TaxTMI 
TaxTMI 
2015 (4) TMI 1086
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....h stay order vide Final Order No. 57266/2013, dated 6-8-2013 and the stay petitions of the present applicants were directed to be listed for fresh decision independently on merits. Accordingly, the same were listed afresh for disposal. 2. We have heard Shri K.K. Anand, learned advocate appearing for the applicant and Shri M S Negi, learned DR appearing for the Revenue. The prayer in the application is to dispense with the condition of pre-deposit of Rs. 10 lakh each imposed on M/s. Suraj Medical Agencies, Shri Roshan Lal Kwatra, Director of M/s. Gold Star Pharmaceuticals Pvt. Ltd. and partner of M/s. Suraj Medical Agencies, Shri Kashmir Chand. Further, penalty of Rs. 25 lakh was imposed on Shri Ashok Kumar Kwatra, Managing Director of M/s. Gold Star Pharmaceuticals Pvt. Ltd. 3. It is seen that finding against the main noticee M/s. Gold Star Pharmaceuticals Pvt. Ltd., was as regards the undervaluation and clandestine removal of their final product. M/s. Suraj Medical Agencies was buyers of such clandestinely removed goods and the other applicants are either the partner of M/s. Suraj Medical Agencies or the Directors of M/s. Gold Star Pharmaceuticals Pvt. Ltd. 4.&e....
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.... in excess of the Rule making power conferred under the Central Excise Act, 1944. 3. There will be an interim order restraining the respondents from giving further effect to the impugned letter dated 13th December, 2011 being part of the Annexure 'P-6' to the writ petition." 7. Though the said decision was passed on 13-9-2012, neither the learned advocate appearing for the appellant nor the learned DR appearing for the Revenue has been able to show us the final outcome of the decision before the Hon'ble High Court. As such, we are constrained to follow the same at this interim stage. Inasmuch as the Hon'ble High Court has granted interim order restricting Revenue from further effect to the proceedings of penalty imposed under Rule 26, by respectfully following the same, we grant the interim relief to the petitioner upon whom penalties stand imposed under Rule 26 of the Central Excise Rules. 8. All the stay petitions are disposed of in the above manner. (Pronounced in the open Court on ) Sd/- (Archana Wadhwa) Member (Judicial) 9. [Order per : Manmohan Singh, Member (T)]. - I have gone through the s....
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....other cited judgment by the appellants, it is observed that Hon'ble Delhi High Court in the case of Sunil Mittal v. CCE - 2013 (289) E.L.T. 441 (Del.) has held that companies can be penalized under Rule 26. In the Punjab and Haryana High Court judgment in V.K. Enterprises v. CCE - 2011 (266) E.L.T. 436 (P&H), it has also been held that penalty under Rule 26 is imposable. Reference was also made to Supreme Court judgment in Standard Chartered Bank & Others v. Directorate of Enforcement & Others - (2005) 275 ITR 81 = 2006 (197) E.L.T. 18 (S.C.) in the above judgment where it is held that legislative never intended to give immunity from prosecution or penalty for grave economic crimes. It was held that company is corporate body and not a natural person. It was held that fine and penalty can be imposed. 16. For ready reference, judgments are briefly discussed below: In a recent judgment Hon'ble Delhi High Court in the case of Sunil Mittal v. CCE - 2013 (289) E.L.T. 441 (Del.) has held that companies can be penalized under Rule 26 ibid. Relevant paras Nos. 9 and 10 of the judgment are as follows: 9. Learned counsel for the appellant next submitted that Natraj Plast....
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....preme Court in Standard Chartered Bank and Ors. v. Directorate of Enforcement and Ors., (2005) 275 I.T.R. 81. The majority view elucidated that a company can be prosecuted and punished for an offence under Section 56(1)(i) of the Foreign Exchange Regulation Act, 1973, even though imprisonment for a term of not less than six months was compulsory. It was also held that legislative intent to prosecute corporate bodies for the offence committed by them is clear and explicit and the statute never intended to exonerate them from being prosecuted. The Legislature never intended to give immunity from prosecution or penalty for grave economic crimes. In such cases it is not possible to impose penalty of imprisonment because the company is a corporate body and not a natural person but fine or cash penalty can be imposed. 17. Hon'ble High Court of Punjab & Haryana too in the case of M/s. Vee Kay Enterprises v. C.C.E. reported in 2011 (266) E.L.T. 436 (P & H) had observed that penalty under Rule 26 ibid is imposable on Dealers of Cenvatable goods when only invoices are raised to pass on illegal Cenvat credit while no raw materials are supplied by the Dealers. The relevant para 10 is r....
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.... 26 ibid. 21. The main accused in these proceedings is M/s. Gold Star Pharmaceuticals Pvt Ltd. There are serious allegations against him for clandestinely manufacturing and clearing medicaments - the main drug being G-Norphine. The modus operandi was to manufacture the drugs with repeat batch numbers. The excess production was further cleared clandestinely mainly through M/s. Suraj Medical Agencies. Stay matter against M/s. Gold Star Pharmaceuticals Pvt. Ltd. was earlier decided by this Bench and pre-deposit of Rs. 1.15 crores ordered vide Final Order Nos. 55665-55669/2013, dated 10-1-2013. As no compliance has been made by him nor any extension sought his stay application along with appeal stands dismissed. Therefore, now I restrict my examination for the stay proceeding for the four appellants M/s. Suraj Medical Agencies, Sh. Roshan Lal Kwatra, Sh. Kashmir Chand and Sh. Ashok Kumar. The last three appellants are directly connected with the two concerns M/s. Gold Star Pharmaceuticals Pvt. Ltd. and M/s. Suraj Medical Agencies. While M/s. Gold Star Pharmaceuticals Pvt. Ltd. is the main accused concerned with production and clearance of the drugs without payment of duty M/s. ....
