Custom, Excise & Service Tax Tribunal
M/S. Nashik Strips Pvt. Ltd vs Commissioner Of Central Excise, Nashik on 15 December, 2009
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI Appeal No. E/1152 to 1156/08, E/1171/08 (Arising out of Order-in-Appeal No. IPL/163 to 168/NSK/2008 dated 28.8.2008 passed by the Commissioner (Appeals) Central Excise & Customs, Nasik.) For approval and signature: Honble Shri Ashok Jindal, Member (Judicial) ============================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Yes
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M/s. Nashik Strips Pvt. Ltd.
:
Appellants
M/s. Master Traders
M/s. Akshar Trading Co.
Shri K.K. Agarwal
M/s. Memon Associates
M/s. JSW Steel Ltd.
VS
Commissioner of Central Excise, Nashik
Respondents
Appearance
Shri Mayur Shroff, Advocate &
Shri Krishna Kumar, Advocate for Appellants
Shri Kishorilal, SDR Authorized Representative (SDR)
CORAM:
Shri Ashok Jindal, Member (Judicial)
Date of hearing : 15/12/2009
Date of decision: /2010
ORDER NO.
Per : Ashok Jindal, Member (Judicial)
These appeals are filed by (a) M/s. Nasik Strips Pvt. Ltd. (NSPL) (b) its Director Shri K.K. Agarwal, (c) M/s. Akshar Trading Co. (d) Master Traders (e) M/s. Memon Associates and M/s. JSW Steel Ltd. against the confirmation of duty on NSPL and penalties on all the appellants.
2. The issue involved in this case is HR Trimmings scrap generated at the factories of M/s.JISCO Ltd., during the course of manufacture of their final products, was auctioned off to its appointed independent auctioneers, who had sold and delivered the same to the small scale units engaged in manufacture of downstream products, situated in and around Viramgam, Gujarat, through dealers such as M/s. Akshar Trading Company, M/s. Umiya Corporation, M/s. Master Traders etc. These Viramgam based and users of HR Trimmings scrap being unregistered SSI units, do not avail Cenvat credit and hence do not require the excise duty paid invoices. The said dealers through brokers such as M/s. Diamond Roadways, Mumbai supplied by M/s.JISCO to M/s. NSPL a manufacturer of M.S.Ingots at Musalgaon-Sinnar, District Nashik. The brokers who used to arrange for transport of goods from the factories of M/s. JISCO to Viramgam,, took the delivery from the factory of M/s. JISCO, but the name of consignee in the corresponding invoice was given as M/s. NSPL, so that the M/s. NSPL could avail Cenvat credit on the strength of the invoices. However, instead of delivery to M/s. NSPL, the consignee appearing in the invoices, were diverted to Viramgam, where the same were delivered to the small scale units engaged in the manufacture of downstream products such as nails, pins, barbed wire etc. M/s. NSPL in turn availed Cenvat Credit of the duty paid as appearing in the said invoices without having physically received the goods mentioned therein. The adjudicating authority confirmed the demand of inadmissible credit availed and utilized by M/s. NSPL and imposed penalty of Rs.2,04,529/- on M/s. NSPL, Shri K.K. Agarwal, Director of M/s.NSPL, Shri Manish Agarwal, M/s. Jindal Steel & Alloys Ltd., Shri Shantilal Umarshi Dharamshi, M/s. Akshar Trading Company, M/s. Master Traders & Memon Associates. Except Shri Shantilal Umershi Dharamshi and Manish Ramavatar Agarwal, the remaining parties have filed the appeal, which are listed before me for hearing.
3. On behalf of M/s. Nashik Strips Pvt. Ltd., the learned Advocate submitted that the appellant has paid the duty of Rs. 2,04,529/- and they have admitted their duty liability and prayed that in that event the penalty be reduced to 25% of the duty confirmed giving the benefit of the proviso to Section 11AC as they have paid the duty before the issuance of the show cause notice.To support to their contention, they placed reliance :
K.P. Pouches Ltd. Vs. Union of India- 2008 (228) ELT 31 (Del.) Commissioner of Central Excise Vs. Marlbro Appliances P. Ltd.- 2007 (208) ELT 503 (Del.) Commissioner of Central Excise, Rohtak Vs. J.R. fabrics (P) Ltd.- 2009 (238) ELT 209 (P & H) Balaji Exports Vs. Commissioner of Central Excise, Surat 2009 (237) ELT 505 (Tri.-Ahmd.) (A) M/s. Nashik Strips Pvt. Ltd.
