personal penalty on directors
Q : Whether penalty can be imposed on directors, when issue involved is one of interpretation of law and there is no loss to the revenue ?
Personal penalty under rule 26(1) of Central Excise Rules, 2002 cannot be imposed on directors, when issue involved is one of interpretation of law and entire situation is revenue neutral (i.e., duty paid would have been eligible as credit)
CESTAT, NEW DELHI BENCH
Commissioner of Central Excise, Delhi-III
FINAL ORDER NOS. A/54479-54480/2014-SM(BR)
APPEAL NOS. E/57213 & 57295/2013-EX(SM)
OCTOBER 28, 2014
Rule 26, read with rule 16B, of the Central Excise Rules, 2002 and rule 4 of the Cenvat Credit Rules, 2004
Subject : Penalty on persons dealing with goods liable to confiscation –
Facts of the Case :–
Assessee cleared metal scrap arising in course of its manufacturing process to job-workers without payment of duty .Job-worker converted it into ingots and assessee used ingots to make strips, which were used in manufacture of final product .
Department argued that metal scrap cleared to job-worker was not semi-finished goods and therefore, could not be cleared without payment of duty and raised demand of duty and also levied personal penalty on directors
HELD : [In favour of assessee]:-
Issue involved was of interpretation of law – Moreover, had scrap been cleared on payment of duty, job-worker would have been entitled to credit thereof and assessee would have been entitled to duty paid by job-worker, thus, making situation revenue neutral.
Hence, penalty under rule 26(1) could not be imposed on director and authorised signatory, as said penalty can be imposed only when person deals with goods, which he knew or had reason to believe are liable for confiscation [Para 6]