JUDGMENT Rajes Kumar, J.
1. In the present writ petitions, petitioner has prayed for quashing the orders dated 24.12.1999 and 11.11.2000 passed by the Customs, Excise and Gold (Control) Appellate Tribunal (hereinafter referred to as "CEGAT').
2. Brief facts of the case are that the M/S India Casting Company. Balkeshwar Road. Agra was a partnership firm in which Sri V.K. Agarwal, A.K. Agarwal, G.K. Agarwal and Smt. Manju Rani Agarwal were the partners and engaged in the business of manufacturing of generating gets M/S Generators and Alternators India, D-2. Site-4 Sikandra, Agra was also manufacturer of generator sets and alternators. The officials of Directorate General of Ann Evasion (Central Excise), New Delhi searched the business premises of M/S India Casting Company, Balkeshwar Road, Agra. M/S Generators & Alternators India, D-2, Site-4, Sikandara, Agra, India House, Bye Pass Road, Agra, business premises of India Casting Company at Patna and business premises of M/S Wilson Diesel (P) Ltd, Patna. The search resulted in seizure of excisable goods (Alternators) 'valued at Rs. 43,500/- from the factory of MS Generators and Alternators India on the ground that no record was being maintained in the factory for the aforesaid goods. Some records were also seized. Show cause notice dated 25th September, 1989 was issued by the Collector, Central Excise, Kanpur to M/S India Casting Company, M/S Generators and Alternators India,, Wilson Diesel (Pvt) Ltd, Sri G.K. Agarwal. A.K. Agarwal, V.K. Agarwal. Smt. Manju Rani Agarwal and Smt. Archana Agarwal requiring them to show cause as to why Central Excise duty amunting to Rs. 5.71.615/- and Special Duty amounting to Rs. 9,549.75 p be not recovered from them under Rule 9 (2) of the Rules and a penalty be not imposed under Section 11A of the Central Excise Act, 1944 Said parries were also required to state why the seized goods valued at Rs. 43,500/- be not confiscated under Rule 173-Q and 1226 of Central Excise Rules, 1944 and why penalty be not imposed under Rule 9 (2), 52-A, 173 - Q and 226 of Central Excise Rules, 1944. They were also required to show cause why the plant and machinery used in the manufacture/production and storage or the said excisable goods be not confiscated under Rule 173-Q(2) of the Central'Excise Rules, 1944. Sarvasri G.K. Agarwal, Ajai Agarwal, V.K. Agarwal, Smt. Manju Rani Agarwal, Smt. Archana Agarwal and M/S Wilson Diesel (P) Ltd, were also required to show cause why penalty be not imposed on them under Rule 173-Q and Rule 209-A of Central Excise Rules, 1944, Defence reply was submitted on behalf of all the parties.
3. Adjudicating authority on, consideration of the reply ordered as under.
(1) Payment of duty of Rs. 5,14,269.93 p by M/S India Casting Company under Rule 9 (2) of Central Excise Rules. 1944 read with Section 11A of Central Excise Act, 1944.
(2) Seized goods valued at Rs. 43.500/-was confiscated and the security of Rs. 10,000/-deposited at the time of provisional release of goods was confiscated.
(3) A penalty of Rs. 2,00,000/- was imposed on M/S India Casting Company.
(4) A penalty of Rs. 1,00,000/-. was imposed on M/S Generators & Alternators Ltd. under Rule 209-A of Central Excise Rules.
(5) A penalty of Rs. 50,000/- was imposed on Wilson Diesel P. Ltd. under Rule 209-A of Central Excise Rules, 1944 and (6) A penalty of Rs. 50,000/- was imposed under Pule 209-A of Central Excise Rules, 1944 on Sarvasri G.K. Agarwal, A.K. Agarwal and Suit Manju Rani Agarwal Ddirectors/partners of M/S India Casting Company and Generators and Alternators Agra.
