M/s Shri Balaji Casting And Anr. vs Commissioner Of CGST, Thane

Imposition of penalty under Rule 26 of the erstwhile Central Excise Rules, 2002 is the subject matter of present dispute. The appellants in these appeals have contended that the provisions of Rule 26 shall have the application only in the case of natural individual person and not on the artificial person such as, an incorporate company or a partnership firm. Thus, it has been stated in the appeal memorandum that imposition of penalty under Rule 26 ibid will not stand for judicial scrutiny.

The learned Advocate appearing for the appellants has relied upon the following judgments to strengthen the stand of the appellant that the penal provisions contained in Rule 26 ibid shall not be invoked in the case of partnership firm, the appellants herein-

(i) Meenakshi Ferro Ingots Pvt. Ltd. V. CCE, Pune-III-MANU/CM/0530/2016, 2016 (344) E.L.T. 1085 (Tri.-Mumbai);

(ii) Nasik Strips Pvt. Ltd. V. CCE, Nasik - MANU/CM/0304/2010 2008, (226) E.L.T. 410 (Tri.-Mumbai)

(iii) Homag India Pvt. Ltd. V. CCE, Bangalore-II - MANU/CB/0265/2017, 2017 (357) E.L.T. 1194 (Tri.-Bang.)

The learned AR appearing for the Revenue reiterates the findings recorded in the impugned order and also relied upon the following judgments to state and submit that since, the appellants had contravened the statutory provisions, Rule 26 ibid has been correctly invoked by the authorities below in support of imposition of penalty.

(i) Amritlakshmi Machine Works Vs. Commr. Of Cus. (Import), Mumbai (2016 (335) ELT 225 (Bom)

(ii) N. Chhittranjan Vs. CESTAT, Chennai (2017 (350) ELT 78 (Mad.)

(iii) Shree Labdhi Prints Vs. Commissioner of C. Ex. & S.T., Surat (2014 (308) 178 (Tri.-Ahmd.)

Heard both sides and perused the records.

Rule 26 of the Central Excise Rules, 2002 existed at the relevant time is extracted herein below:

"Rule 26 penalty for certain offences - 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."

On perusal of above statutory provision, it transpires that the penal provisions contained therein are applicable only in case of natural person and not for the artificial person namely the incorporated company or a partnership firm. Admittedly, in this case the appellants are the partnership firms. Since, they are not the natural persons, I am of the considered view that the provisions of Rule 26 cannot be invoked for imposition of penalty on them. I find that the issue arising out of the present dispute is no more res integara, in view of the judgments relied upon by the learned Advocate for the appellants. I find that this Tribunal in the case of Woodmen Industries Vs. Commissioner of Central Excise vide Order Nos. A/670/KOL/2003 dated 18.09.2003 (referred in MANU/CK/0163/2003) has dealt with the identical set of facts in context with imposition of penalty under Rule 26 ibid on the partnership firm and has held that penalty cannot be imposed on the firm and only the individual person is exposed to the penal consequences provided therein. Further, the Co-ordinate Bench of this Tribunal vide Order dated 20.04.2018 (Appeal No. E/86386/2017) has held that penalty under Rule 26 ibid can be imposed only on the individual person and not on the artificial person or company inasmuch as the goods are handled by a natural person and not by an artificial entity. I also find that similar views have also been expressed by this Tribunal in the orders relied upon by the learned Advocate for the appellant. The decisions relied upon by learned AR for Revenue are distinguishable from the facts of the present case. In the case of Amritlakshmi Machine Works (supra), the issue decided by the Hon'ble Bombay High Court is in context with imposition of penalty under Section 112(a) of the Customs Act, 1962 and not in relation to imposition of penalty under Rule 26 ibid. Similarly, in the case of N. Chittaranjan (supra), the subject matter of dispute was confined to the quantum of penalty imposed by the department in the adjudication order and not in context with the applicability of the provisions of Rule 26 ibid in case of a partnership firm. In the case Shree Labdhi Prints (supra), the Co-ordinate Bench of this Tribunal has dealt with the situation of imposition of penalty under Section 11AC of the Central Excise Act, 1944.

In view of the foregoing discussions, I do not find any merits in the impugned order, insofar as it has upheld imposition of penalty under Rule 26 ibid on the appellants. Accordingly, by setting aside the impugned order, the appeals are allowed in favour of the appellants to the extent of imposition of penalty only.

(Dictated and pronounced in the open Court)