Penalty Under Central Excise Rules Can Only Be Imposed On Natural Person And Not Against Artificial Entity: CESTAT

The Ahmedabad Bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the penalty under central excise rules can only be imposed on natural persons and not against artificial entities.

The bench of Ramesh Nair (Judicial Member) and Raju (Technical Member) has observed that the department has filed an appeal only against M/s Richardson and Cruddas Limited, and no name of the appellant or assessee appeared on the appeal memo. Obviously, when the appellant was not made a respondent in that appeal, the appeal was not filed against the appellant, and consequently, neither the appellant was put to notice nor was the order passed by the Tribunal in respect of the present appellant.

The appellant/assessee has challenged the order passed by the Commissioner of Central Excise challenging the imposition of penalties under Rule 209A of the erstwhile Central Excise Rules, 1944.

The assessee contended that the penalty under Rule 209A was imposed via the impugned order in connection with the confirmed demand against M/s Richardson and Cruddas Limited. In the first round, the adjudicating authority dropped the proceeding of show cause notice against which the Revenue had filed an appeal only against M/s Richardson and Cruddas Limited, but no appeal was filed against the appellant, M/s Ahmedabad Electricity Company Ltd. Though the prayer of appeal seeks to impose a penalty on the present appellant under 209A, However, the appellant was not made a respondent, and no order was passed against the respondent by the Tribunal in said appeal.

In the appeal filed by the department against only M/s Richardson, Cruddas Limited remanded the matter, setting aside the impugned order. The adjudicating authority in de-novo adjudication imposed the penalty under Rule 209A of the Central Excise Rules, 1944, upon the appellant.

The assessee contended that the earlier order dropped the proceedings against which the appeal was not filed against the appellant. The first order, in as much as dropping the proceeding of imposition of penalty under 209 A, attained finality, and after remand by the Tribunal in de-novo adjudication, the adjudicating authority had no legal right to re-open the case and impose a penalty. The penalty imposed by the adjudicating authority in the impugned order is not sustainable. The penalty under Rule 209A cannot be imposed on a company, as the same can be imposed only upon a natural person. The ingredient for imposing penalties mentioned in Rule 209A can be made applicable only against a natural person, not against an artificial entity such as a company. For this reason, the penalty cannot be imposed.

The court, while allowing the appeal, held that in the absence of any appeal against the appellant, against the first order, the order—as far as related to the present appellant—has attained finality.

The court stated that in the de-novo adjudication after remand by the Tribunal, the adjudicating authority had no statutory power to impose a penalty on the appellant. The imposition of a penalty under Rule 209A in the order against the appellant is absolutely illegal and incorrect.

Counsel For Appellant: Anand Nainawati

Counsel For Respondent: Ajay Kumar Samota

Case Title: Torrent Power Limited Versus Commissioner of C.E.-Ahmedabad-ii

Case No.: Excise Appeal No. 10305 Of 2014 - DB

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