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....lso shows that he was getting necessary orders for supplying medicines to different dealers and to collect money from them, in cash, by all these three persons. It is noted here that the prices quoted and collected for the sale of main medicine G-Norphine from the dealers were much more (@ Rs. 3.75/- to Rs. 4.25/- per ampoule) than as shown in the statutory records (@ Rs. 2/- per ampoule). The illegally received remunerations were also being put in the bank accounts of the abovenoted three persons Sh. Roshan Lal Kawatra, Sh. Kashmir Chand and Sh. Ashok Kumar and also in the account of Mrs. Richa Kwatra, wife of Sh. Roshan Lal Kwatra. 22. Therefore without going into further details of the case, it is very clear that all the four noticees are directly involved in the illegal manufacturing and clearance of the medicines. In the interest of the Revenue, some terms need to be imposed upon them especially when the main accused M/s. Gold Star Pharmaceuticals Pvt. Ltd. has defaulted in making the pre-deposit as ordered by this Bench and also considering that both M/s. Gold Star Pharmaceuticals Pvt. Ltd. and M/s. Suraj Medical Agencies are family concerns of Sh. Roshan Lal Kawatra,....
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....on them under Section 11AC. Shri Ashok Kumar Kawatra is the Managing Director of M/s. Gold Star Pharmaceuticals Pvt. Ltd. and on him penalty of Rs. 25,00,000/- was imposed under Rule 26 of the Central Excise Rules, 2002. Another Director of M/s. Gold Star Pharmaceuticals is Shri Roshan Lal Kawatra on whom penalty of Rs. 10,00,000/- was imposed under Rule 26 of the Central Excise Rules, 2002. The allegation against M/s. Gold Star Pharmaceuticals Pvt. Ltd. and its Directors was that during the period of dispute, they had made clandestine clearances of the medicines without payment of duty and beside this, in respect of other clearances had under-declared the value of the goods. M/s. Suraj Medical Agencies, Moga is a dealer who is alleged to have received the medicines cleared by M/s. Gold Star Pharmaceuticals Pvt. Ltd. either without payment of duty or on short payment of duty by resorting to undervaluation. Penalty imposed on M/s. Suraj Medical Agencies under Rule 26 of the Central Excise Rules, 2002 is Rs. 10,00,000/-. Shri Kashmir Chand is an employee of M/s. Gold Star Pharmaceuticals Pvt. Ltd. Incharge of production and clearances of medicines and on him penalty of Rs. 10,00,000/....
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....prima facie in excess of the rule making power conferred under Central Excise Act, 1944 stayed its recovery till the disposal of the appeal, Member (Technical), however, by order dated 24-10-2013 recorded by him, took a different view holding that this is not the case for waiver from the requirement of pre-deposit and ordered pre-deposit of 50% of the penalty imposed by each appellant for compliance with the provisions of Section 35F. 25.2 In view of the difference between Member (Judicial) and Member (Technical), following point of difference has been referred to the undersigned for decision :- ''Whether in view of the facts of active involvement of M/s. Suraj Medical Agencies, Shri Roshan Lal Kawatra, Shri Kashmir Chand and Shri Ashok Kumar in the clandestine manufacture and clearance of medicaments by M/s. Gold Star Pharmaceuticals Pvt. Ltd., pre-deposit of penalty imposed upon them under Rule 26 of the Central Excise Rules, 2002 is demandable as recorded by the Member (Technical)? OR Whether considering the case laws cited by the learned Advocate stay is to be granted to M/s. Suraj Medical Agencies, Shri Roshan Lal Kawatra, Shri Kashmir ....
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.....-Mumbai), wherein the Tribunal relying upon the Apex Court's judgment in the case of Madhumilan Syntex Ltd. v. Union of India (supra) has held that the word "person" in Rule 26 need not be a natural person and penalty under this Rule can be imposed even on a company which is accused of the offences listed in this Rule. He, therefore, pleaded that this order recorded by Member (Technical) which is the correct order. 29. I have considered the submissions from both the sides and perused the records. 30. While Shri Ashok Kumar Kawatra and Shri Roshan Lal Kawatra are the Directors and Managing Director respectively of M/s. Gold Star Pharmaceuticals Pvt. Ltd., Shri Kishan Chand is an employee Incharge of production and clearance of M/s. Gold Star Pharmaceuticals Pvt. Ltd. M/s. Suraj Medical Agencies are a trading firm who were receiving the medicament, from M/s. Gold Star Pharmaceuticals Pvt. Ltd. The allegation against M/s. Suraj Medical Agencies is that they were receiving non-duty paid goods or the goods on which duty had been short paid by undervaluation, cleared by M/s. Gold Star Pharmaceuticals Pvt. Ltd. and it is on this basis penalty is sought to be imposed on th....
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....ty in respect of which duty demand has been confirmed under Section 11A(2) of the Central Excise Act, 1944 and the short payment/non-payment of duty is due to fraud, wilful misstatement, suppression of fact, etc. on his part. Penalty under Rule 26 of Central Excise Rules, 2002 is imposable on the persons other than the manufacturer, who are involved in acquiring possession of or are in any other manner involved in transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner dealing with excisable goods which they knew or had reason to believe are liable for confiscation. This provision is meant for imposition of penalty on the dealers or on other persons who have purchased the goods in respect of the duty liability has not been discharged either in full or in part or on the persons involved in concealing, transporting etc. of such goods, while they knew that the goods having been cleared without discharge of full duty liability, or for any other contravention were liable for confiscation. The provision for imposition of penalty under Rule 26 has been made by the Central Government in exercise of the provisions of Section 37(5) of the Central....