4. Against the order passed by the Collector, Central Excise, dated 03.06.1993, appeal was filed by all the aggrieved parties before the CEGAT. During the pendency of the appeal, Government of India enacted Kar Vivad Samadhan Scheme, 1998 and accordingly a declaration was filed by M/S India Casting Company under Section 89 of the Finance Act (No. 2), 1998 with the Commissioner, Central Excise. Kanpur, the designated authority. The designated authority determined the amount to be paid under Kar Vivad Samadhan Scheme Rules, 1998 and certificate of intimation under Section 90{1} of the said Act was issued on 10th February, 1999, under Section 88(f) of the Finance (No. 2) Act, 1998. Designated authority determined the duty payable to Rs 2,32,135/- and the penalty of Rs. 2,00,000/- was waived. The amount so determined was deposited on 08.03.1999 and a final certificate was issued by the Commissioner, Central Excise.
5. Appeals filed by all the aggrieved persons came up for hearing before the Tribunal. Tribunal vide impugned order dated 24/12/1999 decided all the appeals by the said, order, Tribunal set aside the penalty imposed on Sri G.K.Agarwal, A.K. Agarwal, V.K. Agarwal, Smt. Manju Rani Agarwal and Smt Archana Agarwal. It, however, upheld the penalty imposed on the petitioners. Tribunal held as follows.
"The present appeal are against this imposition of penalty under Rule 209-A of the, Central Excise Rules. In the impugned order there is a specific finding that M/S Wilson Diesel (P) Ltd. appellant issued the bills showing the clearances of diesel engine and M/S Generators' Alternators (India) appellant issued bill showing the clearance of alternators, whereas a complete generating set was cleared by M/S India Casting Company. Therefore, we agree with the arguments of the learned Departmental Representative in respect of these appellant that they abetted M/S India Casting Company in removal of generator set without payment of duty showing as generator set and alternator. Therefore, finding in the impugned order passed by the Collector of Central Excise in respect of M/S Wilson Diesel (P) Ltd. and M/S Generators & Alternators (India) are upheld.
In respect of penalty under Rule 209-A of the Central Excise' Rules, imposed on Shri A.K. Agarwal, Smt. Manju Rani Agarwal, Shri V.K. Agarwal, Sri G.K. Agarwal and Smt. Archana Agarwal, we find that there is no finding in the impugned order to show that they had knowledge that the offending goods are liable for confiscation. The Tribunal in the case of M. Harairaji v. C.C.E. Hyderabad and in the case of Kirti Kumar Mulibhai Parikh v. C.C.E. Vadodara, (supra) relied upon by the appellants, held that under the provisions of Rule 209-A of the Central Excise Rules before penalty is imposed a conscious knowledge to the fact that the goads are liable to confiscation is to be shown. This evidence is lacking in the present case.
Therefore we find penalties imposed on Shri G.K. Agarwal, Shri A.K. Agarwal, Smt. Manju Rani Agarwal, Shri V.K. Agarwal and Smt. Archanna Agarwal are not sustainable. Therefore, the appeals filed by them, are allowed. The appeals are disposed of as indicated above."
6. Thereafter, petitioners filed applications under Section 35C(2) of the Act for the rectification of the aforesaid order on the ground that in view of the provisions of Kar Vivad Samadhan (Removal of Difficulties) order, 1998, penalty of the petitioners being co-noticee be also set aside. CEGAT vide order dated 3rd November, 2000 dismissed the applications. Tribunal observed as follows:
"The contention of the applicants is that in view of the fact that dispute in respect of duty and penalty imposed on M/S India Casting Co. has been settled under KVS Scheme, therefore, no penalty can be imposed on the present applicants. This issue was not raised before the Tribunal at the time of arguments. This fact was admitted by the applicants} As the Issue now raised in notification of mistake application was not raised at the time of arguments; there was no occasion to pass an order in respect of this issue, The applicants want review of the Final Order, which is not permissible As the final order is passed on the basis of facts as pleaded, we find no mistake apparent on record in the final order. Therefore, the applications are rejected.
(Pronounced in Court)"
7. Heard Sri. A.K Gupta, learned counsel for the petitioners and Sri N.I. Jafri, learned Standing Counsel appearing on behalf of the respondents.
8. Learned counsel for the petitioners submitted that the issue involved in the present petition is squarely covered by the decision of this Court in writ petition No. 209 of 2002 Om Prakash Gupta v. Union of India decided on 3rd December. 2003. He further submitted that the petitioners were co-noticee to the M/S India Casting Company whose matter has been settled under Kar Vivad Samadhan Scheme hence, penalty in the case of petitioners should also be waived/deleted.
