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Cash seized during search - False certificate issued by Chartered Accountant that it was share application money - Penalty of Rs 50 lakhs imposed u/r 26 of CE Rules on CA rightly set aside by Tribunal - High Court

By TIOL News Service

ALLAHABAD, JAN 14, 2016: THE appellant is a Chartered Accountant. During search proceedings of a gutka manufacturer, huge amount of cash (Rs 4.38 crores) was seized by the Central Excise officers. The appellant certified that the cash seized was actually share application money received from investors. This claim was later found to be false. Hence, the Commissioner imposed penalty of Rs 50 lakhs on the CA under Rule 26 of the Central Excise Rules, 2002. The CA filed an appeal before the Tribunal. The appeal was allowed by the CESTAT by holding that penalty under Rule 26 or 27 cannot be imposed in the instant case. The department is in appeal before the High Court.

 

After hearing the Counsel for revenue, the High Court held:

+ We find ourselves in agreement with the reasoning given in the impugned order and so far as the issuance of the certificate by the respondent was concerned, that was not during the transaction of transporting, removing, depositing, keeping, concealing, selling or purchasing any excisable goods. The certificate appears to have been obtained at the time of the proceedings that were initiated for the purpose of imposition of penalty and taking action against the trader. This therefore could not be described as an act to attract penalty under Rule 26 and 27, even though this may give a separate cause of action on the ground of money laundering or providing incorrect evidence in order to extend any benefit to the trader or the assessee. The penalty under Rule 26 and 27 therefore would not be attracted in the said background and accordingly no substantial question of law arises.

+ Penalty even otherwise could not have been imposed as the original liability itself was made subject matter of remand by the Tribunal itself in relation to the decision taken in the appeal filed by the trader. The said order is stated to be under challenge in a second appeal before this Court but the same would not have any bearing on this issue keeping in view the reasons recorded hereinabove.

(See 2016-TIOL-88-HC-ALL-CX)

 


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