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No personal penalty can be imposed on employees when penalty on Company is set aside

Commissioner of Central Excise Vs. Chandresh C. Shah [(2014) 48 taxmann. com 236 (Gujarat)]

In the instant case, the Revenue issued a Show Cause Notice (SCN) against Doshion Ltd. (the Company) for recovery of wrongly availed Cenvat credit along with interest and penalty thereon. Further, personal penalty was also imposed against authorized signatory/ managers of the Company (the Respondents) under Rule 15(3) of Cenvat Credit Rules, 2004 (the Credit Rules) and Rule 26 of Central Excise Rules, 2002 (the Excise Rules) The Adjudicating Authority (the AA) confirmed the recovery of reduced amount of Cenvat credit, interest and penalty against the Company and imposition of penalty against the Respondents. However, on appeal the Hon’ble Ahmadabad Tribunal quashed and set aside the order of the AA.

The Department preferred an appeal against the order of the Tribunal to the Hon’ble High Court of Gujarat. The  High Court High Court did not admit appeal relating to penalty on ground that there was not even a prima facie case of fraud, collusion, evasion, etc., by company but the Department challenged deletion of penalty levied on managers, etc.

The Hon’ble High Court held that since there was no material even to suggest prima facie case of fraud, collusion, evasion, etc. against company and penalty levied on company had been finally set aside, no penalty could be levied on managers, etc. Hence, Tribunal order setting aside penalty on managers, etc. was upheld.

(Bimal Jain, FCA, FCS, LLB, B.Com (Hons), Mobile: +91 9810604563, Email: bimaljain@hotmail.com)

Categories: Excise Duty

View Comments (1)

  • sIR,
    Earlier there was case based on Batra commitee . on Induction furnace Electricity exp. SCN issued With Penalty & interest even on Manager & Directors.
    The case was up to CESTAT in between company closed.
    Whether the case is sustainable based on Assumption & presumption. if yes How an authorised signatory be held responsible and to pay penalty & Interest.
    PL advice or provide me such case adjudicated.

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