It is submitted that:-
Without prejudice to the other submissions made in the Appeal Memorandum, the quantum of penalty under 11AC may be reduced to 25% of the duty amount.
On behalf of (B) Shri K.K. Agarwal, Director of Nashik Strips Pvt. Ltd.:
Penalty of Rs. 2,04,529/- has been imposed by the learned Deputy Commissioner under Rule 26 of the Central Excise Rules, 2002. The aforesaid penalty have been upheld by the learned Commissioner (Appeals) vide his order dated 28-08-08.
It is submitted that:-
i. The allegation against the Appellants company was fraudulent availment of irregular and inadmissible Cenvat Credit.
ii. It has been alleged that the Appellants company violated the provisions of Rule 3(1) and Rule 4(1) of the Cenvat Credit Rules, 2002. No violation of the provisions of Central Excise Rules 2002 has been alleged against the company. Furthermore, it is not the Departmental case that the Appellant had contravened any of the provisions of the Central Excise Rules, 2002.
iii. There is neither any averment in the impugned notice nor there is any finding on the part of the lower authorities that the Appellant had dealt with or was in any way concerned with any goods which were liable for confiscation.
iv. As per the provisions of Rule 26 of the Central Excise Rules 2002 , as existing at the relevant period (September 2002), any person who acquires possession of, or is 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 (emphasis supplied), shall be liable to a penalty not exceeding the duty on such goods or rupees ten thousand, whichever is greater. It is not the Departments case that the HR Trimmings removed by M/s. JISCO Ltd. were liable for confiscation. Furthermore, from the plain reading of Rule 26, it is manifest that penalty under Rule 26 is imposable if excisable goods have been rendered liable for confiscation under the Act or the Central Excise Rules 2002. No contravention of the Central Excise Act or the Central Excise Rules 2002 is alleged or averred against the Appellant. Thus, the invocation of the provisions of Rule 26 of the Central Excise Rules 2002 against the aforesaid Appellant is mi-conceived and unsustainable. It is thus submitted that the impugned order upholding penalty under Rule 26 of the Central Excise Rules 2002 is unsustainable and deserves to be set aside.
v. The Appellant relies on the following case laws in this connection:-
1. Dhanlaxmi Garments Vs. Commissioner of Central Excise, Surat I- 2009 (235) ELT 523 (Tri-Ahmd.)
2. Mukand Ltd. Vs. Commissioner of C. Excise, Belapur 2007 (218) ELT 120 (Tri.- Mumbai).
3. Castrol India Ltd. v. Commissioner 2008 (222) E.L.T. 408 (Tribunal);
4. Commissioner of Customs (Export), Mumbai v. M.K. Industries - 2008 (230) E.L.T. 91 (Tri. - Mumbai);
5. Air Carrying Corporation Pvt. Ltd. v. Commissioner 2008 (229) E.L.T. 80 (Tribunal) vi. Without prejudice to the above submission it is also submitted that the penalty of Rs. 2,04, 529/- is harsh and exorbitant. No valid and justifiable reasons are forthcoming in the adjudication order for imposing such harsh and unreasonable penalty on the Appellant nor any valid reasons are forthcoming in the impugned order for sustaining such penalty. Also, the penalty of equal amount of duty imposed on the Company as well as each of the Co-noticees also shows arbitrary exercise of powers vested in the authority and clear non-application of mind. Thus, such harsh and unreasonable penalty cannot be sustained and even if penalty is held to be imposable, a reduction in penalty amount is prayed for.
(C) M/s. Akshar Trading Co., M/s. Master Traders & Memon Associates A penalty of Rs. 2,04, 529/- has been imposed on the aforesaid three firms vide Order-in- Original dated 05-02-08. Penalty has been imposed under Rule 26 of the Central Excise Rules 2002. The concerned period is September 2002. The aforesaid penalties have been upheld by the learned Commissioner (Appeals) vide his order dated 28-08-08.
