By TIOL News Service

NEW DELHI, MAR 01, 2016: RULE 26 of the CER, 2002 has welcomed an amendment with immediate effect, meaning 01.03.2016.

A proviso has been inserted by notification 8/2016-CE(NT) dated 01.03.2016 which reads -

"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.

Perhaps, what they wanted to mean in place of "for" is "against". A corrigendum may be on its way.

Be that as it may, the sum and substance of this insertion would be that co-noticees would not be required to face the music of penalty in case the person liable to pay duty has done his bit in terms of clause (a) or clause (d) of section 11AC(1) of the CEA, 1944.

This was a matter that went either way in the context of the erstwhile section 11A of CEA, 1944 (before 08.04.2011) in the following decisions -

FOR

VIP INDUSTRIES LTD - 2015-TIOL-1931-CESTAT-AHM

CX - Penalty - Rule 26 of CER, 2002 - Main noticee had paid duty and interest and informed the Department by letter dt.08.02.2011 - SCN dt.25.01.2012 issued to main noticee and assessees herein, proceedings dropped by Adjudicating Authority by extending benefit under Section 11A (2B) of CEA, 1944 - When Section 11A(2B) categorically provides that no notice under sub-section (1) of Section 11A shall be served where duty and interest paid by person, imposition of penalty on co-noticee cannot be sustained: CESTAT

ARVIND KUMAR - 2014-TIOL-397-CESTAT-MUM

Penalty - Rule 26 of CER, 2002 - main party has already paid duty, interest and 25% of duty as penalty within 30 days of issuance of SCN, therefore, as per proviso to section 11A of CEA, 1944 proceedings in the SCN come to an end - in this view of the matter, imposing penalties on co-noticees is not warranted - order imposing penalties set aside - appeals allowed: CESTAT

M/s ABIR STEEL ROLLING MILLS - 2013-TIOL-1048-CESTAT-DEL

CX - When the proceedings against the manufacturer/assessee stand concluded on payment of disputed amount of duty plus interest plus 25% of the duty as penalty, there would be no sense in continuing the proceedings for imposition of penalty under Rule 26 against other persons like traders who had purchased the goods, transporters who had transported the goods cleared by manufacturer/assessee, the Directors/employees of the manufacturer/assessee company - Revenue appeal dismissed: CESTAT

AGAINST

SHRI ANAND AGRAWAL& ORS - 2013-TIOL-26-CESTAT-DEL

Penalty - Rule 26 of CER, 2002 - Merely because the manufacturer has discharged his duty liability along with interest and penalty equal to 25% in terms of s.11A(1A) of the CEA, 1944, the proceedings against the co-noticees cannot be held to be conclusive in nature - the benefit is available only to whom a notice is issued u/s 11A(1) of the CEA, 1944 for recovery of duty - such notices cannot be issued to authorised persons as they are no obligation to pay duty - invocation of penal provision of Rule 26 is dependent upon many factors which are unconnected with the provisions of section 11A - Commissioner(A) extending the benefit of proviso to sub-section 2 of section 11A to employees, authorised signatories etc. is not in accordance with law - Order set aside but matter remanded as Commr(A) has not discussed merits of each case in the context of imposition of penalty u/r 26 of CER, 2002 - Revenue appeal allowed in above terms: CESTAT

Thankfully, by this amendment the legal position is made explicit - a small step for the government but a giant leap for the industry!