AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (2) TMI 1290
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....lications have been filed for settlement of the dispute arising out of show cause notice issued under DGCEI F. No. 167/KZU/KOL/Gr.A/12/3068-69, dated 5-6-2013 (hereinafter referred to as 'the SCN') by the Additional Director, Directorate General of Central Excise Intelligence, Kolkata (hereinafter referred to as 'the DGCEI') answerable to the Additional Commissioner of Central Excise & Service Tax, Ranchi Commissionerate Central Revenue Building, 5, Main Road, Ranchi-834001. 2. Briefly, the facts of the case are that the applicant-company is the manufacturer of M.S. Ingot falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985 and holds Central Excise registration. On 7-11-2012, the officers of DGCEI searched the aforesaid factory-cum-office premises of the applicant and other related premises. They seized some records, documents and obtained statements from concerned persons. Examination of the seized records and perusal of statements revealed that the documents in seized File No. 03/JPISPL/FAC/12 were actually 'Gate Passes'/'Weight Slips', used for clandestine removal of 765.37 M.T. of M.S. Ingots without payment of C.E. duty. The officers also....
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.... to believe that the goods were liable for confiscation. In his confessional statement dated 16-11-2012, he accepted the Central Excise liability and stated that he looked after every aspect of the company including purchase of raw materials as well as sales of finished goods. 4.1 In the application for settlement dated 24-6-2013, the applicant admitted the allegation of short-payment of the entire demanded amount of C.E. duty Rs. 30,01,065 and also admitted additional liability of Rs. 1,15,522 towards interest, totalling Rs. 31,16,587. They deposited the said amount of Rs. 31,16,587 by e-payments @ Rs. 5 lakh each on 15-11-2012, 15-12-2012 and @ Rs. 10 lacs on 16-1-2013, 7-2-2013 and balance Rs. 1,16,587 on 8-6-2013 (Rs. 1,065) and 16-6-2013 (Rs. 1,15,522) before approaching the Commission. 4.2 The co-applicant, in his application dated 24-6-2013 referred to the acceptance of the liability towards C. Excise duty as demanded in the SCN along with interest payable thereon by the applicant. He requested for waiver of penalty on himself. He initially did not submit the particulars of other settlement application(s) made by him, but in reply to the statutory notice informed....
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.... the facts of the case as stated by them at serial Nos. 2 and 3 of the Annexure to their applications dated 24-6-2013 and thus, no further comment is warranted on the above issue except on the prayer made by them in the Annexure to the said applications seeking immunity from penalty and prosecution. In this context, they argued that in this case, there was recovery of dispatch slips showing clandestine .dearances of finished goods viz. MS ingots by the applicant-company and the activities leading to clandestine sale of their finished goods were very much within the knowledge of the co-applicant, who, in his confessional statement, admitted the above facts and made the said advance payment towards the outstanding duty liabilities; that thus apparently he was involved in the activity of clandestine manufacture and clearance of finished excisable goods without the cover of Central Excise invoices and without payment of applicable Central Excise duty. Citing precedence of the decisions of this Bench in Final Order Nos. F-245/CE/10-SC(KB), dated 12-10-2010, F-246/CE/10-SC(KB), dated 12-10-2010 and F-244/CE/I0-SC(KB), dated 12-10-2010 where penalty was imposed both on the applicants and ....
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....prayer for granting immunity from penalty may not be granted, particularly in view of the continuous nature of evasion. 9. The Bench has carefully considered the material available on record and submissions made by the ld. Consultant/Advocate of the applicants and the representatives of the Revenue in course of hearing. 10. The Bench notes that the applicants have indulged in deliberate and well-planned evasion of duty in a systematic manner. Goods admitted to have been cleared clandestinely without payment of duties were not entered in the official records prescribed under the Central Excise Act and Rules. Accordingly, these transactions and the profits generated from the same cannot be recorded or utilised by Applicant No. 1. These profits have to be diverted and utilised somewhere else. Applicant No. 2 has played a key role in this entire exercise of duty evasion and utilisation of illegally generated profits as he has in his statement dated 16-11-2012 admitted that he looks after every aspect of the business of Applicant No. 1 including purchase of raw material and sale of finished goods. 11. Taking the above into account and in the facts and circumstances of ....
