The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) of the Allahabad bench has ruled that Rule 26 of the Central Excise Rules does not apply to non- functional directors and held that the penalty not sustained
Sh. Vineet Kumar Singh, Advocate appeared for the appellants and Sh. Shashi Shekhar, Authorised Representative appeared for the respondent.
A search was conducted by the Officers of the Directorate General of Central Excise Intelligence (DGCEI) on 26.09.2007 at the premises of Musk Tobacco (India) Pvt. Ltd., (MUSK). During the search in the factory of M/s Musk Tobacco, the officers found 15000 loose cigarettes of the “Perfect” Brand, value of Rs.4,000/-, unaccounted and the same were seized. The officers also seized a certain quantity of cigarettes from a few other places under the belief that the same has been cleared without payment of duty by M/s Musk Tobacco.
The two appellants contended that they had no concern with the activities of M/s Musk Tobacco, particularly cigarette manufacturing, as they resigned from the Directorship much before the commencement of the manufacture of cigarettes and there was no specific allegation against these appellants in the show cause notice.
It was alleged that the penalty under Rule 26 was mechanically imposed on appellants, treating them to be Directors during the disputed period without application of mind.
It was observed that even during the period when these appellants were Directors in M/s Musk Tobacco, they were practically non-functional Directors, not looking after day-to-day activities. The Tribunal found that the appellant is neither a Director nor an employee of M/s Musk Tobacco.
A Coram comprising Mr Anil Choudhary, member (judicial) and Mr P V Subba Rao, member (technical) held that the appellant is also not liable to penalty under Rule 26 of Central Excise Rules as he has not done nor has been concerned in transporting, removing, depositing, keeping, concealing, etc., of excisable goods and set aside the penalty imposed on this appellant.
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