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2021 (3) TMI 845
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....d Slurry for which, Linear Alkyl Benzene (LAB) and Oleum (concentrated Sulphuric Acid) are the main raw materials. 3.The appellant-partner is aggrieved by the order of the Tribunal imposing penalty of Rs. 2,00,000/- on him, though the Tribunal reduced the penalty from Rs. 50,00,000/- to Rs. 2,00,000/-. 4.The appellant-partner has raised the following substantial questions of law, which were admitted on 12.09.2016:- "i. Whether the Tribunal is right in upholding the imposition of penalty on a partner of the firm, despite holding that the charge of clandestine removal and contravention of law against the firm is not sustainable and the duty demand is consequently set aside? ii. Whether the provisions of Rules 9(2), 173Q, 226 of the Central Excise Rules, 1944 can be invoked against an individual who is not a manufacturer, producer, registered person of a warehouse or a registered dealer? iii. Whether any penalty can be imposed under Rules 9(2), 173Q, 226 against the Partner of a firm when the entire duty demand against the firm has been set aside on merits? iv. Whether penalty under Rules 9(2), 173Q, 226 can be imposed on the appellant without....
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....mption in terms of Notification No.175/86, dated 01.03.1986, as amended. On 12.01.1993, an inspection was conducted by the Officials of the Central Excise Department in the manufacturing unit of the firm and the stock of raw material was verified, a quantity of 440 kgs of Acid Slurry was seized while in transit at Perundurai and another quantity of 140 kgs was seized from the premises of another concern, viz., Baby Star Soap Works, Perundurai. 9.The inspection led to issuance of show cause notice dated 19.04.1994 to the assessee-firm as well as to the appellant-partner and two others alleging that the firm had clandestinely manufactured and removed final product (Acid Slurry) without payment of duty and the others had played a role in the said clandestine removal. The show cause notice proposed to demand a sum of Rs. 3,14,65,370/- as Central Excise duty for the Acid Slurry alleged to have been clandestinely removed from the factory and further demand of Rs. 7,350/- for the final product, which was seized. 10.In the show cause notice, the allegation was that the firm was manufacturing and clandestinely removing Acid Slurry from its factory in excess of the declared quantity by....
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.... that the demand of duty on the firm was set aside. Aggrieved by the order of the Tribunal, upholding the levy of penalty to the extent of Rs. 2,00,000/-, the appellant-partner is before us. 15.Since the Revenue is aggrieved by the order passed by the Tribunal in its entirety, viz., setting aside the entire duty demanded from the assessee-firm and reduction of penalty on the appellant-partner, we first take up the grounds canvassed by Mr.V.Sundareswaran, learned Senior Standing Counsel. 16.It is submitted that the Tribunal ought to have considered that adequate evidence was available as clearly brought out in the show cause notice dated 19.04.1994, as well as in the Order-in-Original dated 03.08.2005, to substantiate the allegation that LAB was procured by the assessee-firm in fictitious names and the same has been used for clandestine manufacture and removal of final product, viz., Acid Slurry. Further, the Tribunal ought to have taken note of the role played by SWC, who were the dealers of LAB for TNPL and the assessee-firm had procured LAB only through SWC and there were enough records to show that cheques were issued in the names of the employees of SWC and these persons ....
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....ner as well as the assessee-firm submitted that the grounds raised by the Revenue, in their appeals, are entirely factual and there is no substantial question of law arising for consideration and this Court will not reappreciate the factual aspects, which have been elaborately dealt with by the Tribunal. 21.Insofar as the appeal by the appellant-partner is concerned, the Tribunal having set aside the entire duty demand on the assessee-firm, ought to have vacated the penalty imposed on the appellant-partner and though the Tribunal reduced the penalty, it has not given any reason as to why penalty has to be imposed on the appellant-partner. In support of her contention, the learned counsel referred to the decisions in the case of Commissioner vs. Mahesh Silk Mills [2015 (319) E.L.T. A52 (Guj.)]; Commissioner of C.Ex. Ahmedabad vs. Gopi Synthetics Pvt. Ltd., [2014 (310) E.L.T. 299 (Guj.)]; Commissioner of C.Ex., Meerut-I vs. R.A. Castings Pvt. Ltd., [2011 (269) E.L.T. 337 (All.)]; Commissioner of CGST and Central Excise vs. Wizard Fragrances [2019-TIOL-541-HC-ALL-CX.]; Commissioner of Central Excise, Agra vs. Aman Gupta [2016 (338) E.L.T. 28 (All.)] and Jubilant Agri & Consumable P....