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....ctors. The point of disagreement is regarding the quantum of penalty on the co-applicant, one of the Directors of the company. We have considered the submissions made and the order of the learned Member and record our observations, discussion and findings below. 16. Allegations against noticee number 1 - the allegations in the show cause notice are of Central Excise duty evasion by wilful suppression of material facts pertaining to production and removal of finished excisable goods, that is, MS Ingots without proper accountal which are mainly, against applicant noticee number 1, as under - (a) Para 6.0 of the show cause notice - alleges that noticee number 1 indulged in unaccounted dispatch/removal of finished excisable goods in their factory premises without discharging duty and have not followed any of the required statutory provisions, like, recording production and removals of finished goods in their Daily Stock Account and issuance of invoices and in order to hoodwink the Authority used 'weighment slips' as dispatch documents. (b) Para 10.1 spells out the contraventions by noticee number 1 (applicant) of various provision....
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....r confiscation.... therefore, appears to have rendered himself liable for penalty in terms of Rule 26 of the said Central Excise Rules, 2002." The DGCEI submissions on the co-applicant's application for settlement confirm this allegation. 18. Thus, insofar as the co-applicant is concerned, the charges in the show cause notice are to the extent of pointing out that the co-applicant had prior knowledge relating to evasion of duty by way of clandestine removals, etc., by 'noticee No. 1', which is the applicant-company and further that such unlawful act would have never taken place without his (co-applicant's) consent and thus he appears to have had knowledge or reason to believe that the goods thus removed were liable for confiscation. On the other hand all the specific charges of violation of Rules by removal of goods without proper assessment, non-payment of duty, non-maintenance of records, non-issue of invoices, non-submission of returns have been made in respect of the applicant-company and not against the Director even considering that he had stated that he looked after all aspects of the business. Thus the aspect of the amount of penalty on the Director needs closer exami....
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....law of misdeed and accrual of advantage/benefit/profit by the company once clandestine evasion of duty has been admitted or established. It does not require evidence regarding diversion and utilisation of profits in respect of the company for the purpose of imposing mandatory penalty on the company. Whereas, the quantum of the proposed penalty on the Director is non-mandatory. Proof of receipt of illegal funds is not required under the mandatory penalty. (iv) At para 10 of the order referred above, it appears to have been assumed that it is the Director (and not the company) on whom the liability arises or shifts for the transactions and profits that have not come on record of the manufacturing company. The above inference does not appear to be sustainable in law, particularly, in view of the fundamental difference between Section 11AC of the Central Excise Act, 1944 and Rule 26 of the Central Excise Rules, 1944 regarding statutory mandatory and non-mandatory character of the two penalties. (v) The inference in the context of profits arising (and being diverted) through evasion of excise duty in respect of the co-applicant but not the company, ....
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.... hold that he (the co-applicant) does not deserve full immunity from penalty. We uphold the grant of immunity from prosecution and penalty on the co-applicant subject to his payment of an amount of penalty. 21. The said SCN proposed to impose penalty under Section 11AC of the Central Excise Act, 1944, read with Rule 25 of the Central Excise Rules, 2002. The wordings of Section 11AC are as follows :- "Penalty for short-levy or non-levy of duty in certain cases. - (1) The amount of penalty for non-levy or short-levy or non-payment or short-payment or erroneous shall be as follows : (a) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded for any reason, other than the reason of fraud or collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade, payment of duty, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to the duty so determined;" However, Rule 25 of the Central Excise Rules, 2002 reads ....
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....nother legal entity having not paid duty leviable. 23. The two penalties are of different types. One relates to a penalty for non-payment of duty (including mandatory penalty) and the latter pertains to guilty knowledge while handling or dealing with goods which are liable to confiscation. Equal penalty for two different offences of different nature under different provisions of law based on assumption, does not appear to be proper. 24. In the case of Vandana Bidyut Chaterjee v. Union of India of the Hon'ble High Court of Bombay [Order dated 13th February, 2012 in Writ Petition Number 165 of 2012 [2013 (292) E.L.T. 6 (Bom.)]] it was held that "It is an undisputed position that in this case that the dues/arrears of excise duty and penalty are that of the company. Therefore, the recovery proceedings under the Recovery Rules, 1995, can be taken only against the company, as it alone is the defaulter. There is no provision to recover the arrears of the company from its Directors and/or shareholders under the said Act. The arrears of dues belonging to a limited company are recoverable only from the limited company concerned which is an independent entity in law, particularly ....