Custom, Excise & Service Tax Tribunal
Rajesh Agrawal vs Commissioner, Cgst & Central Excise ... on 17 July, 2025
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH - COURT NO. - IV
Excise Appeal No. 51066 of 2022
[Arising out of Order-in-Appeal No. RPR-EXCUS-000-APP-070 to 072-19-20 dated
18.09.2019 passed by the Commissioner of Central Excise, Customs & Service
Tax (Appeals), Raipur]
Rajesh Agrawal ...Appellant
E-9, Anari Sadan,
Behind Krishna Adlab,
Samta Colony, Raipur,
Chhattisgarh - 492001
VERSUS
Commissioner of CGST & Central Excise,
Raipur ...Respondent
Central GST Bhavan, Dhamtari Road, Tikrapara, Raipur, Chhattisgarh - 492001 APPEARANCE:
Shri Jitin Singhal, Advocate for the Appellant Shri Kuldeep Rawat, Authorized Representative for the Respondent CORAM:
HON'BLE DR. RACHNA GUPTA, MEMBER (JUDICIAL) DATE OF HEARING: 18.03.2025 DATE OF DECISION: 17.07.2025 FINAL ORDER No. 51040/2025 DR. RACHNA GUPTA Present appeal has been filed against the order in appeal no.
070 to 072-19-20 dated 18.09.2019 to the extent of the penalty of Rs. 2,20,000/- as was imposed under Rule 26 (2) of the Central Excise Rules, 2002 upon one of the co-noticee namely Rajesh Agrawal and has been upheld bt the Commissioner (Appeals). The facts relevant for the present adjudication are as follows: -
1.1 The department got an information about fraudulent passing on of the Cenvat Credit and wrong availment of the same by the manufacturers of Iron & Steel products. The department initiated the investigation. It was observed that M/s. Godavari Power and 2 Excise Appeal No. 51066 of 2022 Ispat Ltd (M/s GPIL), Siltara, Raipur was engaged in manufacture of sponge iron, MS Billet, HB Wires, Ferro Alloys and Iron Ore Pellets.
During investigation it came to notice that the appellant alongwith one Shri Pradeep Kumar Agrawal had supplied the Bazar Scrap / Kabadi Scrap to M/s GPIL and even to various other manufacturers of Iron & Steel including M/s High Tides Infra Projects Ltd, Dhanbad, M/s Jetking Trading & Agency Pvt. Ltd. Raipur, M/s RMS Steel and company Raipur, M/s Shubh Multi Trade company, Raipur. These firms were found to be non-existant and were found to have taken and utilized huge amount of Cenvat Credit without manufacturing any goods during the year 2012-13 and 2013-14. M/s GPIL is also one of such manufactures who were found to have availed illegal Cenvat Credit amounting to Rs. 22,73,091/- during the impunged period of dispute on the strength of fake Cenvatable Invoices issued by the co-noticee no. 3 of the show cause notice. The remaining co-noticees no. 2 to 12 including appellant were found actively involved, with full knowledge, abetting with M/s GIPL in improperly availing the aforesaid Cenvat Credit. 1.2 With these observations the Show Cause Notice No. 110/2015-16 dated 18.08.2017 was served upon M/s GIPL along with 13 co-noticees including appellant proposing recovery of the Cenvat Credit of Rs.22,73,091/- along with interest from M/s GIPL. Penalty was proposed to be imposed upon all remaining co- noticees, including appellant, under Rule 26(2) of Central Excise Rules, 2002. The proposal was initially confirmed vide Order-in- Original No. 006/2019 dated 30.01.2019. Appeal against the said 3 Excise Appeal No. 51066 of 2022 order has been rejected vide the impugned Order-in-Appeal dated 18.09.2019. Being aggrieved the appellant is before this tribunal.
2. We have heard Shri Jitin Singhal, learned Advocate for the appellant and Shri Kuldeep Rawat, learned Authorized Representative for the department.
3. Learned counsel for the appellant submitted that the appellant is a commission agent and is engaged in supply of scrap and ingots on commission basis. The appellant used to take orders on telephone and used to receive Rs.25/- per ton for supply of scrap either from scrap dealer or from purchaser. 3.1 All allegations levelled in the show cause notice have been vehemently denied. Learned counsel submitted that appellant had requested for cross-examination of Shri Pradeep Kumar Agrawal whose statement has been relied by the adjudicating authority to impose penalty against the appellant. However, the Adjudicating Authority declined the said request and without appreciating the submissions made by the appellant imposed penalty on the appellant and duty demand on the main co-noticee i.e. M/s Godawari Power & Ispat Pvt. Ltd. vide Order-in-Original dated 30.01.2019.
