Penalty under Rule 26 of the Central Excise Rules, 2002 cannot be imposed unless the goods are liable for confiscation or the individual issued invoices without delivery to facilitate ineligible Cenvat credit; mere handling of goods by employees is insufficient.

P.V. SUBBA RAO

1. Excise Appeal No. 51606 of 2022 has been filed by Shri K.C. Sharma to assail the personal penalty of Rs. 15 lakhs imposed on him under Rule 26 of the Central Excise Rules, 2002¹Excise Rules read with section 11AC of the Central Excise Act, 1944²CEA, 1944 for handling goods on which Cenvat credit was allegedly wrongly availed by M/s Rallison Electricals Pvt. Ltd., the company, by the Commissioner’s order dated 11.02.2022.

2. Excise Appeal No. 51607 of 2022 has been filed by Shri Lalit Babbar to assail the personal penalty of Rs. 25 lakhs imposed on him under Rule 26 of the Central Excise Rules, 2002 for handling goods on which Cenvat credit was allegedly wrongly availed by M/s Rallison Electricals Pvt. Ltd., Alwar, the company.

3. The company M/s Rallison Electricals Pvt. Ltd. has filed a separate Excise Appeal No. 51613 of 2022 which has been decided separately.

4. In these two appeals, the sole contention of the appellants is that no personal penalty under Rule 26 of the Central Excise Rules, 2002 could have been imposed on them even if the alleged irregular Cenvat credit was availed by M/s Rallison Electricals Pvt. Ltd. and even if the appellants had handled the goods on which Cenvat credit was allegedly wrongly availed.

5. Shri R.K. Hasija, learned counsel for the appellants submitted that he is only assailing the personal penalty imposed under Rule 26 of the Excise Rules on the ground that such a penalty was not imposable even if M/s Rallison Electricals Pvt. Ltd. had a regularly availed Cenvat credit and appellants had handled the goods. Learned authorized representative for the Revenue on the other hand supported the impugned order.

6. Having heard learned counsel for the appellants and learned authorized representative for the Revenue, we find that Rule 26 of the Excise Rules reads as follows :-

“RULE 26. Penalty for certain offences. — (1) Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees, whichever is greater.

Provided that where any proceeding for the person liable to pay duty have been concluded under clause (a) or clause (d) of sub-section (1) of section 11AC of the Act in respect of duty, interest and penalty, all proceedings in respect of penalty against other persons, if any, in the said proceedings shall also be deemed to be concluded.

(2) Any person, who issues -

(i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or

(ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater”.

7. What is evident from the above is that penalty under Rule 26 can be imposed on any person for acts or omissions which render any excisable goods liable to confiscation or on any person who issued an excise invoice without actually delivering goods so as to enable the recipient of such invoice to avail ineligible Cenvat credit. From the operative part of the impugned