person, who issues-

(i) an Excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or

(ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of Cenvat credit under the Cenvat Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater."

Perusal of sub-rule (1) of Rule 26 of the Rules would demonstrate that 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 rupees, whichever is greater.

Sub-rule (2) of Rule 26 demonstrates that any person issuing the Excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or such document is used to take any ineligible benefit under the Act or the Rules made therein shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.

Undisputedly, petitioners are not guilty of issuing any Excise duty invoice without delivery of the goods nor such invoice was used to take ineligible benefit under the Act or the Rules nor both the petitioners were found guilty in transporting, removing or depositing any excisable goods, which were liable to be confiscated. On the other hand, both the petitioners, raised the legal claim pursuant to the Notification No. 50/2003-C.E. , dated 10-6-2003. Therefore, taking the legal ground, which subsequently found not to be available to the unit would not permit the invocation of Rule 26 of 2002 Rules. Therefore, personal penalty imposed against both the petitioners is beyond the scope of Rule 26. Hence, both the petitions are allowed. Impugned orders qua the imposition of personal penalty against the petitioners stand quashed.