3.2 It is further submitted that in the present case, the duty demand was against M/s Godawari Power & Ispat Pvt. Ltd. which has got settled the matter under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS) and the Discharge Certificate (SVLDRS-4 ) has already been issued. M/s GIPL is the main noticee. Learned counsel impressed upon that once the demand of 4 Excise Appeal No. 51066 of 2022 duty has been settled under SVLDR Scheme, the imposition of penalty would automatically fail. The appellant relied upon following judgments to support its plea: -
(a) V.K. Aggarwal Vs. Commissioner of CGST and Central Excise, (2024) 15 Centax 220 (Tri-Del)
(b) Siemens Ltd. v. Commissioner - 2023 (5) TMI 377 -
CESTAT - Mumbai
(c) B.V. Kshatriya v. Commissioner - 2023 (5) TMI 858 -
CESTAT Mumbai
(d) Dinesh Kanoria v. Commissioner - 2022 (12) TMI 1408
- CESTAT Mumbai
(e) Ramesh Despande and Shri Debdutta Chatterjee v.
Commissioner - 2021 (7) TMI 1307 - CESTAT Mumbai
(f) P.B. Vyas v. Commissioner - 2021 (378) E.L.T. 177 (Tri.
Mum.)
(g) Sasthi Charan Banerjee v. Commissioner - Final Order No. 75578/2022, dated 14.12.2022 by CESTAT Kolkata
(h) Manjeet Kaur Bansal v. Commissioner - 2022 (56) G.S.T.L 295 (Tri. Del.) 3.3 Learned counsel further submitted that M/s Godawari Power Ispat Ltd have taken CENVAT credit on the invoices of M/s Jetking Trading & Agencies Pvt. Ltd., Raipur, M/s RMS Steel Tech & Co., M/s S.R. Metallics, M/s Yes Commtrade etc., as per show cause notice. However, there is no iota of evidence on record to prove that the appellant had issued those invoices or had abetted in making those invoices. This makes it clear that the impugned show 5 Excise Appeal No. 51066 of 2022 cause notice is issued mechanically and without application of mind as far as appellant is concerned.
3.4 It is also submitted that statements recorded under Section 14 of the Central Excise Act, 1944 are not admissible if the procedure laid down under Section 9D of the said Act is not followed. Reliance is placed on the judgment of the Hon'ble High Court of Chhatisgarh in the case of Hi-Tech Abrasives Ltd. Vs. CCE&C, Raipur, 2018 (362) ELT 961 (Chhattisgarh). 3.5. It is submitted that penalty under Rule 26(2) of Central Excise Rules, 2002 cannot be imposed on basis of assumptions and presumptions and that there has to be an evidence on record to prove that the assessee had contravened provisions of Rule 26(2) of Central Excise Rules, 2002.
3.6 Finally, it is submitted that the extended period has been wrongly invoked while issuing the show cause notice. Hence, the same is barred by time.
With these submissions the order under challenge is prayed to be set aside and the appeal is prayed to be allowed.
4. While rebutting these submissions learned Departmental Representative submitted that the appellant had facilitated M/s. Godawari Power & Ispat Ltd. to avail improper CENVAT credit amounting to Rs. 22,73,091/- by issuing fake cenvatable central excise invoices and had abetted in making such fake cenvatable invoices for M/s. Jetking Trading & Agencies Pvt. Ltd., Raipur, M/s. Sandeep Commercial Company, Bhilai and M/s. Vinayak Impex, Raipur also as per show cause notice.
6
Excise Appeal No. 51066 of 2022 4.1 Further, appellant helped Shri Pradeep Kumar Agrawal in creating fake firm showing the trading of Iron & Steel products and he along with Shri Pradeep Kumar Agrawal had supplied the Bazar Scrap/Kabadi Scrap (a non-cenvatable Iron and Steel Scrap) to the manufacturers of Iron and Steel including M/s Godawari Power & Ispat Ltd. He had never supplied any goods to M/s Godawari Power & Ispat Pvt. Ltd. Impressing upon no infirmity in the findings against the appellant in the impugned Order-in-Appeal, the present appeal is prayed to dismissed.
5. After hearing the rival contentions and perusing the entire records I observe and hold as follows: -
5.1 The present case got initiated subsequent to search, under warrant, of all the registered premises of manufacturing units of Dhanbad, who had fictitiously shown sale of scrap to the registered dealers, as well as of premises of the respective registered dealers of Raipur. The registered addresses of all the 'non-existent manufacturers' were found to be fake as got recorded under Panchnama proceedings. The registered premises of each of dealers situated at Raipur involved in the case were either found deserted or no business activities were found to have ever taken place there.
