Order date – 25 August 2022

Facts – 

• The appellant, Shri Rahul Chauhan, (Director of M/s Musk Tobacco (India) Pvt. Ltd.) and Ors., were being searched and they found 15000 loose cigarettes of “Perfect” Brand, value of Rs.4,000/-, unaccounted and the same were seized.
• The officers also seized certain quantity of cigarettes from Soron Railway Station Varanasi, Ganesh Trading Company, Baba Road Lines and from few other places and seized the same under the belief that the same has been cleared without payment of duty by M/s Musk Tobacco.
• Show Cause Notice dated 18.05.2010 was issued, demanding duty of Rs.7,74,09,518/- from M/s Musk Tobacco for the period 16.01.2007 to September, 2007. 
• Show cause notice was also issued to these appellants (co-noticees) and others proposing penalty under Rule 26 of Central Excise Rules.
• Aggrieved the appellant filed an appeal.

Issue – 

• Whether a penalty under Rule 26 on the Director can be sustained?

Order – 

• The Tribunal found that the appellant is neither a Director nor an employee of M/s Musk Tobacco and was just director on the papers.
• Further, he is not connected either as a supplier or buyer of finished goods. Only he has provided space in his residence to store the documents of M/s Musk Tobacco, without any knowledge that this relates to clandestine production and removal by M/s Musk Tobacco. 
• Further, the appellant has given a cogent explanation with regard to the documents, registers, loose papers etc. found at his residence that these are regarding “Indira Awas Yojna” and birth/ death record of the Gram Panchayat. 
• Further, stated that blank papers, bill book, bilty book have been purchased by his brother for use in his grocery shop from waste paper merchant. Such explanation has not been found to be untrue. 
• Therefore, it was held that the appellant is also liable to penalty under Rule 26 of Central Excise Rules as he has not done nor has been concerned in transporting, removing, depositing, keeping, concealing, etc., of excisable goods. 
• Accordingly, the penalty imposed on this appellant was set aside and appeal allowed.