Custom, Excise & Service Tax Tribunal
M/S Diamond Roadways vs Commissioner Of Central Excise, Nashik on 31 March, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. IV Appeal No. E/108, 110, 111 & 112/10 (Arising out of Order-in-Appeal No. AKP/78 to 84/09 dated 22.10.2009 passed by the Commissioner of Central Excise & Service Tax (Appeals), Nashik). For approval and signature: Honble Shri Raju, 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 : Yes 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? ====================================================== M/s Diamond Roadways Shri Mahendra K. Agarwal Shri Manish R Agarwal Shri Ramavtar K. Agarwal Appellants Vs. Commissioner of Central Excise, Nashik Respondent Appearance: None for M/s Diamond Roadways Shri Nimesh Mehta, Advocate for Appellant Shri Ashutosh Nath, AC (AR) for Respondent CORAM: SHRI RAJU, MEMBER (TECHNICAL) Date of Hearing: 22.03.2016 Date of Decision: 31.03.2016 ORDER NO. Per: Raju
A case for wrong availment of credit was booked against M/s Bhagwati Steel Cast Ltd. and among others its Managing Director Shri Mahendra K Agarwal, Shri Manish R Agarwal and Shri Ramavtar K Agarwal brokers and M/s Diamond Roadways, a transporter. A demand was confirmed against M/s Bhagwati Steel Cast Ltd., who paid the such amount along with 25% of penalty under Section 11A(2A) of the Central Excise Act. They did not file any appeal against the said order. A penalty of Rs.1 lakh each was imposed on Shri Mahendra K Agarwal, MD; Manish Rr Agarwal broker and M/s Diamond Roadways and Rs.25,000/- on Shri Ramavtar Agarwal. All these penalties were imposed under Rule 26 of Central Excise Rules, 2002.
2. Nobody appeared for M/s Diamond Roadways.
3. Learned Counsel for the appellant namely, Shri Mahendra K Agarwal, Manish R Agarwal and Ramavtar Agarwal argued that the main appellants had paid the duties and 25% of penalty and therefore, in terms of provisions of sub-section (2A) of Section 11A, all proceedings against all person on whom notices served shall be deemed to be conclusive. In support of this assertion, the Counsel relied on the decision of the Tribunal in case of Nirmal Kumar Agarwal 2013 (298) ELT 51 (Tri-Del) and in case of Bajrang Metallic & Power Pvt. Ltd. 2013 (295) ELT 232 (Tri-Del). He further argued that no confiscation has been ordered and therefore, no penalty can be imposed under Rule 26. For this assertion, he relied on the decision of the Tribunal in case of Air Carrying Corporation P. Ltd. 2008 (229) ELT 80 (Tri-Mum). He further argued that Rule 26(2) of the Central Excise Rules was introduced w.e.f. 1.3.2007 and the said rule cannot be invoked for offences committed before 2007. For this assertion, he relied on the decision of the Hon'ble High Court of Punjab & Haryana in case of Mini Steel Traders 2014 (309) ELT 404 (P&H).
4. Learned AR for the Revenue relies on the impugned order. He argued that Hon'ble Supreme Court in case of Sanjay Vimalbhai Deora 2014 (309) ELT A131(SC) has held that where the show-cause notice did not comprises confiscation of goods and penalty, still penalty can be levied if the appellant had knowledge of removing, keeping, selling and concealing the excisable goods. Learned AR also pointed out that sub-rule (2) of Rule 26 has not been invoked for imposition of penalty but only Rule 26 has been invoked. The learned AR also cited the decision of Tribunal in case of one of appellant namely, Diamond Roadways, wherein the penalty under Rule 26 has been upheld in similar circumstances.
5. I have gone through the rival submissions. I find that the issue regarding sub-rule (2) of Rule 26 raised by the learned Counsel is irrelevant as Rule 26 has been invoked and not sub-rule 2 of Rule 26. As regards non-imposition of penalty in case where there is no proposal for confiscation of goods, the Hon'ble Supreme Court in the case of Sanjay Vimalbhai Deora (supra) has upheld the decision of Hon'ble High Court of Gujarat. In the said case, the Hon'ble Supreme Court had upheld the penalty under Rule 26 of the Central Excise Rules, 2002 even in case where there is no proposal for confiscation. The third contention raised by the appellant relates to invocation of provision of sub-section (2A) of Section 11A, I find that the said provisions can be invoked only in respect of such persons on whom notices are served under sub-section (1) of Section 11A. In this case, notice under Rule 26 of the Central Excise Rules, 2002 has been served to all the appellants. In this regard, Tribunal in case of Anand Agrawal 2013 (288) ELT 90 (Tri-Del) has observed as follows: -
4.?Sub-section (1) of Section 11 provides for issuance of show cause notice demanding short-paid or non-paid duty within the period of either one year from the relevant date or five years where there is mis-statement or suppression of facts. Sub-section (1A) which was introduced w.e.f. 13-7-2006 gives the option to person to whom the notice is served under the proviso to sub-section (1) by Central Excise officer to pay duty in full or in part along with interest and penalty equal to the 25% of the duty within a period of 30 days of receipt of the notice. Sub-section (2) refers to a person to whom notice is served under sub-section (1). Proviso to sub-section (2) of Section 11A is to the effect that on payment of duty along with interest and penalty of 25%, proceedings in respect of such person and other persons to whom notices are serving under sub-section 1, served under Section 11 shall be deemed to be conclusive as to the matter stated therein. A combined reading of sub-section (1A), sub-section (2) and proviso to sub-section (2) of Section 11 makes it very clear that the said provisions are applicable in respect of persons to whom notice stands issued under sub-section (1) of Section 11A. Notice under sub-section 1 of Section 11A is issued to a person who has either not paid the duty or short-paid the duty. As such notice to sub-section (1) of Section 11 is issued to a manufacturing unit or a person who is required to pay-duty but has not paid the duty. Notice under sub-section (1) of Section 11 cannot be issued to independent persons who are authorised representatives of manufacturing units inasmuch as such authorised representatives are under no obligation to pay any duty of excise and as such the question of short-payment or non-payment of duty does not arise.
