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.
Conclusion: CESTAT Ahmedabad’s decision stands as a testament to the need for penalties to be reflective of actual wrongdoings rather than procedural oversights. The tribunal’s judgment underpins the importance of accuracy in legal notices and fair treatment in penal actions. In this case, Lokhandwala’s stand was vindicated, emphasizing that penalties should be commensurate with the nature and degree of the offense.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
This appeal is filed by Shri Azaz Lokhandwala who is director of Schurter Electronics (India) Pvt. India Pvt. Ltd challenging the imposition of penalty of Rs 1 Lakh under Rule 26 of Central Excise Rules, 2002. As regard the case of demand of duty against the company M/s Schurter Electronis (India) Pvt. Ltd the same was settled under Sabka Vishwas (Legacy Dispute Resolution Scheme), 2019 and the appeal stand dismissed as deemed withdrawn by this Tribunal vide final order No. A/11724/2021 dated 30.04.2021. The penalty against the director was imposed on the ground that he was aware of all the facts regarding payment of duty without obtaining authorization from the development commissioner and it was also known that such DTA entitlement requires authorization as the said authorization was obtained by them for the earlier period therefore knowingly he was involved in short payment of duty in respect of DTA clearance without permission.
2. Shri Saurabh Dixit, Learned Counsel, appearing on behalf of the appellant at the outset submits that the short payment of duty is due to inadvertence on the part of the company which is procedure lapse. Therefore for this reason personal penalty cannot be imposed for any procedure lapse on the part of the appellant he further submits that in show cause notice the goods penalty was proposed under Rule 25(1)(d), whereas, in the adjudication order penalty was confirmed under Rule 26 for this reason also penalty is not sustainable.
3. Shri A.K. Samota, Learned Superintendent (AR) appearing on behalf of the revenue reiterates the findings of the impugned order.
4. On careful consideration of the submission made by the both the sides and perusal on record, we find that in the show cause notice there is no charge made against the director of the company and straight way the penalty under Rule 25(1)(d) of Central Excise Rules, 2002 was proposed however in the Adjudication order the penalty was confirmed under Rule 26 of Central Excise Rules, 2002. The adjudicating Authority has given the findings that merely by motioning wrong provision the penalty cannot be set aside.
4.1 In this regard we find that it is not only wrong rule mentioned in the show cause notice but even there is no effective charge was made holding the present appellant liable for penalty under either rule 25 or Rule 26.
4.2 Moreover we find that in the present case there is a procedural lapse on the part of the company the goods were cleared on payment of duty. The only lapse is that the appellant could not obtain the permission for the quantity cleared in DTA. There is no suppression of facts in the entire case as the goods were cleared by on the appropriate invoice and on payment of duty therefore even though if there is a short payment of duty for which the penalty cannot be imposed on the director of the company. For this reason we are of the opinion that penalty of Rs. 1 Lakh imposed to the director of the company is not sustainable.
5. Accordingly, the penalty is set aside appeal is allowed.
(Pronounced in the open court on18.08.2023)
