Custom, Excise & Service Tax Tribunal
Dena Bank vs Commissioner Of Central Excise on 6 March, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,WEST ZONAL BENCH AT MUMBAI COURT No. II Appln.No.E/S/1692/11 APPEAL No.E/1479/11 (Arising out of Order-in-Original No.49/BR-45/Th-I/2009 dated 15/12/2009 passed by Commissioner of Central Excise, Thane-I.) For approval and signature: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) 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 :Seen of the Order? 4. Whether Order is to be circulated to the Departmental :Yes authorities? ========================================
Dena Bank Appellant Vs. Commissioner of Central Excise, Respondent Thane-I Appearance: Shri.N.R. Mainkar, Advocate for appellant Shri.A.K.Prabhakar, Supdt. (AR), for respondent CORAM: Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R.Chandrasekharan, Member (Technical) Date of Hearing : 06/03/2012 Date of Decision : 06/03/2012 ORDER NO Per: P.R. Chandrasekharan
1. This appeal and stay application are directed against order-in-original No.49/BR-45/Th-I/2009 dated 15/12/2009 passed by the Commissioner of Central Excise, Thane-I.
2. The facts arising for consideration are as follows:-
2.1 The appellant, M/s.Dena Bank, Industrial Finance Branch, Mumbai, purchased/discounted 24 export bills pertaining to Karnataka Dyeing & Printing Mills Pvt. Ltd. and others and money was advanced to the exporters against these bills. Realization proceeds in respect of these 24 bills was adjusted against money advanced to the exporters by the appellants. With respect to another three bills, the appellant bank sent the bills for collection, the department proceeded against Karnataka Dyeing & Printing Mills Pvt. Ltd. for recovery of deemed Cenvat Credit availed through fraudulent bills.
2.2 A show-cause notice was issued to the appellants for imposition of penalty under Rule 27 of the Central Excise Act, 2002 for their failure to surrender/credit the sale proceeds of the goods, in spite of notices issued by the department vide letters dated 23/06/2004,15/07/2004 and 17/12/2004. In the meanwhile, one of the exporters, M/s.Vikas Exim Pvt. Ltd. filed a Writ Petition No.2381/04 before the Honble High Court of Bombay wherein the appellant M/s.Dena Bank was also a respondent. The honble High Court of Bombay vide order dated 27/08/2004 directed the appellant bank as follows:-
In the meanwhile, the directions contained in the letters dated 15th July, 2004 and 23rd June, 2004 shall remain stayed subject to the following conditions:
i) The sale proceeds of the exports vide invoice/bill Nos.VE/240 dated 14/10/2003, VE/239 dated 13/10/2003 and VE/250 dated 04/12/2003 are received through the respondent No.5 only and upon receipt, the respondent No.5 shall invest the said amount in the fixed deposit initially for a period of six months and renewable thereafter for the same period as and when required until disposal of the petition. 2.3 The appellant replied to the notice issued by the department stating that they have not received the proceeds of the three bills sent for collection and they will remit the proceeds of these bills to the department as and when they receive the same. The show-cause notice was adjudicated by the Commissioner vide the impugned order and the Ld. Commissioner held as follows:-
Dena Bank, Industrial Finance Branch, Cuffe Parade, Mumbai, despite direction issued by the officer of Central Excise vide letters dated 23/06/2004, 15/07/2004 and 17/12/2004 have failed to surrender/credit the sale proceeds of goods which had being returned in contravention of the provisions of Central Excise Act and the Rule made thereunder to the Government of India. Hence, they are liable for penalty under Rule 27 of the Central Excise Rules, 2002. 2.4 Based on these findings, the Ld. Commissioner imposed a penalty of Rs.5 lakh on the appellant under the provisions of Rule 27 of the Central Excise Rules, 2002.
