IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 628 of 2011 For Approval and Signature:
HONOURABLE MR.JUSTICE AKIL KURESHI HONOURABLE MS JUSTICE SONIA GOKANI ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
========================================================= SANJAY VIMALBHAI DEORA DIRECTOR - Appellant(s) Versus CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL & 1 -
Opponent(s) ========================================================= Appearance :
MR GAUTAM H GADHAVI for Appellant(s) : 1, None for Opponent(s) : 1, MR DARSHAN M PARIKH for Opponent(s) : 2, ========================================================= CORAM : HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 02/03/2012 CAV JUDGMENT (Per : HONOURABLE MS JUSTICE SONIA GOKANI)
1. Being aggrieved by the order of the Customs, Excise & Service Tax Appellate Tribunal (“CESTAT” for short) dated 14.5.2010, the present appellant has preferred this appeal u/s. 35G of the Central Excise Act, 1944 (“hereinafter referred to as “the Act”) proposing following questions of law :
(a) Whether penalty can be imposed upon the Appellant under Rule 26 of the erstwhile Central Excise Rules, 2002 in the facts and circumstances of the present case ?
(b) Whether in the facts and circumstances of the case, the Tribunal was right in upholding the penalty of Rs.15,00,000/- imposed on the Appellants under Rule 26 of Central Excise Rules, 2002 ?
(c) Any other question of law that this Hon'ble Court may frame considering the facts and circumstances of the present case
2. Heard learned counsel Ms. Madhu Jain for ld. counsel Mr.Gautam Gadhvi who fervently argued for on behalf of the appellant that imposition of penalty on appellant Shri Sanjay Deora who is the Director of the Firm is contrary to the well laid down principle of law in as much as there is complete absence of any discussion on the part of the Tribunal in a long drawn judgement regarding nature of alleged investment of the appellant. According to learned counsel for confirming the order of Commissioner (Appeals), there is hardly any discussion worth the name to hold appellant liable and therefore, on account of the order being non-speaking the same requires to be quashed.
3. She even on merits contended that the imposition of penalty is in contravention of law of evidence. As there is absolutely no basis to point out any knowledge on the part of the present appellant in respect of alleged concealment transportation etc. of the goods. Learned counsel further argued that the Rule 26 is very clear that the penalty can be imposed only on excisable goods having rendered liable for confiscation under the Central Excise Rule, 2002. Since show cause notice does not propose any confiscation of goods, on that ground alone, the penalty levied on appellant is incorrect.
4. On having considered the submissions made by the learned counsel and on close examination of the materials on record, this Tax Appeal merits no consideration for the reasons to be followed hereinafter.
5. Briefly it would be necessary to make a mention of relevant facts:
5.1 M/s. Sampath Aluminium Pvt.Ltd. (“SAPL” for short) is engaged in the manufacture and clearances of Aluminium ingots etc. . It has two sister units, namely M/s. Deora Wire N.Machine Pvt. Limited and M/s. Sampat Heavy Engineering Limited, both engaged in the manufacture and clearance of “aluminum conductors” and “Machines for drawing wire/rods” . All the three factories are situated in the same compound and are availing the Cenvat Credit facility on the inputs used.
6. By the officers of( DGCEL) respondent- Department , all the three factories were searched on 17th June, 2005 and the business premises of some of the buyers also were simultaneously searched, on having noticed clandestine removal of excisable goods and thereby noticing evasion of the central excise duty. It was also alleged of fraudulent availment of Cenvat Credit on the strength of cenventable invoices collected from the register, Central Excise Dealers without physically receiving the raw-materials. It was also noticed that the Management of all the three factories was done by the present appellant Shri Sanjay Deora in the capacity of Director of two factories and as an authorized signatory of third factory..
7. A show cause notice was issued by the Department on 23.11.2006 alleging that with mutual understanding of few selected buyers, excisable goods(aluminum coils) were removed surreptitiously, without accounting the same in statutory records and without issuance of central excise invoices and thereby the payment of Central Excise Duty payable thereon was evaded.
8. After due adjudication, the duty demand was confirmed for the sum of Rs. 1,23,12,313/- with interest as applicable from SAPL who was also required to pay equal amount of duty. Penalty of Rs. 25 Lakhs was imposed on present appellant.
9. When challenged before the Tribunal, it extensively dealt with the issue and confirmed the penalty on the appellant herein and impugned order is under attack in this appeal.