9. Learned Standing Counsel for Union of India has not disputed the fact that the petitioners were the co-noticee with the main noticee M/S India Casting Company in the show cause notice dated 25th September, 1989 issued by the Collector. Central Excise, Kanpur.
10. In exercise of powers conferred under Section 97(1) of the Scheme, Government of India, Ministry of Finance issued the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998 deemed to have been made effective from 01.09.1998. The order provided as follows:
"Whether a declaration to the designated authority has been made in respect of tax arrear in relation to indirect tax enactment for the amount of duties (including drawback of duty, credit of duty or any amount representing duty), cesses, interest, fine or penalty which constitutes the subject mattes of a demand notice or a show cause notice issued on or before the 31st day of March, I998 but remaining unpaid, and pending driermination on the date of making a declaration and, where, in respect of the same matter stated in the said declaration, a show cause notice has also been issued to any other person and is pending adjudication on the date of making the declaration, then, no civil proceeding for imposition of fine or penalty shall be proceeded with against such other person and in such cases the settlement in favour of the declarant under Sub-section (1) of Section 90 shall be deemed to be full and final in respect of such other person also on whom a show cause notice was issued on the same matter covered under the declaration."
11. A trade notice no MF (OR) CBE&C (F.No. 275/33/98-(X,8A) dated 09.12 1998 was issued by Board in the form of instructions relating to Kar Vivad Samadhan Scheme (Removal of Difficulties) Order, 1998 under Section 92 of the Finance (No. 2) Act, 1998, Annexure-II of the Trade Nonce reads as follows.
"Having due regard to the aims and objects of the Scheme, the Government have decided to issue an order for removal of difficulties in terms of the provisions of Section 97(1) of the Finance (No. 2) Act, 1998 it has been inter all', clarified that no civil proceedings for imposition of fine or penalty shall be proceeded with against the co-notices and in such cases the settlement in favour of the declarant under the Scheme shall be deemed to be full and final in respect of other persons also on whom show cause notices were issued on the same matter."
12. Kar Vivad Samadhan Scheme (Removal of Difficulties) Order. 1998 came up for consideration before Division Bench of Kerala High Court in the O.P. No. 16334 of 1999 in the case of Sri Tom K. Thomas, 253, Hill Garden P.O. Kuttnallur, Trichuri v. Union of India and Ors.. Division Bench of Koala High has upheld the validity of the Kar Vivad Samadhan Scheme and Kar Vivad Samadhan Scheme (Removal of Difficulties) Order. 1998 held as follows:
"The object of the Scheme appears to be to shorten the litigation and settle she dispute between the parties. It is with this end in view, the Scheme has been promulgated. Tax arrears has been defined with regard to indirect enactment as the amount of duties, cesses, interest, etc., determined as due or payable under that enactment as on the 31st day of March, 1998 but remaining unpaid as on the date of making a declaration under Section 88. Under Section 88 of the Scheme where a person makes a declaration to the designate authority in accordance with the provisions of Section 89, then the liability shall be discharged as per the Scheme. It can be seen that so far as the Sections were concerned, no distinction is there made with regard to a principal notices or a co-notice. All are entitled to get the benefit of the Scheme whether the matter is pending in appeal or not. The removal of Difficulties Order was issued because where the principal notices had settled the matter under the scheme, what should be done with regard to the co-notices. It is in that context, Ext. P3 was issued. In Ext.P3 it is stated that much co-notices are entitled to the benefit of the Scheme provided the show cause notice is pending adjudication on the date of making of the declaration. In the explanatory note, it is stated that a settlement in favour of the declarant under the Scheme shall be deemed to be full and final in respect of other persons also on whom show cause notices were issued on the same matter. Sri K. Ramakumar for the respondent argued that petitioners cannot compel as to how the Government should extend the benefit of the scheme. According to Sri K. Ramakumar it is only in cases where show cause notices are pending adjudication that the benefit of the Scheme can be given.
