2008 (3) TMI 141 - AT - Central Excise

Firm penalized for duty evasion using fake invoices; upheld despite prior duty payment claim.

PATEL BROTHERS Versus COMMISSIONER OF C. EX., LUCKNOW

The penalties imposed on a firm for clearing goods without paying duty under bogus invoices were upheld, as the investigation confirmed the use of fake ... Clearance of goods without payment of duty under the cover of bogus invoice to various dealers – dealers admitted the same - contention of the appellant that sub-clause of Section 173Q of Central Excise Rules has not been mentioned in the show cause notice, therefore, penalty is not sustainable, is not acceptable – penalty are justified – since penalties can’t be imposed simultaneously on proprietor & proprietary concern, hence penalty on proprietor is set aside Issues:1. Challenge against imposition of penalties for clearing goods without payment of duty under bogus invoices.2. Contention regarding duty payment prior to show-cause notice to avoid penalty.3. Mention of specific sub-clause under Rule 173Q in show-cause notice for penalty sustainability.4. Imposition of penalties on both the firm and the proprietor.Analysis:1. The appellant contested the penalties imposed for clearing goods without paying duty under bogus invoices. The investigation revealed that the goods were cleared to dealers under the cover of fake invoices, which were later returned. The appellant argued that duty was paid before the show-cause notice, citing a Tribunal decision upheld by the Supreme Court. Additionally, the appellant claimed that the penalty under Rule 173Q was unsustainable as the specific sub-clause was not mentioned in the notice or order-in-original.2. The Revenue representative countered by stating that the goods were indeed cleared under bogus invoices, a fact admitted by the dealers. The penalty was imposed based on this ground. The Tribunal differentiated the present case from the precedent cited by the appellant, where duty was paid after a notification issue. In this case, the appellant cleared goods under fake invoices, making the previous decision inapplicable. The appellant's argument about the absence of the sub-clause of Rule 173Q in the notice was addressed with reference to a Supreme Court decision emphasizing the necessity of notifying the exact contravention.3. The show-cause notice specifically alleged the clearance of goods without duty payment under fake invoices, thus contravening Rule 173Q. This specificity in the notice rendered the appellant's reliance on previous decisions irrelevant in the current context.4. In a related appeal by Patel Brothers, the proprietor's contention regarding penalties imposed on both the firm and the individual was addressed. The penalty on the proprietor was set aside since it was already imposed on the proprietary concern for violating Central Excise Rules. The appeal by the proprietor was allowed, while other appeals were dismissed.