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2026 Supreme(Online)(CESTAT) 815
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL, BANGALORE REGIONAL BENCH - COURT NO. 2
P.A. Augustian, J, Pullela Nageswara Rao, Technical Member
Commissioner Of Central Tax Bangalore North West Commissionerate – Appellant
Versus
Sri Arvind Sekhar Director Saisecurity Printers Private Limited – Respondent
Central Excise Appeal Nos. E/21739/2018 | Central Excise Appeal No. 21740/2018
For the Appellants/Petitioners: N. Anand, Rajashekar B. N. N
For the Respondents:
Penalty under Rule 26 of the Central Excise Rules, 2002, is unsustainable unless there is a specific proposal for the confiscation of goods and such goods are held liable for confiscation, and mere holding of a managerial position without evidence of financial enrichment does not justify the penalty.
Headnote:The case involves the application of Rule 26 of the Central Excise Rules, 2002, regarding the imposition of penalties on the Director and Assistant General Manager of a printing firm. The Revenue alleged that the respondents were involved in the clandestine clearance of excisable goods, specifically university answer booklets and bank passbooks, by wrongly classifying them to evade central excise duty. The Adjudicating Authority had previously dropped the demand for excise duty, interest, and penalties, leading the Revenue to file the present appeals. The primary issue framed was whether a personal penalty under Rule 26 of the Central Excise Rules, 2002, can be sustained in the absence of a proposal for the confiscation of goods. The court reasoned that under Rule 26, a penalty can only be imposed if the goods are held liable for confiscation. Furthermore, the court observed that there were no allegations of personal financial enrichment by the respondents in their capacity as Director and Assistant Manager. Accordingly, the appeals filed by the Revenue are dismissed.
Appearance:
Mr. N. Anand, Advocate for the Appellant
Mr. Rajashekar. B. N. N, Authorised Representative (AR) for the Revenue
CORAM:
Hon’ble Mr. P.A. Augustian, Member (Judicial)
Hon’ble Mr. Pullela Nageswara Rao, Member (Technical)
Final Order Nos. 20226-20227/2026
Date of Hearing:15.09.2025
Date of Decision:27.02.2026
Per: P. A. Augustian
The issue in the present appeal is regarding penalty on the Respondent Shri. M.C Lokesh, Assistant Manager and Shri. Aravind Sekhar, Director of M/s Sai Security Printers., Ltd.
The brief facts are alleging that some of the products manufactured by M/s. Sai Security Printers Pvt., Ltd., were wrongly classified by the Respondent for evasion of central excise duty, proceedings were initiated and show cause notice dated 06.07.2016 was issued to M/s. Sai Security Printers Pvt. Ltd., and respondents were directed to show cause as to why penalty under Rule 26 of the Central Excise Rules, 2002 should not be imposed on them. Thereafter Adjudication Authority as per the Order-in-Original dated 31.01.2017 classified the goods under Chapter Heading 4901 and the proposal for demand of excise duty, interest and penalties were dropped. Aggrieved by said order, review was carried out and as per the Review order No.1/2017 dated 07.04.2017, present appeals are filed.
When the appeals came up for hearing, the Learned Authorised Representative (AR) draws our attention to the allegation against the Respondents herein, in the show cause notice and submits that Respondents herein are liable for personal penalty for their active involvement in the clearance of excisable goods without payment of duty. Learned AR further submits that the appeal filed against assessee, M/s Sai Security Printers Pvt., Ltd., was considered by this Tribunal in Central Excise Appeal No. 20670/2017 and as per the Final Order it is held that:-
"13. Now comparing the items manufactured by the respondent and claim to be a product of printing item at Clause (d) of Para 4 which has been specifically discussed and clarified that university answer booklets and passbooks would fall within the scope of Chapter Subheading 4820. This Circular has been considered by the Tribunal in the case of Nagpur Business Forms Pvt. Ltd. Vs. CCE, Nagpur [2020(2) TMI 283 CESTAT, Mumbai] and M/s. Samanthu Business Forms Pvt. Ltd. vs. CCE, Bangalore : Final Order No.20032/2026 dated 16.01.2026 and followed in deciding the classification of the items referred therein. Applying the said Circular to the facts of the present case, we find that university answer booklets and bank passbooks would come within the scope of Chapter Subheading 4820 and all other forms would go under Chapter Subheading 4901/4911 as mentioned under the said Circular. Needless to say that Circular is binding on the department, hence, the learned Commissioner ought to have considered the said Circular and decided the issue, accordingly. In the result, the impugned order is modified and the matter is remanded to the adjudicating authority to re-quantify the demand considering the classification of bank passbooks, university answer booklets falling under Chapter Subheading 4820 and remaining all other forms classifiable under Chapter Subheading 4901/4911. Since the learned Commissioner has not addressed the issue of limitation and no finding has been recorded, the said issue is kept open and consequently, imposition of penalty be determined depending on the finding on the aspect of limitation. Needless to mention that a reasonable opportunity of hearing be given to the respondent. Revenue’s appeals are allowed by way of remand.”
Learned Counsel for the Respondent submits that the penalty imposed on the Respondent herein are prima facie unsustainable since there is no proposal in the show cause notice for confiscation of the goods and as per Rule 26 of Central Excise Rule, 2002, penalty can be imposed only if the goods are held liable for confiscation. Learned Counsel also