The Departmental case is that the duty paid HR Trimming scrap did not reach the premises of M/s. Nashik Strips Pvt. Ltd. but was delivered to Viramgam based end users of HR Trimming Scrap who did not require Central Excise Invoices as they were enjoying SSI exemption. It is the Departments case that while the HR Trimming Scrap, cleared on payment of duty by M/s. JISCO Ltd., M/s. Nashik Strips Pvt. Ltd. availed Cenvat Credit on the HR Trimmings Scrap on the strength of the 15 invoices issued by M/s. JISCO Ltd. without receiving the goods mentioned in the invoices.
At Para 34 of the impugned notice, it has been averred that the aforesaid three firms were liable for penalty under Rule 26 of the Central Excise Rules, 2002 as the consignments of HR Trimmings Scrap consigned to M/s. NSPL were diverted under their directions and sold to small scale manufacturers of down stream products like nails, pins, horseshoes, washers etc. The findings of the learned Deputy Commissioner are reflected at Para 51 of the Order dated 5-02-08. The learned Deputy Commissioner has imposed penalty under Rule 26 of the Central Excise Rules, 2002 on the basis that the above firms have taken active part in the modus operandi to connive and extend inadmissible credit To M/s. NSPL without delivery of excisable goods and by being in receipt of the impugned goods reached Gujarat and the relevant invoices reached NSPL.
The findings of the learned Commissioner (Appeals) are reflected at Para 5.4 and Para 6 of the Order-in-Appeal dated 28-8-08. The order of the learned Deputy Commissioner has been upheld on the ground that this was a case of fraudulent availment of Cenvat credit based on evidence and statements recorded of concerned persons and the fraudulent availment was facilitated by M/s. JSW Steel Ltd. and the brokers.
It is submitted that:-
i. As per the provisions of Rule 26of the Central Excise Rules 2002 , as existing at the relevant period (September 2002), any person who acquires possession of, or is 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 (emphasis supplied), shall be liable to a penalty not exceeding the duty on such goods or rupees ten thousand, whichever is greater. It is not the Departments case that the HR Trimmings removed by M/s. JISCO Ltd. were liable for confiscation. Furthermore, from the plain reading of Rule 26 it is manifest that penalty under Rule 26 is imposable if excisable goods have been rendered liable for confiscation under the Act or the Central Excise Rules 2002. No contravention of the Central Excise Act or the Central Excise Rules 2002 is alleged or averred against the aforesaid Appellants. Thus the invocation of the provisions of Rule 26 of the Central Excise Rules 2002 against the aforesaid Appellants is mi-conceived and unsustainable. It is thus submitted that the impugned order upholding penalty under Rule 26 of the Central Excise Rules 2002 is unsustainable and deserves to be set aside.
ii. Without prejudice to the above submissions it is submitted that Rule 26 of the Central Excise Rules, 2002 permits imposition of penalty on a person and not a firm. In the present case, penalties have been imposed on the firms. Thus, the impugned order is unsustainable. The decision of the Honble Tribunal in M/s. Woodmen Industries v. Commissioner 2004 (164) E.L.T. 339 (Tribunal) (maintained by the Honble Apex Court in Commissioner v. Woodmen Industries 2004 (170) E.L.T. A307 (S.C.)) is relied upon in this connection. The decision of the larger bench of the Honble Tribunal in the case of Steel Tubes of India Ltd. Vs. Commissioner of C. Excise Indore- 2007 (217) ELT 506 (Tri-LB) is also relied upon in this connection. In the aforesaid case, the Honble Tribunal has also held that for imposition of penalty under Rule 209A of the Central Excise Rules 1944, the person dealing with the excisable goods must have knowledge that they are liable for confiscation. The Honble Tribunal had further held that wherein an assessee is only issuing invoices wherein there is no movement of goods, they cannot be visited with a penalty under Rule 209 A. The aforesaid decision is squarely applicable to the facts of the present case as the case of Department is that only invoices have moved from M/s. JISCO Ltd. to M/s. Nashik Strips Pvt. Ltd. without the HR Trimmings. The duty paid nature of HR Trimmings is not in dispute and it is not the Departments case that the said HR Trimmings were offending goods which were liable for confiscation. The natural sequitur to the above is that the above three Appellants have not dealt with any goods which were liable for confiscation. Furthermore, neither the learned