3. The Ld. Counsel appearing for the appellant makes the following submissions:
3.1 In the instant case, as per the directions of the honble High Court of Bombay cited supra, the appellant have to keep the proceeds of the bills in a fixed deposit initially as and when the sale proceeds are received and thereafter renew the deposit until the disposal of the petition. They have not received the proceeds of the bills yet and, therefore, the question of remitting the sale proceeds to the department does not arise at all. They have undertaken the activity of purchasing export bills/sending the same for collection as part of their normal business activity and provisions of Rule 27 of the Central Excise Rules, 2002 cannot be invoked for imposition of penalty on the appellant because their activity of purchasing/discounting the bills or sending the bills for collection has nothing to do with the confiscability of the goods. The Ld. Counsel further points out that under Rule 27, the maximum penalty that can be imposed is only Rs.5,000/- and in the instant case, the Ld. Commissioner imposed a penalty of Rs.5 lakh, which is not provided for in the law.
3.2 He also relies on the judgement of this Tribunal in the case of Bank of Madura Ltd., & Others Vs. CC, Madras reported in 1987 (28) ELT 396 (Tribunal) wherein in a similar situation this Tribunal held as follows:-
In the instant case, notwithstanding the fact that Bank of Madura without exercising proper diligence and reasonable care, acting in a most imprudent way, has acted in flagrant violation and breach of all codes and regulations of financial discipline expected of a scheduled bank, no act or omission of the Bank can be said to have been rendered the imported goods liable for confiscation within the meaning of Section 112 of the Act. The mere opening of letters of credit without margin in respect of a person who is a man of straw and a person who is non-existent, and all on the basis of a mere letter of guarantee by a person who was not even and income-tax assessee and whose credit worthiness also the Bank was blissfully ignorant of, would all be acts of culpable ignorance and reprehensible imprudence on the part of a banking institution but would fall short of an act or omission rendering the goods liable to confiscation within the meaning of Section 112(a). What the Bank has done, to put it no higher is to fritter away its funds in utter disregard of the banking procedures and rules and regulations and that would not ipso facto make it liable for a penalty under Section 112(a) of the Act. In view of our finding on the facts and circumstances of this case that the Bank is not guilty of an offence under Section 112(a) of the Act, we do not feel called upon to consider and pronounce upon the question as to whether the Department would be entitled to urge a plea for imposition of a penalty in the absence of a specific prayer in the memorandum of appeal filed before the Tribuna.
4. The Ld. Supdt (AR) appearing for the Revenue reiterates the findings of the adjudicating authority.
5. We have carefully considered the rival submissions.
6. After hearing both sides, we are of the view that the appeal itself can be disposed of at this stage. Therefore, after granting stay of the penalty adjudged against the appellant, we take up the appeal itself for disposal.
7. The short question involved is whether the act of discounting export bills or sending export bills for collection as part of normal banking operations by the appellant bank would render the export goods liable to confiscation and the bank liable to penalty. The liability to confiscation under excise law arises for violation of provisions of Central Excise Act and rules made thereunder. A banking transaction would not normally violate the Central Excise law or the Rules, especially when the same is carried out as part of the normal banking operations. This Tribunal, in Bank of Madura case cited supra held that even if the bank undertook the banking transaction without exercising proper diligence, the same might amount to culpable ignorance and reprehensible imprudence but would fall short of an act or omission rendering the goods liable to confiscation within the meaning of Section 112 (a) of the Customs Act. The same logic applies in respect of excise law also. Therefore, the conduct of the bank in discounting export bills or sending the export bills for collection, cannot, in any way, be construed as violation of Central Excise Act or Rules making the goods liable to confiscation. In such an event no penalty can be imposed on the banking company and, accordingly, we find that imposition of penalty under Rule 27 of the Central Excise Rules on the appellant bank is bad in law. Further, we notice that the maximum penalty that can be imposed under the said Rule is only Rs.5,000/- whereas in the instant case the Ld. Commissioner has imposed a penalty of Rs.5 lakh on the bank under Rule 27 of the Central Excise Rules, 2002 which shows clear non-application of mind and ignorance on the part of the adjudicating authority. Such an order, in our view, is perverse and bad in law. Accordingly, we set aside the imposition of penalty on the appellant bank and allow the appeal with consequential relief, if any.
(Dictated in Court) (Ashok Jindal) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) pj 1 7