5.2 The impugned show cause notice was issued based on the statements as were recorded during the investigation. The appellant was impleded as co-noticee based on the statement of Pradeep Kumar Agrawal the co-notice no. 11. Apparently, the 7 Excise Appeal No. 51066 of 2022 request of the appellant to cross examine said Pradeep Kumar Agrawal was declined. It is the settled position of law that statements recorded under Section 14 of the Central Excise Act cannot be relied upon as evidence without following the rigor of Section 9D of the Act. It has been further held that the provisions of Section 9D is mandatory in nature. The Hon'ble High Court of Chattisgarh in Hi-Tech Abrasives Ltd. (Supra) held as under: -
"9.5 Undoubtedly, the proceedings are quasi criminal in nature because it results in imposition of not only of duty but also of penalty and in many cases, it may also lead to prosecution. The provisions contained in Section 9D, therefore, has to be construed strictly and held as mandatory and not mere directory. Therefore, unless the substantive provisions contained in Section 9D are complied with, the statement recorded during search and seizure operation by the Investigation Officers cannot be treated to be relevant piece of evidence on which a finding could be based by the adjudicating authority. A rational, logical and fair interpretation of procedure clearly spells out that before the statement is treated relevant and admissible under the law, the person is not only required to be present in the proceedings before the adjudicating authority but the adjudicating authority is obliged under the law to examine him and form an opinion that having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice. Therefore, we would say that even mere recording of statement is not enough but it has to be fully conscious application of mind by the adjudicating authority that the statement is required to be admitted in the interest of justice. The rigor of this provision, therefore, could not be done away with by the adjudicating authority, if at all, it was inclined to take into consideration the statement recorded earlier during investigation by the Investigation officers. Indeed, without examination of the person as required under Section 9D and opinion formed as mandated under the law, the statement recorded by the Investigation Officer would not constitute the relevant and admissible evidence/material at all and has to be ignored. We have no hesitation to hold that the adjudicating officer as well as 8 Excise Appeal No. 51066 of 2022 Customs, Excise and Service Tax Appellate Tribunal committed illegality in placing reliance upon the statement of Director Narayan Prasad Tekriwal which was recorded during investigation when his examination before the adjudicating authority in the proceedings instituted upon show cause notice was not recorded nor formation of an opinion that it requires to be admitted in the interest of justice. In taking this view, we find support from the decision in the case of Ambica International v. UOI rendered by the High Court of Punjab and Haryana.
XXX XXX XXX Accordingly, on the first and second question of law, we hold that the statement of the Director could not be treated as relevant piece of evidence nor could be relied upon without compliance of Section 9D of the Act. The two questions of law accordingly, stand answered in that manner"
5.3 Similar view has been taken by the Hon'ble High Court of Allahabad in the case of CCE, Meerut-1 Vs. Parmarth Iron Pvt. Ltd., reported as, 2010 (260) ELT 514 (All.) and Punjab and Haryana High Court in the case of Jindal Drugs Pvt. Ltd. Vs. Union of India, reportedas, 2016 (340) ELT 67(P&H) and Hon'ble CESTAT, New Delhi in the case of CCE, Delhi-I Vs. Kuber Tobacco India Ltd., reported as, 2016 (338) ELT 113 (Tri- Del.) and Elora Tobacco Co. Ltd. Vs. CCE, Indore, reported as 2017 (347) ELT 614 (Tri-Del.).
5.4 I observe that in the present case the appellant had prayed for cross-examination of Shri Pradeep Kumar Agrawal, however, the same was not allowed. Hence, no reliance can be placed on such statement in view of the above mentioned decisions and also in view of the judgment passed by the Hon'ble Supreme Court of India in the case of Andaman Timber Industries Vs. CCE, Kolkata-II, reported as, 2015 (324) ELT 641 (SC) followed by Hon'ble High 9 Excise Appeal No. 51066 of 2022 Court of Allahabad in the case of CCE Vs Kurele Pan Products, 2014 (307) ELT 42 (All.).
5.5 From the statement of the appellant dated 11.05.2016 it was found even by Commissioner (Appeals) (Para 15 of O-I-A) that the appellant has deposed about being involved in supply of Bazar Scrap but to M/s Prakash Industry Ltd. only and he had not supplied Bazar Scrap to any other unit. Just because the subsequent testimony about supplying Bazar Scrap to M/s Raghubir Concast Pvt. Ltd. Raipur, was acknowledged by the appellant, He cannot be alleged to have supplied the scrap to M/s GIPL and other manufacturers in Dhanbad and Raipur on fake invoices without supply of goods, as alleged in the show cause notice. 5.6 From the above discussion, it stands clear that the statutory mandate of admissibility of the statement has not been fulfilled in the present case. Resultantly the sole reliance on the statement that too for purpose of imposing penalty on the appellant is not sustainable.
