2015 (8) TMI 1235 - AT - Central Excise

Tribunal upholds penalty for Rajesh Maheshwari, acquits M.B. Baheti for lack of evidence.

Shri M.B. Baheti of M/s. Decora Tubes Ltd, Shri Rajesh Maheshwari Versus CCE & ST, Kanpur

The Tribunal upheld the penalty imposed on Shri Rajesh Maheshwari for his involvement in clandestine activities, citing substantial evidence. However, the ... Recovery of wrongly taken cenvat credit - personal penalty whereas the company is under liquidation - Imposition of penalty under Rule 26 - Held that:- Show cause notice had been issued not only to the appellant company M/s. DTL, Unit-II (Aluminium Division) but also to the Managing Director, Shri M.B. Baheti, Shri Ravindernath Jain, Joint Managing Director and Shri Rajesh Maheshwari, Manager (Finance). Even if the Commissioner could not adjudicate the question of duty demand against M/s.DTL in view of the liquidation order of the High Court on 11.07.2005, in our view, the Commissioner could always adjudicate the question of imposition of penalty on the appellant, Shri M.B. Baheti and Shri Rajesh Maheshwari. Moreover, though the Commissioner has confirmed the duty demand against M/s.DTL, they are not in appeal and, therefore, this Tribunal is not required to go into the question as to whether the confirmation of duty demand against M/s.DTL was correct or not. Statement dated 28.07.2003 of Shri M.Baheti, Managing Director, which is being used against him, is that after taking stock of the situations in the wake of search of Unit M/s. DTL, Unit-II, he had removed Shri Rajesh Maheshwari from M/s. DTL as he found him solely responsible for this act. From this statement, no conclusion can be drawn that Shri M. Baheti was involved in day-to-day functions of the Aluminium Division of M/s.DTL or had knowledge about its activity of duty evasion. Moreover, from his statement referred to in para-15 of the show cause notice, it is seen that Shri H.P. Gupta, Advisor and Shri Rajesh Maheshwari, Manager (Finance) had been reporting to Mr. Ravindra Jain, Joint Managing Director and that during 1997-98, M/s. DTL (Aluminium Division) had become a sick unit and it had been decided to sell the assets of the aluminium division of the company to Shri Ravindera Jain and Shri Jain was inducted to run this Unit. Thus from this statement, it is clear that it is Shri Ravinder Jain, who was running the Aluminium Division and Shri M. Baheti was not involved in day-to-day functions of this Unit. In our view, therefore, the evidences on record are not sufficient to conclude that Shri Baheti was, in any way, concerned in removal of the clandestinely cleared goods from M/s. DTL. In view of this, the imposition of penalty under Rule 26 of the Central Excise Rules on Shri M. Baheti would not be sustainable and has to be set aside. - Decided partly in favour of assessee. Issues Involved:1. Legality of the Commissioner's order post-liquidation.2. Justification for the imposition of penalties on Shri M.B. Baheti and Shri Rajesh Maheshwari under Rule 26 of the Central Excise Rules, 2002.Detailed Analysis:1. Legality of the Commissioner's Order Post-Liquidation:The appellant argued that the Commissioner's order dated 25.10.2005 was contrary to Section 446 of the Companies Act, 1956, which prohibits proceeding with any legal action against a company in liquidation without the Tribunal's permission. The Tribunal noted that even if the Commissioner could not adjudicate the duty demand against M/s. Decora Tubes Ltd. (DTL) due to the liquidation order, the Commissioner could still adjudicate the imposition of penalties on individuals such as Shri M.B. Baheti and Shri Rajesh Maheshwari. Since M/s. DTL did not appeal, the Tribunal did not need to address the correctness of the duty demand confirmation against M/s. DTL.2. Justification for Imposition of Penalties:Shri Rajesh Maheshwari:The Tribunal found substantial evidence against Shri Rajesh Maheshwari, including incriminating documents recovered from his residence and his admission of involvement in the clandestine removal of goods. He had also floated firms (M/s. Shree Mahakal Metal Works and M/s. Maa Bhagwati Metals Works) for the purpose of removing goods without payment of duty. As the proprietor of one of these firms, he was directly involved in the sale of clandestinely cleared goods. Therefore, the Tribunal upheld the imposition of a penalty on Shri Rajesh Maheshwari under Rule 26 of the Central Excise Rules, 2002.Shri M.B. Baheti:The Tribunal found insufficient evidence to conclude that Shri M.B. Baheti was involved in or had knowledge of the clandestine activities of the Aluminium Division. The statement used against him indicated that he removed Shri Rajesh Maheshwari after discovering the clandestine activities, but it did not prove his involvement in day-to-day operations or knowledge of duty evasion. The Tribunal noted that Shri Ravinder Jain was running the Aluminium Division, and Shri M.B. Baheti was not involved in its daily functions. Consequently, the imposition of a penalty on Shri M.B. Baheti under Rule 26 was deemed unsustainable and was set aside.Conclusion:The appeal filed by Shri M.B. Baheti was allowed, and the penalty imposed on him was set aside. The appeal filed by Shri Rajesh Maheshwari was dismissed, and the penalty imposed on him was upheld.