Case Law Details
Anil Dudalal Kaneria Vs C.C.E (CESTAT Ahmedabad)
Introduction: Discover the recent ruling by CESTAT Ahmedabad in the case of Anil Dudalal Kaneria vs C.C.E.-Bharuch [Excise Appeal No.10079 of 2019]. The case revolves around the imposition of a significant penalty on the Chairman of a company for alleged failure in accounting for manufactured goods. The penalty was later reduced from INR 5 Lacs to INR 1 Lac.
Detailed Analysis: Anil Dudalal Kaneria, the Chairman of M/S Kaneria Granito Ltd., faced a Show Cause Notice (SCN) from the Revenue Department for failing in proper accounting of manufactured goods. The department alleged non-reply to the SCN and imposed a penalty of INR 5 Lacs under Rule 26 of the Central Excise Rules, 2002.
The Respondent argued that excess goods found in the company’s premises were intended for clandestine removal without duty payment, leading to confiscation. The issue raised was whether a penalty on the Chairman for inadequate accounting of finished goods was justifiable.
CESTAT Ahmedabad, in Excise Appeal No.10079 of 2019, made the following key observations:
The allegation of goods being kept for clandestine removal lacked supporting evidence.
A huge personal penalty cannot be imposed on the Chairman, especially when not overseeing accounts.
The only lapse was the failure to ensure proper accounting, warranting a token penalty.
The order was modified, reducing the penalty from INR 5 Lacs to INR 1 Lac. The decision emphasized the need for evidence and proportionality in imposing penalties.
Conclusion: CESTAT Ahmedabad’s decision in Anil Dudalal Kaneria vs C.C.E. highlights the importance of substantiated claims and proportional penalties. The ruling underscores that imposing a substantial penalty on a company’s Chairman requires clear evidence of involvement and a proportional response. This case sets a precedent for similar situations where accountability for accounting lapses is assessed.
This article provides a detailed analysis of the CESTAT Ahmedabad decision in Anil Dudalal Kaneria vs C.C.E., where a penalty imposed under Rule 26 was reduced from INR 5 Lacs to INR 1 Lac. The case emphasizes the significance of evidence and proportional penalties in excise appeals involving the Chairman’s responsibility for goods accounting.
The CESTAT, Ahmedabad in Mr. Anil Dudalal Kaneria v. C.C.E.-Bharuch [Excise Appeal No.10079 of 2019] has held that a huge personal penalty cannot be imposed on the Chairman of the Company who is not looking after the accounts of the goods manufactured. Further, reduced the penalty of INR from 5 Lacs to INR 1 Lacs for failure in ensuring proper accounting of the finished goods.
Facts:
Mr. Anil Dudalal Kaneria (“the Appellant”) is the Chairman of M/S Kaneria Granito Ltd. (“the Appellant’s Company”).
The Revenue Department (“the Respondent”) issued a Show Cause Notice (“SCN”) to the Appellant for alleged failure in proper accounting for the manufactured goods . Further, it has been alleged that there was no reply from the Appellant w.r.t. to the SCN and accordingly, the Respondent imposed a redemption fine and penalty of INR 5 Lacs on the Appellant as per Rule 26 of Central Excise Rules, 2002 ( “the Central Excise Rules”)
The Appellant has filed this appeal against the confirmation of imposition of a penalty of INR 5 lakhs by the Respondent.
The Respondent contended that the goods found in excess in premises of the Appellant’s Company were kept for clandestine removal which was without payment of duty. Hence, the goods were confiscated by the Respondent.
Issue:
Whether the Respondent can impose a penalty on the Appellant for failure to ensure proper accounting of finished goods?
Held:
The CESTAT, Ahmedabad in Excise Appeal No.10079 of 2019, held as under:
- Observed that, the allegation made by the Respondent that the goods found in excess in premises of the Appellant’s Company were kept for clandestine removal which was without payment of duty and is not supported by any evidence.
- Stated that, the Respondent cannot impose a huge personal penalty on the Appellant who is not looking after the accounts of the goods manufactured.
- Held that, the only lapse on the part of the Appellant is that the proper accounting of the finished goods was being done or not were not ensured, for which a token penalty can be imposed.
- Modified the order passed by the Respondent and reduced the penalty amount from INR 5 Lacs to INR 1 Lacs.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
This appeal is directed against Order-In-Appeal wherein, in the case of appellant the penalty imposed under Rule 26 of Central Excise Rules, 2002 was upheld by the learned Commissioner (Appeals). The appellant was imposed with penalty of Rs.5 Lacs on the ground that the appellant has failed to account for the manufactured goods properly and on visit of the officers, the excess goods were found which was lying unaccounted hence goods were confiscated and redemption fine and penalty was imposed. Consequently, penalty of Rs.5 Lacs was imposed on the appellant.
02. None appeared on behalf of the appellant despite several notices.
03. Shri R P Parekh, learned Superintendent (AR) appearing on behalf of the revenue reiterates the finding of the impugned order.
04. I have carefully considered the submissions made by learned AR and perused the records. I find that the learned Commissioner (Appeals) while upholding the penalty under Rule 26 given the following finding:-
5.2 Now coming to the second appeal filed by the Shri Anil Dudalal Kaneria, Chairman & MD of the appellant Company, against the imposition of Penalty under Rule 26 of the Central Excise Rules, 2002, I find that the argument that the Chairman & MD had not ‘physically dealt’ with the goods for illicit removal, fails before the evidences gathered and collaborated with the documents recovered from the factory premises as well as the marketing office which prove beyond doubt the role of Shri Anil Dudalal Kaneria, Chairman & MD of the appellant Company, in the possession of finished excisable goods viz. Polished vitrified Tiles without being accounted for in statutory Central excise Records with the sole purpose of clearing the same from the factory premises without issuance of Central Excise Invoice and without payment of Central Excise Duty. Thus, it had been proved that Shri Anil Dudalal Kaneria, Chairman & MD of the appellant company, had committed acts of contraventions of the provisions of the Central Excise Law and had dealt with excisable goods in a manner other than as provided in the Central Excise Law or Rules made there under. Thus I find that these acts had rendered Shri Anil Dudalal Kaneria, Chairman & MD liable for penal action under Rule 26 of the Central Excise Rules, 2002, which I confirm and uphold.
From the reading of the above finding, I find that the learned Commissioner (Appeals) has stated that the appellant had in possession the physical goods namely, Polished vitrified Tiles without being accounted for in Central excise records for clearing the same from the factory premises without issuance of Central Excise Invoice and without payment of Central excise duty. However, from the facts I find that the appellant in his statements recorded by the investigating agency nowhere stated that the goods found excess in the factory were lying for clandestine removal therefore, the serious allegation made by the department that the goods were kept for clandestine removal without payment of duty is not supported by any evidence. The appellant has stated in their statement that the unaccountal of goods is due to mismatch and cessation of the factory and the concerned staff has left the job therefore, even though the goods were found unaccounted for which the company has been imposed with redemption fine and penalty, personal penalty cannot be imposed on the Chairman and MD of the company who is not looking after the accountal of the goods manufactured. The only lapse on the part is that being the Chairman and MD of the company, he has not ensured that the proper accounting of the finished goods is being done or not for which a token penalty can be imposed.
05. Accordingly, I reduce the penalty from Rs. 5 Lacs to Rs.1 Lac. The impugned order stands modified to the above extent. The appeal is partly allowed in the above terms.
(Pronounced in the open court on 08.06.2022)
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