Deputy Commissioner nor the learned Commissioner (Appeals) have given any findings to the effect that the HR Trimmings were either confiscable or liable for confiscation. The learned SDR has referred to the decision of the Honble Tribunal in the case of Dr. Writers Food products Vs. Commissioner of Central Excise Pune-II- 2009 (242) E.L.T. 381 (Tri. - Mumbai) in support of his submission that penalty was imposable even if a person did not physically deal with the goods. He has also submitted that the decision of the larger bench in the case of Steel Tubes of India V/s. CCE was considered by the Honble Tribunal in arriving at the said decision. However a reference to Para 30 of the decision in the case of Dr. Writers Food products makes it manifest that decision in the case of Steel Tubes of India Vs. CCE Indore- 2007 (217) ELT 506 (LB) was distinguished on the basis that in the case of Steel Tubes no goods had moved and only invoices had moved. In the present case also it is the Departments case that no goods had moved to Nashik Strips Pvt. Ltd. and only invoices had moved to M/s. Nashik Strips Pvt. Ltd. Thus the decision in the case of M/s. Steel Tubes of India Ltd. is squarely applicable to the facts of the present case. The decision of the Apex Court in Sachidananda Banerjee ACC Calcutta V/s. Sitaram Agarwal 1999 (110) ELT 292 (S.C.) is also inapplicable in the facts and circumstances of the present case. In the said case, the Apex Court, inter-alia, held that even though the Appellant (Sitaram) had not come into actual possession of the smuggled gold before the police intervened there was no doubt that he was concerned in dealing with prohibited goods. In the present case, it is not the case of the Department that the HR Trimmings were offending goods which were liable for confiscation. Thus, the Appellants cannot be said to be in any way concerned with any goods liable for confiscation and there is neither an averment nor a finding of the lower authorities that the Appellants hasd dealt with any goods which were liable for confiscation. Under the circumstances the Apex Court judgment in Sachidananda Banerjee ACC Calcutta V/s. Sitaram Agarwal 1999 (110) ELT 292 (S.C.) is inapplicable in the present case. The imposition of penalty under Rule 26 of the Central Excise Rules 2002 thus deserves to be set aside.
iii. The learned SDR has also relied upon the Apex Court judgment in the case of M/s. Agarwal Trading Corporation and Others Vs. Assistant Collector of Customs, Calcutta and others- 1983 (13) ELT 1467 (S.C.) in support of the submission that penalty can be imposed on the firm under the provisions of Rule 26 of the Central Excise Rules 2002. In the aforesaid decision the Honble Apex Court has held as follows in Para 7:-
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 General Clauses Act, 1897, or Section 2(3) of the Act of 1868 would be applicable to the said Acts in both of which person has been defined as including any company or association or body of individuals whether incorporated or not. It is of course contended that this definition does not apply to a firm which is not a natural person and has no legal existence, as such clauses (3), (8) and (37) of Section 167 of the Sea Customs Act are inapplicable to the appellant firm. In our view, the explanation to S.23-C clearly negatives this contention. In that a company for the purposes in that section is defined to mean any body corporate and includes a firm or other association of individuals and a Director in relation to a firm means a partner in the firm.(emphasis supplied) It is submitted that in the above judgment, the Honble Apex Court had held that penalty can be imposed on the firm though it was a natural person in view of the explanation to Section 23-C of the Foreign Exchange Regulation Act. In the present case, the aforesaid explanation to Section 23-C of the Foreign Regulation Act cannot be pressed into service for the purposes of the Central Excise Rules 2002. Thus the Apex Court judgment in the case of M/s. Agarwal Trading Corporation and Others Vs. Assistant Collector of Customs, Calcutta is inapplicable to the present case. Furthermore; the decision of the Honble Tribunal in the case of M/s. Woodmen Industries v. Commissioner 2004 (164) E.L.T. 339 (Tribunal) was specifically in the context of Rule 26 of the Central Excise Rules 2002 and the same has been maintained by the Honble Apex Court in Commissioner v. Woodmen Industries 2004 (170) E.L.T. A307 (S.C.). Under the circumstances, it is submitted that no penalty is imposable on the firm under the provisions of Rule 26 of the Central Excise Rules 2002.
