Case Law Details
Azaz Lokhandwala Director Vs C.C.E. & S.T.-Vadodara (CESTAT Ahmedabad)
Introduction: In a notable judgment by the CESTAT Ahmedabad, a penalty imposed on Shri Azaz Lokhandwala, Director of Schurter Electronics (India) Pvt. Ltd, has been quashed. This comes after allegations against him about short payments of duty in relation to DTA clearance without permission.
Analysis: The heart of the matter revolved around the imposition of a penalty of Rs. 1 Lakh under Rule 26 of Central Excise Rules, 2002. The case of demand against Schurter Electronics had already been settled under the Sabka Vishwas Scheme in 2021. However, the penalty against Lokhandwala was based on allegations that he was knowingly involved in the short payment of duty.
Shri Saurabh Dixit, defending Lokhandwala, highlighted inadvertent procedural lapses on the company’s part, questioning the appropriateness and foundation of the penalty. A critical observation was that while the show cause notice proposed a penalty under Rule 25(1)(d), the actual penalty was confirmed under Rule 26.
Furthermore, the tribunal underscored that even though there might have been a procedural oversight from the company’s side, no factual suppression existed. The goods were cleared using the correct invoice and appropriate duty payment. The mere short payment of duty, which stemmed from a procedural error, shouldn’t warrant such a hefty penalty on the company’s director.
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