Demand of excise duty is valid if the Assessee was aware that the transaction was done without the payment of duty

The CESTAT has ruled that an excise duty demand is valid if the assessee was aware that goods were transacted without paying the required duty. While the penalty initially imposed on an individual was reduced, the tribunal emphasised that knowledge of non-payment is key. The case involved a finance executive who argued he wasn't involved in duty evasion, but the tribunal found he had ultimate responsibility for booking transactions and was aware of the duty status.

The CESTAT, Ahmedabad in Rajesh Mangal v. C.C.E. & S.T.-Ahmedabad-III [Excise Appeal No. 11712 of 2013-DB dated June 15, 2023] held that the demand for Excise Duty would be valid if the Assessee was aware that the transaction was done without the payment of duty and subsequently reduced the penalty imposed under Rule 26 of the Central Excise Rules, 2002 ("the CE Rules"). 

Facts

Rajesh Mangal ("the Appellant") was working as DGM finance with M/s Electrotherm (India) Ltd ("the Company"). 

A Show Cause Notice dated May 31, 2010 ("the SCN") was issued by the Revenue Department demanding excise duty of INR 1,30,14,009/- from the Company and a penalty of INR 10 lacs was demanded from the Appellant under Rule 26 of the CE Rules, which was adjudicated by the Commissioner of Central Excise who vide Order-In-Original confirmed the penalty however, the demand of excise duty was settled under SVLDRS-2019.

Aggrieved by the order the Appellant filed an appeal before the CESTAT.

The Appellant reiterated the case that the demand before the Company had been settled under SVLDRS-2019 and the Company had paid the duties as required under the scheme and the Appellant had no role in alleged non-payment of duty since, the work related to the removal of goods was handled by another person and as the Appellant was not involved in the case of evasion of duty so penalty cannot be imposed on the Appellant.

Issue

Whether the Appellant is liable to penalty under Rule 26 of the CE Rules if the transaction of removal of goods was done without payment of duty?

Held

The CESTAT, Ahmedabadin Excise Appeal No. 11712 of 2013-Bheld as under:

• Observed that, the demand for excise duty was valid as the transaction of movement of goods was undertaken, knowingly without the payment of excise duty.
• Observed that the Appellant had the ultimate responsibility of booking all the transactions and was aware that the transaction was made without the payment of duty.
• Noted that, the Appellant has placed reliance on multiple case, however, the court was of the view that the penalty under Rule 26 of the CE Rules is to be dealt with respective facts.
• Reduced, the penalty from INR 10 lacs to 1 Lacs.