Case Note & Summary
The petitioners, Mr. Ashokkumar H. Fulwadhya and Mr. Daulatkumar H. Fulwadhya, directors of M/s. Harisons Steel Pvt. Ltd., challenged an order dated 4th August 2009 passed by the Customs Excise & Service Tax Appellate Tribunal (CESTAT), West Zonal Bench, Mumbai. The CESTAT directed each petitioner to pre-deposit 25% of the penalty imposed on them under Rule 13(1) of the Cenvat Credit Rules, 2002, as a condition for hearing their appeal. The petitioners argued that Rule 13(1) only permits penalty on the person who avails the credit, not on directors personally. The court, after hearing both sides, allowed the petitions, set aside the pre-deposit order, and directed the CESTAT to hear the appeals on merits without insisting on any pre-deposit. The court held that the imposition of personal penalty on directors was not permissible under Rule 13(1) of the Cenvat Credit Rules, 2002.
Headnote
A) Customs and Excise - Pre-deposit - Penalty on Directors - Rule 13(1) Cenvat Credit Rules, 2002 - The issue was whether the CESTAT could direct directors to pre-deposit 25% of personal penalty imposed on them under Rule 13(1) of the Cenvat Credit Rules, 2002. The court held that Rule 13(1) contemplates penalty only on the person availing credit, not on directors personally, and thus the pre-deposit order was not sustainable. (Paras 3-4)
Issue of Consideration
Whether imposition of personal penalty on directors is permissible under Rule 13(1) of the Cenvat Credit Rules, 2002, and whether the CESTAT could direct pre-deposit of 25% of such penalty as a condition for hearing the appeal.
Final Decision
The court allowed the petitions, set aside the impugned order of CESTAT dated 4th August 2009, and directed the CESTAT to hear the appeals on merits without insisting on any pre-deposit.
Law Points
- Rule 13(1) of Cenvat Credit Rules
- 2002
- penalty on person availing credit
- personal penalty on directors not permissible
- pre-deposit condition for appeal
Case Details
2010 LawText (BOM) (01) 295
Writ Petition No. 18 of 2010 and Writ Petition No. 53 of 2010
H.G. Dharmadhikari for petitioners, R.V. Desai (senior counsel) with R.B. Pardeshi for respondents
Mr. Ashokkumar H. Fulwadhya and Mr. Daulatkumar H. Fulwadhya
Union of India and others
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Nature of Litigation
Writ petition challenging the order of CESTAT directing pre-deposit of 25% of penalty imposed on directors under Rule 13(1) of Cenvat Credit Rules, 2002.
Remedy Sought
Petitioners sought quashing of the CESTAT order directing pre-deposit and a direction to hear the appeal on merits without pre-deposit.
Filing Reason
The CESTAT directed the petitioners, who are directors of M/s. Harisons Steel Pvt. Ltd., to pre-deposit 25% of the penalty imposed on each of them under Rule 13(1) of the Cenvat Credit Rules, 2002, as a condition for hearing their appeal.
Previous Decisions
The CESTAT passed the impugned order on 4th August 2009.
Issues
Whether imposition of personal penalty on directors is permissible under Rule 13(1) of the Cenvat Credit Rules, 2002.
Whether the CESTAT could direct pre-deposit of 25% of such penalty as a condition for hearing the appeal.
Submissions/Arguments
Petitioners argued that Rule 13(1) of the Cenvat Credit Rules, 2002 contemplates penalty only on the person availing credit, not on directors personally.
Respondents argued in support of the CESTAT order.
Ratio Decidendi
Rule 13(1) of the Cenvat Credit Rules, 2002 contemplates penalty only on the person who avails the credit, and not on directors personally. Therefore, the CESTAT could not direct directors to pre-deposit 25% of the penalty imposed on them.
Judgment Excerpts
Learned counsel for the petitioners, in short, submits that imposition of personal penalty on the director is not permissible under rule 13(1) of Cenvat Credit Rules, 2002 as this rule contemplates penalty only on the person availing credit.
Procedural History
The petitioners filed Writ Petition No. 18 of 2010 and Writ Petition No. 53 of 2010 before the Bombay High Court challenging the order of CESTAT dated 4th August 2009. The court heard the petitions and passed judgment on 19th January 2010.
Acts & Sections
- Cenvat Credit Rules, 2002: Rule 13(1)
