Issue of wrong certificate does not attract penalty under Excise rule 26 or 27

Rajesh Singh Chauhan for the Appellant.

ORDER

1. Heard Sri Rajesh Singh Chauhan, learned counsel for the appellant.

2. This appeal questions the correctness of the impugned order of the Tribunal whereby it has been held that neither Rule 26 nor Rule 27 of the Central Excise Rules 2002 would be applicable so as to attract the penalty clause against the respondent for imposing a penalty of Rs. 50 Lacs on the ground that the respondent had in any way abetted the evasion of excise duty that was leviable on the firm of which he was the auditor and in whose favour he had issued a certificate with regard to the source of the amount that had been recovered during the said proceedings.

3. Sri Rajesh Singh Chauhan submits that in relation to the order passed by the Commissioner Central Excise vide order dated 23rd March, 2007 the trader had preferred an appeal before the Tribunal. The Tribunal vide its decision dated 12th August, 2011 had discussed this issue in Paragraph 5 of the order but had not extended any benefit of exonerating the respondent of his alleged abetment and liability so as to invoke the penalty clause under Rule 26 of 2002 Rules. The submission is that in the absence of any such finding the respondent was liable for such penalty which had already been imposed on him.

4. The respondent filed his own appeal which has given rise to the present second appeal. The Tribunal after taking notice of the aforesaid facts has independently now recorded a finding that Rules 26 and 27 are not attracted, inasmuch as, the respondent had no role in the alleged clearance of the goods without payment of excise duty and therefore in the absence of any such act or abetment the penalty imposed on the respondent was unjustified. The appeal was accordingly allowed against which the department has come up before this Court.

5. Sri Rajesh Singh Chauhan has invited the attention of the Court to Rule 26 and Rule 27 of the 2002 Rules that are extracted herein under for ready reference:—

“Rule 26. Penalty for certain offences. — (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 —

Rule 27. General penalty. – A breach of these rules shall, where no other penalty is provided herein or in the Act, be punishable with a penalty which may extend to five thousand rupees and with confiscation of the goods in respect of which the offence is committed.”

6. On the strength of aforesaid, Sri Rajesh Singh Chauhan submits that the respondent by his act of extending the benefit of a certificate had allowed the assessee to set up a defence of evasion of excise duty on goods coupled with a huge amount of cash that was recovered and went unexplained from the premises of the assessee.

7. The certificate in effect indicated that the said amount of huge cash was a sort of investment received from such investors which was not found to be correct by the Tribunal, and therefore the certificate was a false certificate which ultimately benefited the trader/assessee in setting up an explanation with regard to the evasion of excise duty. He therefore submits that such an act of issuance of a certificate during the course of the proceedings amounts to an abetment as per Section 26(2)(ii) and hence the imposition of penalty was justified.

8. Having considered the submissions raised, we find that in the appeal filed by the trader, the finding recorded by the Tribunal in its order dated 12th August, 2011 is categorically to the effect that the respondent cannot be said to have acted in a manner so as to hold him an abetter in relation to the commission of any alleged offence as described under Rule 26. It has also been found that the allegation which is being made against the respondent appears to be basically that of money laundering and the same is not subject to any penalty under Rule 26.

9. It is correct that the final relief of exempting the penalty imposed on the respondent had not been pronounced in the said order and it is for this reason that the respondent appears to have filed his separate appeal.

10. We find ourselves in agreement with the reasoning given in both the orders including the impugned order and so far as the issuance of the certificate by the respondent was concerned, that was not during the transaction of transporting, removing, depositing, keeping, concealing, selling or purchasing any excisable good. The certificate appears to have been obtained at the time of the proceedings that were initiated for the purpose of imposition of penalty and taking action against the trader. This therefore could not be described as an act to attract penalty under Rules 26 and 27, even though this may give a separate cause of action on the ground of money laundering or providing incorrect evidence in order to extend any benefit to the trader or the assessee. The penalty under Rules 26 and 27 therefore would not be attracted in the said background and accordingly we do not find any substantial question of law so as to entertain this appeal.

11. Penalty even otherwise could not have been imposed as the original liability itself was made subject matter of remand by the Tribunal itself in relation to the decision taken in the appeal filed by the trader. The said is stated to be under challenge in a second appeal before this Court but the same would not have any bearing on this issue keeping in view the reasons recorded hereinabove.

12. The appeal is dismissed with the aforesaid observations.