Without prejudice to the above submission it is also submitted that the penalty of Rs. 2,04, 529/- is harsh and exorbitant. No valid and justifiable reasons are forthcoming in the adjudication order for imposing such harsh and unreasonable penalty on each of the Appellans nor any v valid reasons are forthcoming in the impugned order for sustaining such penalty. Also, the penalty of equal amount of duty imposed on the Company as well as each of the Appellants herein also shows arbitrary exercise of powers vested in the authority and clear non-application of mind. Thus such harsh and unreasonable penalty cannot be sustained at all and even if penalty is held to be imposable, a reduction in penalty amount is prayed for.
(D) JSW Steel Ltd.
It is submitted that as per well settled law, whatever be the facts of the case the imposition of penalty under Rule 26 of CER 2002 cannot be upheld and the impugned order of Commissioner (Appeals) is liable to be set aside on the following grounds among others.
(i) Lack of jurisdiction of the officers to the issue of show cause notice and to adjudicate the case,
(ii) No penalty can be imposed on the company.
(iii) There is no proposal/finding and/or order about liability to confiscation or confiscation of any goods for contravention of the provisions of Central Excise Act or Rules as the case may be. In any case the Good being duty paid goods could not have been confiscated;
(iv) The transactions are of September 2002, whereas sub-rule (2) in Rule 26 of CER 2002 was inserted and made effective with effect from 1.3.2007 no penalty therefore can be imposed under Rules 26(2) of CER 2002;
(v) There are no findings by the Commissioner (Appeals) on all these legal submissions made before him and had been completely ignored by Commissioner (Appeals).
Without prejudice to the above submissions; it is submitted that there cannot be any penalty in the facts and circumstances of the case as:
(i) The scrap is sold by the appellants adopting an online process as per normal business practice. The process and procedure of selling the scrap is open and transparent.
(ii) The scrap is sold by the appellant on ex-factory basis and delivered to the purchasers at the factory gate on payment of duty on the vehicles supplied by or on behalf of the purchaser/successful bidder.
(iii) On the successful bidder/dealers advice the name and address of the consignee are reflected in the Central Excise Invoice. The payment is received by cheque/DD. The appellants have discharged the statutory burden of payment of duty on the goods issued the invoice and handed over the possession of goods admittedly to the highest bidders/transporters representative. The appellants cannot be held responsible if the duty paid and the invoices issued by the appellant were misused by the buyer of the said goods or any other person. The owner ship of the said goods stands transferred to the purchaser and it wont be prudent for the appellants to know or inquire about whether the goods delivered and dispatched by them reached the final destination. There is no other statutory obligation cast on the appellant under the law to verify the vehicle details or the numbers.
4. On the other hand, the learned SDR submitted that 5.1 As regards the physical handling of the goods the issue is covered by the Honble CESTAT, WZB, Mumbais Order reported in 2009 (242) ELT 381 wherein the Honble tribunal observed as under
31. Thus, we are? of the firm view that Mr. Ketkar cannot be given relief from penalty merely because he did not physically deal with the goods removed clandestinely, without payment of duties. It is noted that the Supreme Court decision in the case of Sitaram Agarwala (supra) was not brought to the notice of the Tribunal while deciding the case of Steel Tubes (supra).
In view of this there pleas do not hold gods and the decision of the Honble Tribunal in the case of Steel Tubes relied upon by the counsel, as per incuriam of Honble Apex Courts judgements in the case of Sitaram Agrawal, 1999 (110) ELT 1467 SC and the Tribunal decision.
5.3 With regard to the imposition of penalty on corporate body under rule 26 of the ibid rules attention may be invited again to the decision of CESTAT, Mumbai Bench in SHRISHTI IMPEX PVT. LTD. Versus COMMISSIONER OF CENTRAL EXCISE, THANE-I ; 2008 (232) E.L.T. 210 (Tri. Mumbai) ,Wherein the Honble Tribunal held as under:
28.?As regards penalty imposed on the remaining applicants i.e., M/s. Sonu Synfab Pvt. Ltd., M/s. Sudarshan Texport Pvt. Ltd., M/s Suncekowa Texport Pvt. Ltd., M/s. Pearl Agencies, M/s. Kakda Impex (I) Pvt. Ltd., Shri Ashok Kumar Sharma, Shri Govind Kakda, M/s. Shivarti Textiles Pvt. Ltd., M/s. V-Trans (India) Ltd. and M/s. Suresh Synthetics, we find that the plea taken is prima facie not acceptable inasmuch as we find that these applicants have dealt with the goods in some manner or the other and even corporate bodies can be penalized as per the Supreme Court decisions in the case of Agarwal Trading Corporation and others reported in 1983 (13) E.L.T. 1467 (S.C.) and in the case of Sitaram Agarwal reported in 1999 (110) E.L.T. 292 (S.C.).
