IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. CEA No.96 of 2007 (O&M) Date of decision: 27.7.2010 Commissioner of Central Excise Commissionerate. -----Appellant. Vs. M/s S.K. & Company (P) Ltd. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Sanjeev Kaushik, Advocate for the appellant. Mr. Sandeep Goyal, Advocate for the respondent. --- ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the Revenue under Section 35(G) of the Central Excise Act, 1944 (for short, “the Act”) against order of the Customs, Excise & Service Tax Appellate Tribunal, New Delhi, reducing penalty under Section 11AC of the Act. 2. Show Cause Notice dated 10.5.2001 was issued to M/s Aravali India Ltd. for wrong availment of MODVAT Credit. Allegation, inter-alia, was that without the goods actually being received, false bills were being prepared. The Adjudicating Authority raised demand of duty and also imposed penalty on the stockist company as well as on Mr. S.K. Gupta, Director of M/s S.K. Gupta & Co. Pvt. Ltd. and Anil Kumar Goyal, partner of M/s CEA No.96 of 2007 Rohan Roadways. Penalty was upheld by the Appellate Authority. On further appeal to the Tribunal, it was argued that there was no mens rea and penalty was not justified. The Tribunal held that the respondent could not be absolved of the liability to pay penalty, though in absence of proof of individual role, penalty personally imposed on the Director was not called for. However, the penalty was reduced only on the ground that the amount was high. The relevant observations are:- “.......We, therefore, do not agree with the contention that Rule 173 Q (1) (bbb) cannot be invoked against the appellant. In their reply and their contention before us they have not been able to extricate themselves from the charges levelled against them on their involvement in wrong Modvat availment by M/s Aravali India Ltd. The statements made by authorized persons which include their own employee go to show that the appellants are hand-in-glove in the wrongful act unearthed by the investigators. As regards the contention that Rule 209A is not applicable and that no penalty is imposable thereunder on the appellant Director. It is noticed that the distributorship agreement cloudlessly indicates that the appellants were very much concerned in physically dealing with excisable goods. We have to clarify here that the phrase ‘physically dealing’ cannot connote the muscular prowess of an individual appellant for, it should be interpreted in the context of the organization to which the individual belongs. However, we notice that the investigation has not brought out any evidence mens rea against the role played by the Managing Director of the unit in his individual capacity 2 CEA No.96 of 2007 and since no finding has been made out against him, we do not find any merits in invoking Rule 209A for imposing penalty on him.....” 3. We have heard learned counsel for the parties. 4. Learned counsel for the Revenue submits that in view of judgments of the Hon’ble Supreme Court in Commissioner of Central Excise v. SKF India Ltd. [2009] 239 ELT 385 and Union of India v. Rajasthan Spinning & Weaving Mills [2009] 238 ELT 3, the Tribunal had no jurisdiction to reduce penalty if mens rea was established. 5. Since the impugned order is in conflict with the judgments of the Hon’ble Supreme Court relied upon on behalf of the Revenue, the same cannot be sustained and is set aside. The matter is remanded to the Tribunal for fresh decision on merits in accordance with law. 6. Parties are directed to appear before the Tribunal for further proceedings on 8.11.2010. The appeal is disposed of. (ADARSH KUMAR GOEL) JUDGE July 27, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE 3