5.7 Penalty otherwise is a grave word of criminal consequence. Hon'ble Supreme Court in the case of Hindustan Steels Ltd. Vs. State of Orissa reported as 1978 (2) ELT J 159 (SC) has held that penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law and was guilty of conduct contumacious or dishonest or acted in conscious disregard of its obligation. The Hon'ble court further held that even if a minimum penalty is prescribed the authority competent to impose penalty will be justified in refusing to invoke penalty when there is a technical or venial breach of the provisions of the Act or where the 10 Excise Appeal No. 51066 of 2022 breach flows from the bona fide belief that the offender is not liable to act in the manner prescribed by the statue. Thus, on the same analogy the parties are not liable for any penal action and so the penal proceedings initiated in the show cause notice merits to be dropped. To impose penalty there should be sufficient evidence with regard to guilty frame of mind of the accused. In the absence of evidence of knowledge of the appellant, no penalty can be imposed. The essential criterion for invoking the provisions of Rule 26 is the presence of mensrea on the part of the person referred to in the provision. In the present case, no evidence has been adduced by the department to show that the Appellant was having the belief that there is any duty evasion. The positive evidence which is missing in the present proceedings. I draw my support from the following judgements:
Anil Kumar Saxena vs. CCE - 2000 (129) ELT 351 Laurel Organics Ltd. vs. CCE 2002 (140) ELT 151 5.7 It is also observed that penalty was proposed to be imposed only based on the fact that the appellant is a director of the main appellant company. Penalty under Rule 26(2) of the Central Excise Rules, 2002 cannot be imposed on any employee/director of a company. In support of their contention, the appellant has placed reliance in the case of Z.U. Alvi vs. CCE, 2000 (117) ELT 69 (Tri.), Sterlite Industries (India) Ltd. vs. CCE, 2002 (143) ELT 682 (Tri.) and in the case of Kamdeep Marketing vs Collector of Customs, Delhi reported in 1999 (110) E.L.T. 696 (Tribunal). Hence it is held that penalty is wrongly imposed on the appellant.11
Excise Appeal No. 51066 of 2022 5.8 It is also an apparent and admitted fact that the main noticee M/s GIPL, the company has got settled the dispute under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 (SVLDRS). The law has been settled that once the demand against the company stands settled, no question arises of imposition of penalty either on its director or on its raw material suppliers. We draw our support from the decision of this tribunal in the case titled as VK Agrawal vs. Commissioner of Central Tax and Central Excise reported as 2024 (15) Centax 220. It also apparent on record that appellant also applied under SVLDRS but his request was rejected holding it premature, being prior the final decision on settlement request of main noticee., M/s GIPL. As already observed above, the main notices M/s GIPL has already been issued the discharge certificate, the co noticee should not have been penalized in terms of the clarificatory Circular No. 1071/4/2019 dated 27.08.2019. Hence it is held that the order of imposition of penalty upon the appellant is not sustainable, the demand as such is no more existing. I draw my support from the decision in the case of Simens Ltd. vs Commissioner of Central Excise reported as 2024 (18 Centex 164 Tri. Bom.) 5.9. Finally coming to the plea of limitation, I find that the only case of department for invoking larger period of limitation is that disputed goods were not received by the M/s GIPL and hence M/s GIPL is alleged to have resorted to suppression of facts. On the contrary, it is the admitted fact that M/s GIPL had submitted that ER - 6 returns mde disclosure of inputs received in the factory and consumed in the manufacturing process. Thus M/s GIPL complied 12 Excise Appeal No. 51066 of 2022 with the aforesaid mandate while filling the ER -6 returns. The veracity of ER - 6 returns filed by the GIPL has never been questioned by the departmental authorities. 5.10 There is no allegation in the show cause notice nor any evidence produced by the department proving any positive act on part of the appellant which may amount to be called as collusion with the alleged fraudulent parties that too with the intention of evasion of Payment of excise duty. Resultantly, proposal of imposition of penalty upon the appellant vide the show cause notice dated 18.08.2017 is held to be barred by the period of limitation. I draw my support from the following decisions:
(i) Continental Foundation Jt. Venture v. CCE, Chandigarh-I [2007 (216) E.L.T. 177 (S.C.)]
(ii) CCE, Mumbai IV v. Damnet Chemicals Pvt. Ltd. [2007 (216) E.L.T. 3 (S.C.)]
(iii) Anand Nishikawa Co. Ltd. v. CCE [2005 (188) E.L.T. 149 (S.C.)]
6. In the light of entire above discussions, the order under challenge is hereby set aside. Consequent thereto, the appeal is hereby allowed.
[Order pronounced in the open court on 17.07.2025] (DR. RACHNA GUPTA) MEMBER (JUDICIAL) HK