Penal Provision Of Central Excise Rules, 1944 Cannot Be Invoked Against The Accountant: CESTAT

The Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that the penal provision of Rule 209 A of the Central Excise Rules, 1944, cannot be invoked against a person who is only involved in maintaining the accounts of the company.

The bench of C.L. Mahar (technical member) has observed that as per Rule 209 A, the person who is to be penalized under this provision needs to have physically dealt with the dutiable goods and have done certain acts that have made the subject goods liable for confiscation. He is consciously aware of this very fact that acquiring possession of such goods by transporting them and dealing with them in other manners will render the goods liable for confiscation.

The officer of the Central Excise Department visited the factory premises of M/s. Raipur Manufacturing Co. Ltd., Saraspur Gate, Ahmedabad, on April 13, 1998. After scrutiny of the Central Excise records for the previous financial years (1994–1995), 1995–1996, and 1996–1997, The department formed the view that the assessee has not valued the captively consumed yarn properly as they have failed to include expenses such as bonuses, gratuities, interest, and marketing expenses in the cost of yarn that has been used captively.

A demand show cause notice was issued demanding Central Excise Duty of Rs. 1,02,68,913. The penal provision under 173 Q(1) has also been invoked.

The penal provision under Rule 209 A of the Central Excise Rules has also been invoked against the appellant, Nitin M. Dhandhukia. The penalty of Rs. 5 lakh has been imposed on the appellant under Rule 209 A of the Central Excise Rules, 1944.

The appellant contended that the issue of the inclusion of expenses such as bonuses, gratuities, interest, and marketing expenses has already been settled in favor of the assessee. The provision of Rule 209 A cannot be invoked against the appellant as he was working as an employee and looking after the accounting work only. He was in no way concerned with the physical movement of raw materials or finished goods.

The CESTAT, while allowing the appeal, held that the order concerning penalizing the appellant under Rule 209 A of the Central Excise Rules, 1944, was without any merit.

Case Title: Nitin M Dhandhukia Versus C.C.E.-Ahmedabad-ii

Case No.: Excise Appeal No. 381 of 2012-SM

Date: 12.05.2023

Counsel For Appellant: Nirav Shah

Counsel For Respondent: P.Ganesan

Click Here To Read The Order