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Judgment
These appeals are directed against the impugned order dated 18.10.2012 passed by the Commissioner (Appeals), Customs, Central Excise and
Service Tax, Indore, upholding confiscation of seized goods and imposition of penalty in the adjudication orders.
Brief facts of the case are that M/s. Taneja Iron and Steel Pvt. Ltd. (the appellant No.1) is engaged in the manufacture of spring assembly and
leafs (springs leafs) falling under Tariff Heading 7320 of the First Schedule to Central Excise Tariff Act, 1985. M/s. Taneja Brothers (the appellant
No.2) is engaged in the trading of goods manufactured by the appellant No.1. The Officers of Central Excise Headquarters Preventive Branch,
Indore visited the shop of the appellant No.2 on 09.03.2010 and during the course of verification, they came to know that the leaf springs valued at
Rs.25,44,508/- were lying in the shop of the appellant No.2. On the basis of investigation, show cause notices were issued to both the appellant No.1
and 2, proposing confiscation of goods under Rule 25 of the Central Excise Rules 2002 and for imposition of penalty under Rule 26 of the said rules.
Further, the SCN proposed imposition of penalty on appellant No.1 under Rule 25 of the said rules. The SCN were adjudicated vide the Order-in-
Original dated 31.01.2012, wherein the seized goods valued at Rs.25,44,508/- were confiscated under the provisions of Rule 25 of the rules with the
option to the noticee to redeem the confiscated goods on payment of fine of Rs.5.00 Lakhs. Further, penalty of Rs.1,50,000/- each was imposed on the
appellant No.1 & 2 under Rule 26 and 25 respectively of the Central Excise Rules, 2002. In appeal, the ld. Commissioner (Appeals) vide the impugned
order has upheld the adjudication order. Hence, these present appeals are before the Tribunal.
Ms. Aarthy Venkat, ld. Advocate appearing for the appellant submits that the show cause notice has not been properly issued inasmuch as Rule 25
is applicable to the producer/manufacturer, registered person of the warehouse or a registered dealer. According to the ld. Advocate, since the
appellant No.2 is not confirming to either of the categories mentioned in the said rule, order for confiscation of goods and for imposition of penalty is
not justified, since outside the scope and Purview of the said statutory provisions. To support her stand that Rule 25 of the Rules cannot be invoked,
the ld. Advocate has relied on the judgment of Hon’ble Delhi High Court in the case of Commissioner of Central Excise, Delhi-I vs. Balaji Trading
company and Others reported in 2013 (290) E.L.T. 200 (Del.). The ld. Advocate further submits that both the authorities below have not discussed as
to which of the clause enumerated in Rule 25 has the application in the case for confiscation of goods and for imposition of penalty. In this context, the
ld. Advocate has placed reliance on the judgment of Hon’ble Supreme Court in the case of Amrit Foods vs. Commissioner of Central Excise,
U.P. reported in 2005 (190) E.L.T. 433 (SC.). It is the submission of the ld. Advocate that once the goods are not liable for confiscation, the penalty
imposed under Rule 26 of the Rules on the appellant No.2 is not legal and proper. To substantiate her said submission, the ld. Advocate has relied on
the decision of this Tribunal in the case of Imran Khan vs. Commissioner of Central Excise, Meerut-I reported in 2013 (292) E.L.T. 239 (Tri. Delhi).
On the other hand, Shri.G.R. Singh, ld. D.R. appearing for the respondent reiterates the findings recorded in the impugned order and further submits
that since the goods were seized from the premises of appellant No.2, the order for confiscation is proper and imposition of penalty under Rule 25 on
the appellant No.1 and under Rule 26 on the appellant No.2 are justified. To support his said stand, the ld. D.R. has relied on the decision of this
Tribunal in the case of Interscape Vs. Commissioner of Central Excise, Jaipur reported in 2003 (157) E.L.T. 221 (Tri. - Del.), Sunil Juneja vs.
Commissioner of Central Excise, Jaipur reported in 2007 (218) E.L.T. 390 (Tri. Del.) , Lupin Laboratories Ltd. vs. Commissioner of Central Excise,
Mumbai-IV reported in 2007 (207) E.L.T. 465 (Tri. Mum.) and also the judgment of Madras High Court in the case of Shakti Textiles Corporation vs.
Collector of Central Excise, Madurai reported in 2000 (123) E.L.T. 222 (Mad.).
I have heard the ld. Counsel for both sides and perused the records.
The short question involved in this appeal for consideration by the Tribunal is as to whether the goods can be confiscated and penalty can be
imposed under Rule 25 ibid from a person who is not categorized under Rule 25 of the Rules for accomplishing the purpose; whether penalty can be
imposed under Rule 26, when the confiscation is not proper and justified. Rule 25 & 26 of the Central Excise Rules 2002 is extracted herein below:-
“RULE 25. Confiscation and penalty. â€" (1) Subject to the provisions of section 11AC of the Act, if any producer, manufacturer,
registered person of a warehouse [or an importer who issues an invoice on which CENVAT credit can be taken] or a registered dealer,-
(a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or
(b) does not account for any excisable goods produced or manufactured or stored by him; or
(c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate
required under section 6 of the Act; or
(d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty, then,
all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse [or an importer who
issues an invoice on which CENVAT credit can be taken] or a registered dealer, as the case may be, shall be liable to a penalty not
exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or
clause (c) or clause (d) has been committed, or [five thousand rupees], whichever is greater.