10. At the outset, it is required to be mentioned that imposition of penalty on the appellant is under Rule 26 of the Central Excise Rules, 2002. Rule 26 provides that any person who acquires possession of, or in any way concerned in transporting, removing, depositing, keeping concealing, selling or purchasing, or in any other manner deals with any excisable goods, which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to penalty or exceeding the duty of such goods or Rs 10,000/- whichever is greater.
10.1 It is apparent from the very tenor of the rule that penalty is imposable if excisable goods have been rendered liable for confiscation under the Act, or the Central Excise rules. The person who acquires possession of such goods, or in any manner concerned with any of the activity like transporting, removing, concealing etc. in dealing with such goods which he would have a reason to believe were liable to confiscation, would render himself liable for penalty.
10.2 It was contended retrospectively by the learned counsel Mr. Jain that the show cause notice does not speak of confiscation of excisable goods, and therefore, when the goods have not been rendered liable for confiscation Rule 26 cannot come into effect. This interpretation is not conducive to the object in bringing such provision on the statute book. The goods, even if are not confiscated or not have been rendered liable for confiscation, while indulging into any of the activities concerning such goods, provision of Rule 26 would be attracted.
10.3 As can be noted in the elaborate discussion conducted by the Tribunal, while confirming the duty demand in respect of various industries it has noted the manner in which clandestine removal of goods was made. The Tribunal noted that the department had based its case to support clandestine removal without payment of duty on the record seized in the search operation and also on the statements recorded of authorised signatory and excise incharge, watchman, director. All these companies and director and authorised signatory B.R Overseas one of the buyers and the Director of M/s Anish Metals is also one of the buyer and transporters. It was further noted that the details of documents like note books, files, etc were examined for the purpose of verifying statements as well as substantiated the allegations of clandestine removal. The Tribunal also noted that the authenticity of the note book were confirmed and the entries and the registers were well explained in the statements of different persons. The Tribunal concurred with the commissioner's findings of rejecting the Chartered Engineer's report on probable production capacity of SAPL. The Tribunal found substance in the findings of the Commissioner that the actual production accounted by the appellant was more than the Chartered Engineers certified production and therefore such certificate of chartered engineer was not found trustworthiness and was rejected.
11. The Tribunal also noted that as was done in the order in original, for every industry and buyer there was necessity to individually examine the quantity of goods clandestinely removed and holding that the clearances shown in the private record could not be possibly relating to clandestine removal, as for demanding the full quantity as per the work sheet attached to the show cause notice, the private record according to the Tribunal could not be only material for working out such quantity. Therefore it analysed the evidence in respect of each buyer as was done by the Commissioner in order in original and accordingly it analysed the case of each buyer and reduced the total duty demand from total quantity of Rs 567.367 metric valued at Rs 5,28,37,316/- to Rs 86,23,50/-. It also confirmed the penalty against the SAPL giving an option to pay the duty interest and penalty @ 25% of the duty amount towards within 30 days of its order and likewise confirmed the penalty against the present appellant reducing the same to Rs 15 lakhs from Rs 25 lakhs in consonance with the reduction in duty demand.
12. As can be seen from the record the extensive role attributed to the present appellant as a Director to M/s SAPL to M/s Deora wires (DWNMPL) as also an authorised signatory of SHEL, not only he had knowledge at every stage, while removing keeping, selling, concealing the excisable goods and it would not have been possible without his active role and connivance with other buyers. The Commissioner Appeals has rightly levied penalty for his having contravened the statutory provision and the rules and the Tribunal was justified in confirming the same. Although, the discussion with regard to the confirmation of penalty is very brief that itself cannot deter us from upholding such findings of the Tribunal inasmuch as the Tribunal, while concurring with the reasonings of the Commissioner (Appeals) in imposing the penalty need not have elaborated his role and the provision of Rule 26. It also need not have any specific terms holding the person liable for penalty with both the adjudicating authorities below have discussed elaborately the role of appellant and the order of the Tribunal also attributes such clandestine removal and confirmation of demand of duty to the Director of SAPL against the company also the penalty has been confirmed in way of confirmation of demand on duty.
13. Even otherwise, the entire issue is based on the factual matrix which was before the Tribunal and basing its reasoning and the conclusion on the evidence produced by the revenue and on appreciating those details when the order has been passed, it cannot be said that there is either any error or perversity in the findings of the Tribunal. It also adopted a reasonable approach, according to us when it reduced the penalty correspondingly when there was a reduction in confirmation of duty demand. This appeal being devoid of any merits deserves rejection and is therefore stands rejected.
(Akil Kureshi,J.) bina (Ms. Sonia Gokani,J.)