TaxTMI 
TaxTMI 
2017 (4) TMI 690
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....ssioner, Central Excise, Jaipur-I wherender inter-alia a demand of Rs. 1,54,87,744/- alongwith interest and equivalent penalty has been confirmed against M/s RKSM. The impugned order also imposes a penalty of Rs. 25 lakhs on Shri R. K. Goel, Director of M/s RKSM and penalty of Rs. 2,50,000/- on Shri R. K. Gupta, Authorised Signatory of M/s RKSM. 1.2 The impugned order further imposes penalty of Rs. 2,50,000/- each on the following, who are also in appeal before the Tribunal. i) M/s Palsons Fabrics Pvt. Limited ii) M/s Hariom Textile iii) M/s Berry Brothers iv) M/s Orion Fabrics Pvt. Ltd. v) M/s Anand Prakash & Sons (HUF) vi) M/s Sri Sai Shanti Textile (SSST) vii) M/s Ankur Sulz Pvt. Limited viii) Shri Devraj Sindhal S/o Sh. Bishan Das Sindhal ix) M/s Shavellon Fabrics x) M/s Nishu Fabrics xi) M/s Pioneer Suitings Pvt. Limited xii) Mahender Kumar Miglani, Prop. of M/s Miglon Synthetics. 2. The brief facts of the case are that the appellant M/s RKSM holding Central Excise registration, are engaged in manufacture of processed man- made fabrics/ cotton fabric falling under ....
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.... i) The appellant M/s RKSM is engaged in the manufacture of processed man-made fabrics after getting supply of grey fabrics. They are suppliers mainly to Government department. ii) The suppliers exaggerated the figures of grey fabrics mainly at the instance of M/s RKSM as they wanted to get the finances/ loan from the Banks for replacing their old machinery. iii) The shortages and excesses are nullified if figures of shortages and excesses are compared. iv) The department has investigated only thirteen suppliers and others were not investigated by the department. v) In the worst case scenario their demand cannot exceed approximately Rs. 11 lakhs. vi) They were not given opportunity of cross-examination. vii) Parallel invoice book was not provided to the appellant- assessee. viii) The appellants should be allowed deemed credit of the grey fabric received though no documents were provided. ix) No single evidence of clandestine removal has been provided by the department. If 8% shrinkage and 4% damage is taken into consideration there will be no any shortage or excess production. x) Searches were ma....
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....how cause notice for penalising them under Rule 26 of Central Excise Rules is non- est in law. Such rule only becomes applicable where a person has reason to believe about the goods being liable for confiscation. In this connection, reliance is placed on the following: a) Steel Tubes of India Ltd. vs. CCE, Indore -2007 (217) ELT 506 (Tri.LB) b) Aditya Steel Ind. Vs. CCE, Hyderabad -1996 (84) ELT 229 (Tribunal) c) Woodmen Industries vs. CCE, Patna -2004 (164) ELT 339 (Tri. Kolkata). (vi) Merely some records recovered from M/s RKSM carrying the name 'DEV RAJ' has been the basis to implicate the appellant and thereby force him to admit the same in his statement. There is otherwise, no such corroboration to such statement. (vii) In his statement, Sh. Mahender Kumar Miglani denied having sent any goods to M/s RKSM. He was even shown certain invoices issued by M/s Pioneer Suitings Pvt. Ltd. Alwar in the name of 'MIGLON' for clearances of grey fabrics and such invoices allegedly showed grey fabrics were received by M/s RKSM. On being shown such invoices, Sh. Mahender Kumar Miglani denied having sent any grey fabrics to M/s RKSM. In sho....
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.... such documents can be presumed unless the contrary is proved. The scrutiny of the documents recovered, investigations conducted at various ends and depositions made revealed that M/s R.K. Silk Mills (I) Ltd. Khairthal had received 1921968.98 mtrs. of grey fabrics un-accountedly through various means for illicit production of processed fabrics as evidenced from the facts given below: a. Shri R.K. Gupta, an authorised signatory of RKSM admitted that he had submitted daily reports of grey receipt, machine- wise production, goods passed/ damaged, dispatch of processed fabrics and cash reports, fuel and electricity consumption reports to their Delhi office which were resumed from the office premises under panchnama dated 08.07.03. b. The documents/ records seized at the office premises of RKSM contained details grey receipt by RKSM Khairthal from various parties as well as from its Delhi office for processing without any cover of documents, production thereof without accounting for and clandestine removal of processed fabrics. The seized records / documents also contained details of production and consumption of fuel and electricity and also collection of job charges.....
