The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) held that employees of principal manufacturers cannot be penalized for excise duty-related lapses by job workers unless there is direct involvement.
The appellants included Abbas Rangwala ( Plant Accounting Manager of Cargill India Pvt. Ltd ), Santosh Khandelwal ( Senior Manager of Accounts at Ruchi Soya Industries Ltd ), and Anilkumar P. Jain ( Authorized Signatory of Paras Trading Company ). The penalties arose from confusion regarding excise duty liability on goods manufactured on a job-work basis.
Paras Trading Company argued that it believed goods manufactured on a job-work basis were exempt from duty. This belief started from conflicting judgments at the time, later it was resolved in the Thermax Babcock & Wilcox Ltd. case (2018) which clarified that job workers are liable for excise duty payments.
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The appellant’s counsel argued that they had no direct involvement in excise duty compliance and acted in good faith. They submitted that all transactions were legitimate and properly documented, and there was no evidence of fraudulent intent or clandestine removal of goods.
The single-member bench comprising Ramesh Nair ( Judicial Member ) observed that employees of principal manufacturers are not responsible for duty compliance of job workers. It further observed that no penalties were imposed on the companies themselves so their employees could not be held liable.
The tribunal explained that the confusion regarding duty liability at the time was genuine and that the transactions conducted by Paras Trading Company were legitimate and documented. The tribunal also found no evidence of any mala fide intention by the job worker.
So, the tribunal ruled that penalties imposed under Rule 26 of the Central Excise Rules, 2002, were unwarranted and set them aside. The appeals filed by the appellants were allowed, granting them consequential relief.
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