[Emphasis supplied] 5.4 As is evident this judgement of Honble Tribunal is based on Agarwal Trading Corporations Case, where in Para 7, the Honble Apex Court held 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 General Clauses Act, 897, or Section 2(3) of the Act of 1868 would be applicable to the said Acts in both of which `person has been defined as including any company or association or body of individuals whether incorporated or not. It is of course contended that this definition does not apply to a firm which is not a natural person and has no legal existence, as such clauses (3), (8) and (37) of Section 167 of the Sea Customs Act are inapplicable to the appellant firm. In our view, the explanation to Section 23C clearly negatives this contention. In that a company for the purposes in that section is defined to mean any body corporate and includes a firm or other association of individuals and a Director in relation to a firm means a partner in the firm. The High Court was clearly right in holding that once it is found that there has been a contravention of any of the provisions of the Foreign Exchange Regulation Act read with Sea Customs Act by a firm, the partners of it who are in-charge of its business or are responsible for the conduct of the same, cannot escape liability, unless it is proved by them that the contravention took place without their knowledge or they exercised all due diligence to prevent such contravention.
Thus the ratio of Honble Apex Courts judgement in the case of Agrawala Trading Corporation and interpreted by the Honble Tribunal in Shrishti Impex makes explicit that corporate bodies as per are not immune from penalty.
[Emphasis supplied] With regard to the submission of the counsel of JSW it is clearly coming out form the Show Cause Notice, Order-in-Original and Order-in-Appeal that the successful bidders were small scale manufactures located in or around Viramgam in Gujarat where as the goods were consigned to M/s. NSPL located in Nashik , in Maharashtra. The truck Nos. mentioned in all the fifteen invoices held the registration Nos. of the state of Gujarat and as per RTO regulations the vehicles which are registered in Gujarat can not play between the locations in Maharashtra in other words Gujarat vehicles can load the goods form the state of Gujarat and deliver them on various places in the state of Maharashtra. They can also load goods form various places of Maharashtra and unload the same in the state of Gujarat as per provision Central Motor vehicles act 1988 but they can not delivered the same with in the state of Maharashtra, as contained in Para 11 and 13 of SCN and find mention in partys replies Show Cause Notice dated 23.10.2007 and enclosed as exhibited C to their appeal Memorandum.
Thus it was prudent for M/s. JSW to verify the genuineness of the transportation of the goods but they did not do so and hence it clearly reveals that they could not have done so unknowingly and therefore having known that the goods are not going under the cover of the invoice issued by them the goods was liable for confiscation and hence M/s. JSW became liable for penalty under rule 26 of ibid Rules.
Further, as per Para 10 of SCN Shri. Narendarbhai Khodabhai patel, partner of M/s. Ambika Carriers stated as under:-
On being shown invoice No. 1204321 / 26 09 -2002 issued by M/s. Jindal Steel & Alloys Limited, Vashind, Dist-Thane meant for consignee M/s. Nashik Strips (P) Limited, Plot No. 13 to 17, Shirdi Road, STICE, Sinnar, Dist. Nashik, he sated that their truchkGJ-2T-6657 was not used for transportation of MS Scrape of above-said units. He further stated that during the material period, his trucks were in-transit between Mumbai to Mehsana, Carrying iron loose wire bundles under consignment notes 069 dated 25.09.2002. In support of his say, he produced photocopies of the said consignment notes and one page of log-book of the truck GJ-2T-6657 duly signed by him. He further stated that said truck was never used for transportation of goods of M/s. Jindal Steel & alloys Limited, Vashind to M/s. Nashik Strips Private Limited, Sinnar; that they did not have any permit for transportation of goods within any places in Maharashtra State and hence they never loaded any goods for internal transportation in Maharashtra.