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....ntral Excise Act, 1944 on various occasions, have categorically admitted clandestine production and clearance of processed fabrics from their factory. The suppliers of grey fabrics, as discussed in the show cause notice in detail, also in their respective statements have admitted having sent the unaccounted grey fabrics to RKSM for processing and received the same after processing without payment of Central Excise duty and Central Excise invoices. These statements have not been retracted. Now, RKSM have come up with a cooked story that in order to borrow money from the bankers they prepared records of fake production of processed fabrics to prove their viability before the bankers and the same were recovered/ resumed by the department and on the basis of which the impugned demand has been raised on assumption and presumption. This contention of the assessee is nothing but an after-thought version and is untenable in view of the factual position discussed above. Hence, the case laws cited do not support the assessee". (Emphasis supplied) 6.1 The appellant-assessee's argument that the Revenue investigated merely only thirteen suppliers and not the others cannot favour the....
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....khs imposed on him is that he was not concerned with any activities of Rule 26 of the Central Excise Rules, 2002. Sh. R. K. Goel says that only an allegation against the appellant is that without his consent and participation clandestine removal of goods was not possible. He has pleaded that the entire charge of clandestine removal was based on inferences and possibilities and there is no positive evidence. However, from the evidence on record, as discussed earlier, it cannot be said that the department's case of unaccounted receipt of the grey fabric and clearance of processed fabric without payment of duty and without issue of Central Excise invoice against the appellant - assessee is based on inferences and possibilities. The appellant being a Director in the company cannot abdicate his responsibility of payment of duty of Central Excise. He has been imposed a penalty of Rs, 25,00,000/- under Rule 26 of Central Excise Rules, 2002. Therefore, the contravention of the provisions of Rule 26 against Sh. R. K. Goel is sustained. However, considering that the equivalent penalty of Rs. 1,54,87,744/- has been imposed on the appellant-assessee, we take a lenient view in case of Sh. R. K.....
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....u Fabrics appear to be either partnership firm or proprietorship firm as they have not used in their name and style the suffix private limited. The remaining two individuals are (i) Shri Dev Raj Sindhal and (ii) Mahender Kumar Miglani. 10. The main contention of M/s Palson Fabrics Pvt. Limited, M/s Orion Fabrics Pvt. Limited, M/s Ankur Sulz Pvt. Limited & M/s Pioneer Suitings Pvt. Ltd. against imposition of penalty is that they are impersonal entities and penalty under Rule 26 of Central Excise Rules is not imposable on them, they having the status of a company. It is also pleaded that Rule 26 of Central Excise Rules does not have a provision of imposing penalty on the ground of abetment. They also cited following case laws in support: i) Steel Tubes of India Ltd. vs. CCE, Indore- 2007 (217) ELT 506 (Tri. LB) ii) Woodmen Industries vs. CCE, Patna -2004 (164) ELT 339 (Tri. Kolkata). 10.1 Above case laws hold that penalty under Rule 26 of Central Excise Rules, 2002 (Rule 209A of erstwhile Central Excise Rules, 1944) is not imposed on a company but only on a person. Therefore, following the ratio in the above case laws penalty imposed on these four companies is....
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....ifferent and distinct juristic personality but only a convenient collective description of such body of individuals. It is the law alone that can create or recognize a juristic personality distinct from the constituent individuals as in the case of companies. Therefore, merely because definition of 'person' would include more than one person as a body of individuals, there is no automatic birth of a juristic person unless specifically so recognized by law". 12.1 Further Hon'ble Supreme Court in the case of Agarwal Trading Corporation and Others vs. Asst. Collector of Customs, Calcutta and others - 1983 (13) ELT 1467 (S.C.) holds that on a firm or its partners a penalty can be imposed and a 'person' who includes an association or body of individuals. Hon'ble Supreme Court in the said case inter alia observes as under: "7. The second contention that because the firm is not a legal entity, it cannot be a person within the meaning of Section 8 of the Foreign Exchange Regulation Act or of Section 167(3), (8) and (37) of the Sea Customs Act, is equally untenable. There is of course, no definition of 'person' in either of these Acts but the definition in Section 2(42) of the G....
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....gainst them. They are therefore, liable for imposition of penalty under Rule 26 of the Central Excise Rules, 2001 read with Rule 26 of the Central Excise Rules, 2002. However, considering the totality of the facts and circumstances of the case, penalty imposed on M/s Berry Brothers of Rs. 2,50,000/- appears to be on higher side and the same is, therefore, reduced to Rs. 50,000/- (Fifty thousand only), which is 20% of the penalty imposed by the impugned order. 14. On behalf of M/s Anand Parkash & Sons (HUF) ld. Advocate argued that the penalty of Rs. 2,50,000/- imposed is exorbitantly high. Considering the totality of facts and circumstances of the case the penalty imposed appear to be on higher side and the same is reduced to Rs. 50,000/- (fifty thousand only), which is 20% of the penalty imposed by the impugned order. 15. M/s Shavellon Fabrics pleads that they are not concerned with any goods received from M/s RKSM; they purchase thread from open market and get the same converted to grey fabrics from M/s Sanjay Suitings. There was no notice issued to M/s Sanjay Suitings and there is nothing on record to link the receipt of the goods by M/s Shavellon Fabrics. There is nothing....