2003 (12) TMI 128 - AT - Central Excise

Tribunal Overturns Penalties; Lack of Evidence and Mens Rea in Central Excise Case Leads to Successful Appeals.

KAMDEEP MARKETING PVT. LTD. Versus COMMISSIONER OF C. EX., INDORE

The Tribunal set aside the penalties imposed on the appellants under Rule 209A of the Central Excise Rules, 1944, due to the lack of evidence showing ... Imposition of penalties under Rule 209A - Words and Phrases - HELD THAT:- The expression 'any other manner' should be understood in accordance with the principle of ejusdem generis and would, then, mean 'any other mode of physically dealing with the goods'. This position has been recognized in Godrej Boyce & Mfg. Co.[2002 (2) TMI 263 - CEGAT, MUMBAI] which has been followed in A.M. Kulkarni [2003 (2) TMI 507 - CESTAT MUMBAI]. The decision in Ram Nath Singh [2002 (11) TMI 145 - CEGAT, NEW DELHI] is also to the same effect. Any person to be penalized under the above rule should also be shown to have been concerned in physically dealing with excisable goods with the knowledge or belief that the goods are liable to confiscation under the Act/Rules. In the instant ease, neither of the essential ingredients of offence under Rule 209A has been shown to exist. We have already noted the Commissioner's findings against these appellants. The above findings of the learned Commissioner do not come anywhere near satisfying the essential requisites for penalty under Rule 209A. There is no finding that the appellants had dealt with any excisable goods in any manner specified or contemplated under Rule 209A, let alone any finding of mens rea. As regards the penalties imposed on Paras Vora and Ajit Singh Bhatia as partners of the respective firms, these penalties were imposed in addition to the like penalties imposed on the firms and hence cannot be sustained in view of the settled law on the point vide B.C. Sharma [2000 (8) TMI 137 - CEGAT, COURT NO. I, NEW DELHI], Chandrakant Sanghvi [2000 (9) TMI 286 - CEGAT, MUMBAI] and Harish Dye & Ptg. Works [2000 (11) TMI 266 - CEGAT, MUMBAI]. The same is the case with the penalty imposed on Vishal Agarwal in addition to that imposed on his proprietorship viz. Vishal Transport Service. Thus, we set aside the penalties imposed on the appellants and allow these appeals. Issues Involved: Imposition of penalties under Rule 209A of the Central Excise Rules, 1944; Challenge to penalties based on lack of reliable evidence and violation of natural justice.Imposition of Penalties under Rule 209A:The appellants were penalized under Rule 209A for involvement in fraudulent activities related to Modvat credit and excisable goods. The Commissioner found various appellants to have connived or dealt with goods in a manner that facilitated fraudulent activities. However, the Tribunal noted that for a penalty under Rule 209A to be valid, it is essential that the person physically dealt with excisable goods knowing they were liable for confiscation. The Tribunal referenced previous decisions to support this interpretation. In this case, it was argued that there was no finding that the appellants had physically dealt with excisable goods in the specified manner, thus questioning the basis for imposing penalties.Violation of Natural Justice:In Appeal Nos. 1997-2000, a challenge was raised regarding the violation of natural justice by the Commissioner. It was alleged that the order was passed without giving the appellants an opportunity to be heard personally. The Commissioner's observations regarding the lack of response from the appellants to show cause notices and hearing notices were noted. The Tribunal found that these observations were not contested in the appeals, leading to the conclusion that the plea of violation of natural justice was not sustainable in those cases.Decision and Findings:The Tribunal emphasized the requirements for imposing penalties under Rule 209A, highlighting the need for physical involvement with excisable goods and the presence of mens rea. The Commissioner's findings were scrutinized, and it was concluded that the essential elements for penalty under Rule 209A were not established in this case. Additionally, penalties imposed on individuals as partners of firms were deemed unsustainable based on established legal principles. Consequently, the Tribunal set aside the penalties imposed on the appellants and allowed the appeals.