(2) An order under sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice.
RULE 26. Penalty for certain offences. â€" [(1)] 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.
[(2) Any person, who issues â€
(i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or
(ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has
taken any ineligible benefit under the Act or the rules made thereunder like claiming of CENVAT credit under the CENVAT Credit Rules,
2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.]â€
On perusal of Rule 25 ibid, it reveals that the provisions contained therein can be invoked against the persons namely, producer, manufacturer,
registered person of warehouse, registered dealer. In the present case, the appellant No.2 is not confirming to any of the category of persons
mentioned in the said rule. Thus, in my view, the provisions of Rule 25 cannot be invoked against appellant No.2 for confiscation of goods. Similarly,
Rule 26 of the said rules also cannot be invoked for imposition of penalty in view of the fact that the goods were not liable for confiscation under Rule
25 of the said rules. Since the goods are not liable for confiscation, the appellant No.1 cannot be fastened with the liability for payment of penalty
under Rule 25 of the said rules.
The Hon’ble Delhi High Court in the case of Balaji Trading Company (supra), while interpreting the provisions of Rule 25 have held that
penalty can be imposed only on the category of persons spelt out in Rule 25 and the same cannot be imposed on any other person. The relevant
paragraph in the said judgment is extracted herein below:-
“5. The Tribunal, however, allowed the appeals of the respondents by holding that Rule 25 does not apply fo the respondents as it was
not the case of the prosecution that the respondents were producers, manufacturers, registered persons of a warehouse or registered
dealers. It is pertinent to note that Rule 25(1) specifically mentions four categories of persons :- (a) producer; (b) manufacturer; (c)
registered person of a warehouse; or (d) a registered dealer. These four categories of persons are also mentioned at the end of Rule 25,
where the liability of penalty has been spelt out. It is, therefore, clear that the penalty can be imposed on such persons only. The
respondents are neither producers nor manufacturers of the said Prabhat Zarda nor are they the registered persons of a warehouse in
which the said zarda had been stored. The respondents are also not the registered dealers. That being the case, no penalty can be imposed
on the said respondents. The Tribunal has come to the correct conclusion, particularly, as it was not the case of the prosecution that the
respondents fell within any one of the four categories of persons mentioned above.â€
Since the show cause notices in this case have not been properly issued to the persons to whom the same were required to be issued, imposition of
penalty under Rule 25 and Rule 26 is not justified in the circumstances of the present case. In this context, I rely on the judgment of the Hon’ble
Supreme Court in the case of Amrit Foods(supra), the relevant paragraph of the said judgment is extracted below:-
“5. The Revenue has preferred an appeal from the order of the Tribunal setting aside the imposition of penalty under Rule 173Q of the
Central Excise Rules, 1944. The Tribunal has set aside the order of the Commissioner on the ground that neither the show cause notice nor
the order of the Commissioner specified which particular clause of Rule 173Q had been allegedly contravened by the appellant. We are of
the view that the finding of the Tribunal is correct. Rule 173Q contains six clauses the contents of which are not same. It was, therefore,
necessary for the assessee to be put on notice as to the exact nature of contravention for which the assessee was liable under the provisions
of the 173Q. This not having been done the Tribunal’s finding cannot be faulted. The appeal is, accordingly, dismissed with no order as
to costs.â€
The decision cited by the ld. D.R. are distinguishable from the fact of the present case inasmuch as the manufacturer M/s. Interscape (supra) was
proceeded against for confiscation of goods and for imposition of penalty; whereas in the present case the proceedings have been initiated against the
trader for confiscation of goods. Similarly, the decision of Lupin Laboratories cited by the ld. D.R. is not applicable to the facts of the present case,
since there was no specific mention in the decision as to whether the appellant therein was conforming to the person mentioned in erstwhile Rule
173Q or not. Moreover, this particular issue as to whether the provisions of the present Rule 25 (erstwhile Rule 173Q of Central Excise Rules, 1944)
can be applicable to the persons not categorized in the said rules, the matter has been dealt with adequately by the Hon’ble Delhi High Court in
the case of Balaji (supra). Further, the judgment of Hon’ble Madras High Court in the case of Shakti Textiles Corporation relied on by the ld.
D.R. is not applicable to the facts of the present case in as much as in the said decided case, Rule 173 Q has not been invoked for confiscation and
imposition of penalty.
In view of the foregoing, I am of the opinion that order for confiscation of seized goods under Rule 25 and imposition of penalty under Rule 26 of
the rules on the appellant No.2 is not proper and justified and also penalty imposed on the appellant No.1 under Rule 25 is also not proper. Therefore, I
do not find any merits in the impugned order, and thus, the appeals filed by the appellant are allowed.
[Dictated and Pronounced in the Open Court…]