The above statements and evidence recorded from the truck owners conclusively indicate that the vehicles never entered the factory premises of M/s. JSW and the goods were cleared in some other vehicles, which were meant for transportation to Gujrat and this is possible only when M/s. JSW connived with M/s. NSPL in this fraud. Thus goods mentioned in the Cenvatable invoices issued by M/s. JSW were in fact not transported or delivered to M/s. NSPL but, were diverted and delivered at various destinations at Viramgam, Gujarat. The evidence given by truck owners indicat that the said trucks in fact did not ply between the factory of M/s. JISCO and that of M/s. NSPL. It also evidences that M/s. NSPL did not receive the said H R Trimmings Scrap at their factory at musalgaon. Tal. Sinnar. It indicates that at the time of clearance, M/s. JSW were supplied with some truck numbers for putting the same on the invoices raised in the name of M/s. NSPL whereas, in reality the said trucks were never used for transportation of the HR Trimmings scrap to M/s. NSPL. It also shows that, M/s. Diamond roadways, situated at 14, Liberty House, Zakaria Masjid Street, Mumbai had manipulated the transport documents and arranged for the diversion of the goods in-transit and had managed the transport from the Vashind factory of M/s. JISCO to the actual places of delivery in Gujarat.
Thus the submission of M/s. JSW Steel about their innocence do not hold any water.
3. A regards to the plea of jurisdiction taken by M./s. JSW Limited it may be mentioned that M/s. JSW Steel has been penalized under Rule 26 of the Central Excise Rule, 2002 for facilitating M/s. Nashik Strips Private Limited to avail of fraudulent Cenvat credit. The Deputy Commissioner, Central Excise & Customs, Nashik IV Division has not traversed beyond the Jurisdiction for the reason that the cause of action has arisen within the jurisdiction of Nashik IV Division, where M/s. Nashik Strips Private Limited are located and registered. The Bombay High Court, in case of M/s. Varun Shipping Company Limited V/s. Deputy Collector of Customs as reported in 2003 (154) ELT 34 (Bom).has held that if a part of action has arisen within the jurisdiction of Bombay High Court, then the writ can be entertained by the Bombay High Court and thus overruled the contention of the revenue that Bombay High Court has no jurisdiction to entertain the petition because the goods were discharged at Kandla, which is within the jurisdiction of Gujrat High Court in this case the Honble High Court has observed as under:
5. Another contention was raised on behalf of the Revenue that this Court has no jurisdiction to entertain the petition because the goods were discharged at Kandla and the adjudication order was passed at Kandla falling within the jurisdiction of Gujarat High Court. This submission is also without any merit because, in the instant case, the appellate order challenged in the petition has been passed by the authority at Bombay. In a similar case, being Writ Petition No. 3641 of 1987 [J. M. Baxi and Co. v. Dy. Collector of Customs, since reported in 2002 (4) Mh.L.J. 823] decided today i.e. 6-8-2001. we have held, that if a part of the cause of action has arisen within the jurisdiction of this Court, then the Writ can be entertained by this Court. In the present case, the appellate order challenged in the petition was passed at Bombay and accordingly this court will have jurisdiction to entertain the petition.
4. With regards to the submission of the counsel for the Nashik Strips Private Limited regarding non Quantification of interest it may be submitted that the amount of interest of Rs. 1,06,678/- was quantified and M/s. Nashik Strips Private limited were informed to pay the same vide Range Superintendents letter dated 25.02.2008. As such the amount of interest was informed to the party within a period of 20 days from the date of passing of the order, which is 05.02.2008. (A copy of jurisdictional commiserates Communication is enclosed herewith for reference.) Therefore, there is no substance in the argument of the assessee that they were not informed about the amount of the interest to be paid as directed in the OIO. Thus the requirement of Section 11 AC (2A) of the Central Excise Act. 1944 for reduction penalty to 25 % has not been complied with.
5. Heard both the sides.
6. I have gone through the submissions made and reliance placed verbally and in their written submissions in detail. After going through I find as follows:
(A) NASHIK STRIPS PVT LTD.:- In the case of NSPL the appellant has admitted the wrong availment of Cenvat credit without receiving the goods and paid the duty before issuance of the show cause notice. In that event I confirm duty demand and penalty under Section 11AC against the appellant but appellants are given an option of the reduce penalty to Rs. 25% of the duty confirmed giving the benefit of proviso to Section 11AC if the appellant pays the same within 30 days of the communication of this order failing which the appellant shall pay the 100% of the duty confirmed as laid down in the decisions in the case of K.P. Pouches (P) Ltd. Vs Union of India (Supra).
