NEW DELHI, APRIL 10, 2013: THIS is an appeal filed by the revenue against an order of the CESTAT which quashed the penalties against the respondents imposed by the Commissioner under Rule 25 of the Central Excise Rules.

The allegation against the respondents was that they were storing and selling zarda which had the brand name of “ Ratna ” and which had been manufactured by Prabhat Zarda Factory. It is alleged that the said Prabhat Zarda had clandestinely cleared the said quantities of 'Ratna' Zarda and that the same were being stored with the respondents for further sales. It is also contended that the said respondents were related concerns of Prabhat Zarda Factory.

The Tribunal allowed the appeals of the respondents by holding that Rule 25 does not apply to the respondents as it was not the case of the Department that the respondents were producers, manufacturers, registered persons of a warehouse or registered dealers. It is pertinent to note that Rule 25(1) specifically mentions four categories of persons :-

(a) producer;

(b) manufacturer;

(c) registered person of a warehouse; or

(d) a registered dealer.

The High Court observed, "These four categories of persons are also mentioned at the end of Rule 25, where the liability of penalty has been spelt out. It is, therefore, clear that the penalty can be imposed on such persons only. The respondents are neither producers nor manufacturers of the said Prabhat Zarda nor are they the registered persons of a warehouse in which the said zarda had been stored. The respondents are also not the registered dealers. That being the case, no penalty can be imposed on the said respondents. The Tribunal has come to the correct conclusion, particularly, as it was not the case of the Department that the respondents fell within any one of the four categories of persons mentioned above."

The Counsel for the Department pleaded that Rule 25(1)(c) would be applicable, which reads as,

(c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act;

The High Court did not agree because sub-clause (c) would apply only in respect of the four categories of persons mentioned in the earlier part of Rule 25(1) of the said Rules. That is clearly not the case. Therefore, Rule 25(1)(c) would have no application in the present case.

As no substantial question of law arises, the Revenue appeal is dismissed.

(See 2013-TIOL-284-HC-DEL-CX)