Demand of Excise Duty Valid as the Transaction Done without Payment of Duty: CESTAT reduces Penalty under Rule 26 [Read Order]

In a significant case, the Ahmedabad bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the demand for Excise duty is valid as the assessee was aware that the transaction was done without payment of duty and reduced the penalty under Rule 26.

Rajesh Mangal the appellant is working as DGM Finance with M/s. Electrotherm (India) Ltd. A case was made out under a common show cause notice dated 31.05.2010 against M/s. Electrotherm (India) Ltd wherein, Shri Rajesh Mangal, the present appellant was also made a party. There was an excise duty demand proposed against the company M/s. Electrotherm (India) Ltd for an amount of Rs. 1,30,14,009/- and a penalty under Rule 26 was proposed on the present appellant.

A show cause notice was adjudicated by Commissioner of Central Excise, Ahmedabad-I vide Order-In-Original against the said order, the present appellant was imposed with a penalty of Rs. 10 lacs in terms of Rule 26 of Central Excise Rules, 2002 therefore, the present appeal filed by the appellant.

Shri M.G. Yajnik, counsel appeared on behalf of the appellant submitted that as regards the main case of M/s. Electrotherm (India) Ltd the same has been settled under SVLDRS-2019 and the company has paid the duties as required under the scheme. Further stated that he has no role in the non-payment of duty by the company as the work related to the removal of goods was being handled by one Shri S.G. Pathak.

The two-member bench comprising Mr Ramesh Nair, Judicial Member and Mr C L Mahar, Technical Member observed that the major work related to the removal of goods is looked after by one Shri S.G. Pathak and the appellant’s statement was not recorded. The statements which he has given to the investigating officer is on behalf of the Director accordingly, such statement can be used against the Director only and not anyone else.

However, the appellant worked at DGM Finance ultimately all the transactions are finally booked in the books of accounts and for which the appellant is responsible as he was aware of the transaction made without payment of duty. The CESTAT held that “the appellant deserves leniency therefore, I reduce the penalty from Rs. 10 lacs to Rs. 1 lac.  Therefore, the impugned order in respect of the present appellant is modified to the above extent.”

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