Before we try to interpret Ext.P3, we have to find out the meaning of the expression "is pending adjudication". Now, before any action is taken under the Excise laws or under the Direct Tax laws, notices are issued to the parties by the primary authority. The primary authority then considers the matter and dispose of the same by his order. It is a known fact that most of these Acts provide remedies against the orders passed by the primary authority. Appeals, Second Appeals or Revisions are provided against final orders. It is also a fact which does not require any proof that an appeal is a continuation of the original proceedings. Even though in appeal what the Appellate Authority considers is the correctness or otherwise of the order passed by the Primary Authority, the entire matter is before the Appellate Authority and in that sense we can say that the adjudication has not become final and is pending consideration. It can also be said that what is pending before the Appellate Authority is the adjudication of the show cause notice.
Thus the expression "is pending adjudication" should be interpreted to take in also cases where appeals against adjudication proceedings are also pending. In that case, petitioners will be entitled to the benefit of the Scheme and their claims cannot be rejected because the matter is pending in appeal.
Considering the above circumstances, we allow the Original petitions, declare that co-notices like the petitioners are also covered by the Order dated 8.12.1998 notwithstanding the fact that the show cause notices has been adjudicated upon in relation to the co-notices as well as the declarant under Section 90(1) of the Finance Act, 1998.
13. Now the matter has been finally decided by the Apex Court in the case of Union of India and Ors. v. Onkar S. Kanwar and Ors. reported in 2002 (7) SCC, 591. Apex Court has upheld the view taken by Division Bench orf Kerala High Court. Hon'ble Supreme Court held as follows:
"We have heard the parties. In our view, a reading of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order shows that where a declaration had been made in respect of a tax arrear and where in respect of the same matter a show-cause notice had also been issued to any other person, then the settlement in favour of the declarant has to be deemed to be full and final in respect of other persons on whom show-cause notices had been issued. It is settled law that when an appeal is pending there is no finality to the proceedings. The proceedings are then deemed to be continuing. Undoubtedly, at one place the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order seems does state that the show-cause notice should be pending adjudication. However, the same Order also talks of the show-cause notice being in respect of the same matter on which the show-cause notice has been issued to the main declarant. Then the Order provides that a settlement in favour of the declarant will be deemed to be full and final in respect of other persons also. This Order has to be read as a whole. If read as a whole, it is clear that a settlement by the main declarant is to operate as full and final settlement in respect of all other persons on whom show-cause notice was issued in respect of the same matter. Thus read as a whole the words "pending adjudication " cannot be read to exclude cases where the proceedings are still pending in appeal. Even otherwise the Order has to be read alongwith the Kar Vivad Samadhan Scheme. Under the Kar Vivad Samadhan Scheme, a party can file a declaration so long as the proceedings are pending. Thus, even though the show-cause notice may have been adjudicated upon the an appeal is pending, a party could still take the benefit of the Kar Vivad Samadharn Scheme and file a declaration. The object of the Kar Vivad Samadhar Scheme (Removal of Difficulties) Order is to give benefit of a settlement by the main party (i.e. the Company in this case) to all other co-notices. This being the object, a classification, restricting the benefit only to cases where the show-cause notice is pending adjudication, would be unreasonable. If read in this manner the Order would be discriminatory. An interpretation which leads to discrimination must be avoided. An interpretation, as suggested by Mr. Ganesh, would also be against the object of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order. It is therefore not possible to accept the submissions of Mr. Ganesh. in our view the reasoning given by the High Court of Kerala is correct and need to be upheld."
14. Following the aforesaid decision of Apex Court, this court in writ petition No. 209 of 2002 Om Prakash Gupta v. Union of India decided on 3rd December, 2003 deleted the penalty in case of co-noticee. The present case is squarely covered by the said decision.
15. In my opinion, when statutory provision, namely, Kar Vivad Samadhan (Removal of Difficulties) order, 1998 was in existence, same ought to have been considered by the Tribunal. Non-consideration of such order was patent mistake and ought to have been rectified by considering the same, but Tribunal has erred in not considering the Kar Vivad Samadhan (Removal of Difficulties) order, 1998 merely because it was not argued.
16. In the result, both the writ petitions are allowed. Order of the Tribunal are set aside and it is held that the petitioners are not liable for penalty being co-noticee to M/S India Casting Company in which the matter has been settled under Kar Vivad Samadhan Scheme.