2015 (12) TMI 1398 - AT - Central Excise

CESTAT Upholds Penalties for Excise Duty Evasion Scheme Participants, Varies Based on Individual Roles

The Appellate Tribunal CESTAT Ahmedabad upheld penalties on individuals directly involved in an excise duty evasion scheme, such as Shri A.R. Majmudar and ... Levy of personal penalties on the directors and partners of the defaulting company and firms for wrong claim of SSI Exemption - Appeal of the Main Assessee was already dismissed for non compliance of stay order - Heldthat:- A. R. Majmudar was involved in wrong availment of SSI exemption benefit. Thus, the imposition of penalty on Shri Majmudar as Director of M/s. Bakul is justified. We agree with the submission of the Learned Advocate that the imposition of penalty on Shri A.R. Majmudar as partner of M/s Pocono is liable to set-aside, as he is already penalized as Director of M/s. Bakul on the same transaction. The imposition of penalty on Smt. A.A. Majmudar proprietress of M/s Shonar, we find that Smt. A.A. Majmudar had knowingly involved in irregular availment of the SSI exemption by M/s. Bakul. Hence, the imposition of penalty on her is justified. - Rule 209A of the erstwhile Central Excise Rules, 1944 provides any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act, or these rules, shall be liable to a penalty. The expressions in any other reasons have wide amplitude. It is the case of Revenue that Mrs. Majmudar knowing fully was involved in wrong availment of benefit of SSI exemption by M/s. Bakul, who cleared the goods without payment of duty, liable for confiscation. - However, penalty imposed is reduced - Appeal disposed of. Issues:1. Imposition of penalty on dummy units and individuals under Central Excise Rules, 1944.2. Application of Rule 209A in the case.3. Justification of penalties imposed on different parties involved.Issue 1: Imposition of Penalty on Dummy Units and Individuals:The case involved M/s Bakul being accused of floating dummy units, M/s Pocono and M/s Shonar, to evade Central Excise Duty. The Adjudicating Authority confirmed a demand of duty on M/s Bakul and imposed penalties on all entities involved. The appellants argued that penalties on dummy units and individuals were unjustified. The Revenue contended that penalties were legitimate due to the evasion scheme. The Tribunal analyzed the evidence, including bank statements and production activities, concluding that penalties on M/s Pocono and M/s Shonar were unwarranted as they were dummy units. However, penalties on individuals, such as Shri A.R. Majmudar and Smt. A.A. Majmudar, were upheld based on their involvement in the evasion scheme.Issue 2: Application of Rule 209A:The appellants contested the application of Rule 209A, which pertains to penalties for dealing with goods liable for confiscation. The Revenue argued that Rule 209A applied as individuals knowingly participated in the wrongful availment of SSI exemption. The Tribunal examined the involvement of individuals in the evasion scheme and found that penalties under Rule 209A were justified for those directly engaged in irregular activities. The penalties imposed on Shri A.R. Majmudar and Smt. A.A. Majmudar were assessed based on their roles in the scheme, leading to varied outcomes for each individual.Issue 3: Justification of Penalties Imposed:After considering submissions from both sides and reviewing the case records, the Tribunal made specific determinations regarding the penalties imposed. Penalties on M/s Pocono, M/s Shonar, and Mr. A.R. Majmudar as partner of M/s Pocono were set aside. However, the penalty on Mr. A.R. Majmudar as Director of M/s Bakul was upheld due to his involvement in the wrongful availment of SSI exemption. The penalty on Smt. A.A. Majmudar, proprietress of M/s Shonar, was reduced considering the circumstances. The Tribunal's decision reflected a nuanced approach based on individual roles and responsibilities within the evasion scheme.This judgment from the Appellate Tribunal CESTAT Ahmedabad delves into the intricacies of imposing penalties under the Central Excise Rules, 1944, focusing on the involvement of dummy units and individuals in evading excise duty. The analysis showcases a thorough examination of the evidence presented, legal arguments made, and precedents cited to arrive at a nuanced decision regarding the imposition and justification of penalties on the entities involved in the evasion scheme.