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....l Authority with regard to the issue of clandestine removal. 27.What is important to note is that the order of remand passed by the Tribunal, for de novo adjudication by the Commissioner, is after issuing specific directions as to how adjudication should proceed. It was pointed out that the Adjudicating Authority has failed to take into consideration the most important criteria required for manufacture, that is, LAB and Oleum, in terms of the quantum of raw material required and final product required to be manufactured. Noting that the main contention of the assessee was with regard to the non-receipt of both the ingredients and that the transportation of the raw material requires special tankers and special storage facility and cannot be kept in drums, the Tribunal observed that this valuable piece of defence and rebuttal evidence has not been taken into consideration and therefore, concluded that the order of the Commissioner dated 10.09.1996 was a non-speaking order. 28.Further, with regard to the allegation of receipt of important item clandestinely and clandestine manufacture and removal of final product, it was held that it is for the Department to show that the assess....
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....tions made and directions given in Jaya Soap Works (supra), which was held to be a matter identical to that of the assessee's case. Further, the Commissioner was directed to take into consideration the judgments pertaining to confirmation of manufacture of removal of goods and in particular, in the case of Krishna Bottling (P) Ltd. vs. Commissioner [1999 (32) R.L.T. 845]. Thus, the order of remand for de novo consideration was in the light of the observations and directions issued in the order. 31.The Adjudicating Authority, being an authority subordinate to the Tribunal, is bound by the directions, as the majority view of the Tribunal confirmed the order of remand for de novo consideration. Thus, if there is any infraction of the directions issued by the Tribunal, then it would be a matter, which can be taken note of by the Tribunal in the second round of litigation and it would call for interference. Thus, we are required to see as to whether the Commissioner, on de novo adjudication, had taken note of the directions issued by the Tribunal, while remanding the matter or merely confirmed the earlier proposal by slightly revising the demand. This aspect of the matter has bee....
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.... LAB by the assessee, no evidence has been brought out in the de novo order except relying on the statements of the employees of SWC. Further, the Tribunal noted that the period involved in the case relates to April, 1989 to February, 1995, the assessee was registered with the Central Excise Department and therefore, the Adjudicating Authority ought to have given a clear finding on the manufacture of final product and clandestine clearance. Further, the Tribunal noted that both the inputs viz., LAB and Oleum and the final product, Acid Slurry are highly corrosive chemicals, requiring safety for transportation and storage. 36.Further, the Tribunal rightly held that the onus is on the Department to establish the supply of LAB by SWC in various fictitious names pertaining to the assessee-firm and a mere seizure of 449 kgs of Acid Slurry valued at Rs. 16,000/- during transit, cannot be a proof for the Revenue to arrive at a conclusion that huge quantity of Acid Slurry was manufactured and cleared clandestinely. 37.Further, the Tribunal faulted the Adjudicating Authority for having computed the quantity and value purely on mathematical formula and worked out the total quantity of ....
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....dinate Bench in Pan Parag India vs. CCE, [2013 (291) E.L.T. 81 (Tri.)] wherein, it was held that the theory of preponderance of probability would be applicable only when there was strong evidence heading only to one and only one conclusion of clandestine activity and the said theory cannot be adopted in case of a week evidence of a doubtful nature. Further, the Tribunal rightly pointed out that no attempt has been made to obtain documents and records from TNPL, which is crucial for the sale of LAB instead the Adjudicating Authority relied solely on the statements and records of SWC. Thus, the Tribunal concluded that the entire demand based on alleged clandestine removal is based on assumptions and theoretical calculations by taking notional quantity of LAB and set aside the entire demand. 39.The above findings rendered by the Tribunal would clearly show that a thorough fact finding exercise has been done and the missing links have been pointed out by the Tribunal and we find the entire matter to be fully factual and no question of law would arise for consideration in the appeals filed by the Revenue. 40.In the decision of this Court in the case of Commissioner of Central Exci....
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....ove reasons, we hold that there is no substantial question of law arises for consideration in the appeals filed by the Revenue in C.M.A.Nos.2714 and 2715 of 2016 and accordingly, the same are dismissed. 46.The appellant-partner is aggrieved by that portion of the impugned order whereby, the Tribunal did not give the appellant-partner full relief, but granted partial relief by reducing the penalty imposed on him. If the assessee-firm has been completely exonerated, as the allegation of clandestine manufacture/removal having not been established, then the appellant-partner cannot be mulched with penalty. 47.In the preceding paragraphs of this judgment, we have upheld the findings of the Tribunal, setting aside the entire demand of duty on the allegation of clandestine removal. If that be so, then the appellant-partner also needs to be exonerated. That apart, we find from the Order-in-Original more particularly, the order dated 03.08.2005, that there is no clinching evidence to link the appellant-partner with that of the allegation made against the assessee-firm except to state that some of them were close relatives and the appellant-partner had control over them. This finding, ....