Whether confiscation penalty can be imposed on person other than those specified in Rule 25?

PJ/Case Laws/2012-13/1523

Case:- Commissioner Of Central Excise Delhi-I Vs Balaji Trading Co & Ors

Citation:-2013-TIOL-284-HC-DEL-CX

Brief facts:- This is an appeal under Section 35G of the Central Excise Act, 1944. It has been filed by the revenue, being aggrieved by the final order No. A/655- 657/2012-EX (BR) dated 05.06.2012 passed by the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) in Central Excise Appeal Nos. 260/2012, 292 /2012 and 342/2012, whereby the said appeals filed by the respondent were allowed. The Commissioner (Adjudication) had passed an order on 31.10.2011, whereby he had imposed penalties of Rs . 10 lacs on Balaji Trading Company, Rs . 3 lacs on Pooja Agencies and Rs . 10,000/- on Balaji Flexipacks, respectively, under Rule 25 of the Central Excise Rules, 2002. The allegation against the respondents was that they were storing and selling zarda which had the brand name of “Ratna” and which had been manufactured by Prabhat Zarda Factory. It is alleged that the said Prabhat Zarda had clandestinely cleared the said quantities of ‘Ratna' Zarda and that the same were being stored with the respondents for further sales. It is also contended that the said respondents were related concerns of Prabhat Zarda Factory. The Commissioner passed an order-in-original dated 31.10.2011, whereby the said penalties were imposed on the respondents under Rule 25 of the said Rules. Rule 25 of the said Rules reads as under:-

“RULE 25. Confiscation and Penalty- (1) Subject to the provisions of section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer, -
(a)   removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or
(b)   does not account for any excisable goods produced or manufactured or stored by him; or
(c)   engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or
(d)   contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty,

then , all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (c) or clause (d) has been committed, or [rupees two thousand], whichever is greater.

Appellant’s Contention:The learned counsel for the appellant contended that Rule 25(1)(c) would be applicable.

Reasoning of Judgement:- The Tribunal, however, allowed the appeals of the respondents by holding that Rule 25 does not apply to the respondents as it was not the case of the prosecution that the respondents were producers, manufacturers, registered persons of a warehouse or registered dealers. It is pertinent to note that Rule 25(1) specifically mentions four categories of persons :-

(a) producer;
(b) manufacturer;
(c) registered person of a warehouse; or
(d) a registered dealer.

These four categories of persons are also mentioned at the end of Rule 25, where the liability of penalty has been spelt out. It is, therefore, clear that the penalty can be imposed on such persons only. The respondents are neither producers nor manufacturers of the said Prabhat Zarda nor are they the registered persons of a warehouse in which the said zarda had been stored. The respondents are also not the registered dealers. That being the case, no penalty can be imposed on the said respondents. The Tribunal has come to the correct conclusion, particularly, as it was not the case of the prosecution that the respondents fell within any one of the four categories of persons mentioned above.

Decision:-The appeal was dismissed.

Comment:-The substance of this case is that penalty under Rule 25 can be imposed only on a producer, manufacturer, registered person of a warehouse, or a registered dealer.

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PJ/Case Laws/2012-13/1523

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