(B) K.K. AGARWAL DIRECTOR OF M/S. NSPL. :- The only contention of the appellant is that the appellant has not dealt physically with the impugned goods and in that situation no penalty under Rules 26 of the Central Excise Rules, 2002 can be imposed on the appellant and there is no allegation against the appellant the only allegation against the appellant company only. In the case of Dr. Writers Food Products reported in 2009 (242) ELT 381 this Tribunal has held that the appellant cannot be given relief from penalty merely because he did not physically deal with the goods removed clandestinely, without payment of duties. Following the ratio laid down in the case of Dr. Writer Food Products (Supra) I confirm the impugned order regarding the penalty against Shri K.K. Agarwal Director of NSPL.
(C) M/S. AKSHAR TRADING CO., M/S. MASTER TRADERS, M/S. MEMON ASSOCIATES :- The main contention of the appellants are that Rule 26 of the Central Excise Rules 2002 permits imposition of the penalty on the person and not on the firm. Accordingly, the penalties on the firm cannot be imposed. But, in the case of Shrishti Impex Pvt. Ltd. Vs. Commissioner of Central Excise, Thane-I 2008 (232) E.L.T. 210 (Tri. Mumbai). It was held that corporate bodies can be penalized as per Supreme Court decision in the case of Agarwal Trading Corporation and others reported in 1983 (13) E.L.T. 1467(S.C.). Further in the case of M/s. Twenty First Century Wire Rods Ltd. and Kundli Ispat ltd. in Appeal No. E/268/09 & E/319/09 Vide Order No. A-264 to 269/09/EB/kC-I dt. 9.6.09, this Tribunal has held that a person under rule 26 would incoude living as well as non-living person. Following the same ratio, I also confirmed the penalties against all the above appellants and impugned order is confirmed against these three appellants.
(D) JSW STEEL LTD.:- The appellant is challenge the impugned order on the ground that officer to issue the show cause notice and adjudicated the goods was not having any jurisdiction and there is no finding about the liability of confiscation of the goods and moreover that the submission of the appellant is that they sold the scrap on ex-factory basis and delivered to the purchasers at the factory gate on payment of duty in that event the appellants are not liable for any penalty. With regard to the jurisdiction, I find that in the case of M/s. Varun Shipping Co. Ltd. Vs. Deputy Collector of Customs 2003 (154) E.L.T. (Bom.) the Honble Bombay High Court in the facts that the goods were discharged at Kandla, and adjudication order also passed at Kandla. As the cause of action took place in the jurisdiction of Gujarat High Court the same cannot be challenged in petition before the Bombay High court. In that case the Honble High Court of Bombay held that if a part of cause of action has arisen within the jurisdiction of the court than the writ petition can be entertained by the court. In this case also, the invoices were issued by the appellant to M/s. NSPL who obtained the Cenvat Credit on the strength of invoice without receiving the goods at Nashik hence the argument of the learned Advocate are not acceptable. It is held that adjudicating authority was having the jurisdiction to adjudicate the impugned case. Further, the contention of the appellant that the appellant has sold the goods through online process and on ex-factory basis and delivered the goods to the purchasers at factory gate on payment of duty. In this case the allegation against the appellant are that the goods against this invoices were never moved. Moreover, the vehicle number entered in the invoices were NOT correct and the statement of the truck owners that the vehicle mentioned in the invoices never entered in the factory premises of the appellant and the statement of the truck owner was not contravorted by the appellant and it was observed by the adjudicating authority that the appellants are involved with M/s. NSPL in the fraud. I hold that it is the duty of the supplier of goods to enter the correct number of vehicle in their invoice while clearing the goods and in this case the vehicles which are mentioned in the invoice did not carry the goods at the time of clearance. In that event, the appellant cannot escape from the liability of penalty. Accordingly, I confirm the penalty against the appellants.
7. With these observations all the appeals are disposed of.
(Pronounced in court on ) (Ashok Jindal) Member (Judicial) Sm 16