Penal Provision of Central Excise Rules not to be Invoked against Company Accountants: CESTAT [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that the penal provision of the Central Excise Rules, 1944 are not to be invoked against the company accountant.

The department formed a view that assessee namely M/s. Raipur Manufacturing Co. Ltd has not valued the captively consumed yarn properly as they have failed to include the expenses such as bonus, gratuity, interest and marketing expenses and in the cost of yarn which has been used captively.

A demand cum show cause notice was issued on 24.09.1999 demanding Central Excise duty of Rs. 1 crore. The penal provision under 173 Q (1) of the Central Excise Rules has also been invoked. The penal provision under Rule 209 A of Central Excise Rules has also been invoked against the appellant Nitin M Dhandhukia and a penalty of Rs. 5 lakhs have been imposed on the appellant under Rule 209 A of Central Excise Rules, 1944.

The Advocate appearing on behalf of the Appellant contended that the issue of inclusion of expenses such as Bonus, Gratuity, Interest and Marketing Expenses has already been settled in favour of the assessee by the Tribunal in the case of M/s. Asoka Spintex and in the case of M/s. Asarwa Mill.

It was also argued that the provision of Rule 209 A of the Central Excise Rules, 1944 cannot be invoked against the appellant as he was working as an employee and looking after the accounts work only and was in no way concerned with the physical movement of raw-material or finished goods. The Counsel also stated that if there is no proposal to confiscate the goods in the show cause notice, the provision of Rule 209 A of the Central Excise Rules, 1944 cannot be invoked.

From the plain reading of the Rule 209 A of Central Excise Rules that the person who is to be penalized under this provision needs to have physically dealt with the dutiable goods and have done certain acts which have made the subject goods liable for confiscation.

A Single Bench of CL Mahar, Technical Member observed that “, I find that the appellant was only an accountant who was doing normal accountancy work. The issue of valuation of captively consumed yarn is a matter of the interpretation and therefore the penal provision of Rule 209 A of Central Excise Rules, 1944 cannot be invoked against the person who is only involved in maintaining the accounts of the company.”

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