5.?Further when we analyze proviso to sub-section (2) of Section 11A, the same refers to conclusion of proceedings in respect of such person. Such person refer to the persons to whom notice has been served under sub-section (1) of Section 11 and who have paid the duty along with interest and 25% of penalty within a period of 30 days of receipt of the notice. Accordingly, it has to be concluded that the proceedings do not come to an end in respect of all the persons in as much as the expression used in the said proviso is only in respect of such persons and not all the noticees.
6.?I also find that the proviso to Section 2 also refers to the other persons. As such it has to be seen as to who other person can be in respect of which the proceedings would get concluded on payment of duty interest and part penalty. The said proviso does not refer to all other persons, but the same qualifies the other persons to whom notices are served under sub-section (1). As such the reference to other persons in the said proviso is not to all other persons to whom notices are served for imposition of penalty under law but are restricted to other persons to whom notices are served under sub-section (1) of Section 11A. As already observed, notices under sub-section (1) of Section 11A are served only to those persons who are required to pay duty and have either not paid duty or short-paid. Notices under sub-section 1 are not to be issued to other persons who may be employees of the manufacturing unit. As such analyzing the proviso to sub-section (2) of Section 11A, it becomes clear that the proceedings are deemed to be conclusive only in respect of such person who discharges his duty liability in terms of sub-section (1A) or to whom notices stands served under sub-section (1).
7.?Referring to the provisions of Rule 26 of Central Excise Rules, 2002, it is seen that the same prescribes for imposition of penalty in certain circumstances. For better appreciation, the said rule is re-produced below:-
RULE 26. Penalty for certain offences - (1) 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, shall be liable to a penalty not exceeding the duty on such goods or *[(two thousand rupees], whichever is greater.
8.?As is seen from the above, the invocation of penal provision of Rule 26 is dependent upon so many factors which are unconnected with the provisions of Section 11A. No doubt a combined show cause notice under Section 11A demanding short-paid or non-paid dues along with proposal to imposition of penalties under Rule 26 is issued but as already discussed, the two proposals are independent of each other and mutually exclusive. Rule 26 which provides for imposition of penalty in certain circumstances cannot be said to be a part of the proviso to sub-section (2) of Section 11A so as to conclude the proceedings in respect of all noticees on payment of duty, interest and part penalty by main manufacturer. The said proviso, in my views, only concludes the proceedings in respect of the persons against whom notice under Section 11A is issued and who have deposited the duty in terms of provisions of sub-section (1A) of Section 11A. As such I agree with the Revenue that payment of short paid and non-paid duty by the main manufacturer would not result in conclusion of proceedings against all other persons on whom penalty stands proposed to be imposed in terms of Rule 26. If the legislative intent was extending immunity to all connected persons, the language used would have been simpliciter in respect of all persons.
9.?I may here discuss the Boards circular relied upon by Commissioner (Appeals). Para 2 of Circular No. 831/08/2006-CX, dated 26-7-2006 reads as under :-
2.?Section 11A of the Central Excise Act, 1944 has been amended to introduce an optional scheme for enabling voluntary payment of duty by assessees in full or in part in cases involving fraud, misstatement etc. along with interest and 25% of the duty amount as penalty within 30 days of the receipt of the show cause notice thereby dispensing with the rigours of adjudication procedure. This is an additional facility given to the Trade to settle the dispute at an early stage to reduce litigation and also aid in collection of tax dues more expeditiously. The scheme is optional and not compulsory. The assessee has the further option of using the proposal facility in full or in part. In case of part payment, the remaining amount will be subject to regular proceedings as per the law.
10.?A reading of the above circular nowhere clarifies the issue as to whether payment by the main manufacturer would result in stopping of proceedings in respect of all the persons or the same would amount to settle the dispute vis-`-vis the main manufacturer only. As such nothing turns on the said Circular.
6. In view of the above, the grounds raised by the appellant do not survive. However, looking at the role of the appellant and fact that the duty and penalty has been paid by the main appellants, the penalties are reduced from Rs.1 lakh to Rs.75,000/- on Shri Mahendra K Agrawal, Manish R Agrawal & M/s Diamond Roadways and from Rs.25,000/- to Rs.20,000/- on Shri Ramavtar K Agrawal. The appeals are disposed of in the above terms.
(Pronounced in Court on 31.03.2016) (Raju) Member (Technical) Sinha 5 Appeal No. E/108, 110-112/10