Custom, Excise & Service Tax Tribunal
M/S Twenty First Century Wire Rods Ltd vs Commissioner Of Central Excise & ... on 9 June, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO. I
Excise Appeals No. 268, 269, 270, 296, 297 and 319 of 2009
(Arising out of Order-in-Original No. 01/COMMR./GOA/CX/2008-09 dated 20.11.2008 passed by the Commissioner of Central Excise & Customs, Goa).
For approval and signature:
Honble Mr. Justice R.M.S. Khandeparkar, President
Honble Mr. A.K. Srivastava, Member (Technical)
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1. Whether Press Reporters may be allowed to see :
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?
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1. Excise Appeal No. 268 of 2009
M/s Twenty First Century Wire Rods Ltd.
Appellants represented by
Shri V.M. Doiphode, Advocate
Vs.
Commissioner of Central Excise & Customs, Goa
Respondent represented by
Shri S.S. Katiyar, SDR
2. Excise Appeal No. 269 of 2009
Shri Darshan Churiwala
Appellants represented by
Shri V.M. Doiphode, Advocate
Vs.
Commissioner of Central Excise & Customs, Goa
Respondent represented by
Shri S.S. Katiyar, SDR
3. Excise Appeal No. 270 of 2009
Shri Vinod Goel
Appellants represented by
Shri V.M. Doiphode, Advocate
Vs.
Commissioner of Central Excise & Customs, Goa
Respondent represented by
Shri S.S. Katiyar, SDR
4. Excise Appeal No. 296 of 2009
Shri Pawan Sharma
Appellants represented by
Shri Subba Reddy, Advocate
Vs.
Commissioner of Central Excise & Customs, Goa
Respondent represented by
Shri S.S. Katiyar, SDR
5. Excise Appeal No. 297 of 2009
Shri Kishan Sharma
Appellants represented by
Shri Subba Reddy, Advocate
Vs.
Commissioner of Central Excise & Customs, Goa
Respondent represented by
Shri S.S. Katiyar, SDR
6. Excise Appeal No. 319 of 2009
M/s Kundil Ispat Ltd.
Appellants represented by
Shri Aqeel Sheerazi, Advocate
Vs.
Commissioner of Central Excise & Customs, Goa
Respondent represented by
Shri S.S. Katiyar, SDR
CORAM:
MR. JUSTICE R.M.S. KHANDEPARKAR, PRESIDENT
MR. A.K. SRIVASTAVA, MEMBER (TECHNICAL)
Date of Hearing: 09.06.2009
Date of Decision: 09.06.2009
ORAL ORDER NO.
Per: Mr. Justice R.M.S. Khandeparkar, President All these appeals are being taken up for hearing in terms of the order passed today in the stay applications No. 337, 338, 339, 368, 369 and 417 of 2009. We have heard at length the learned Advocate for the appellants and learned SDR for the respondents. We have perused the records placed before us.
2. The appellants challenge the order dated 20.11.2008 passed by the Commissioner at Panji, Goa, whereby the authority apart from demanding the duty and interest payable thereon, has also imposed penalty against each of the appellants.
3. The appellants in appeal No. 268 of 2009 are engaged in the manufacture of steel ingots and the appellants in appeal No. 269 & 270 of 2009 are the Directors of the said company. The appellants in appeal No. 296 & 297 of 2009 are the employees of the said company, whereas the appellants in appeal No. 319 of 2009 are the purchasers of the product manufactured by the said company.
4. Under the impugned order the appellant company has been ordered to pay the duty to the tune of Rs.56,87,671/- on the ground of clandestine removal of the steel ingots manufactured by the company during the period from October, 2004 to March, 2005 in exercise of powers under Section 11A(2) of the Central Excise Act, 1944, besides demanding interest on the said amount in terms of Section 11AB of the said Act and has also been asked to pay the penalty of the equal amount under Section 11AC of the said Act. The appellant in appeal No. 269 of 2009 has been ordered to pay penalty of Rs.55 lakhs, whereas the appellant in appeal No. 270 of 2009 has been ordered to pay penalty of Rs.50 lakhs. The appellant in appeal No. 296 of 2009 has been ordered to pay penalty of Rs.5 lakhs, whereas the appellant in appeal No. 297 of 2009 has been ordered to pay penalty of Rs.10 lakhs. The appellant in appeal No. 319 of 2009 has been ordered to pay penalty of Rs.5 lakhs. In addition, two others namely M/s Ellenabad Steels Pvt. Ltd. and M/s Shirdi Steel Rollers Pvt. Ltd., who are the purchasers of the product from the appellant company, have been ordered to pay penalty of Rs.5 lakhs each.
5. The impugned order is sought to be challenged by the company and its Directors on two grounds, namely, failure on the part of the authorities to comply with the basic principles of natural justice inasmuch as that the appellants were not furnished with copies of all the documents relied upon and the documents which were seized in the course of investigation were not returned and their request for cross examination of the persons whose statements were recorded was rejected and secondly on the ground that admittedly the cash amount, which was recovered in the course of investigation from the premises of the appellant company was to the tune of Rs.30,67,989/- in the month of February, 2005 and a sum of Rs.16,77,482/- in the month of March, 2005 and considering the same the duty amount could not have exceeded the sum of Rs.15,46,229/-. The challenge on behalf of the employees of the appellants is that they had carried out their duties under the instructions from their masters and, therefore, they could not have been penalized in the matter as they had not done anything with the intention of evading the duty but had merely performed their obligation towards their masters. The challenge on behalf of the purchaser in appeal No. 319 of 2009 is to the effect that the appellant did not fall within the expression person under Rule 26 of the Central Excise Rules, 2002 and that the company is not a natural person and hence could not have been subjected to penalty under the said Rule.
6. The learned SDR on the other hand has submitted that the appellant company and their Directors were given enough opportunity to contest the case and also to collect the seized documents but they failed to render necessary co-operation to the Department and they cannot now blame the authorities and accuse them of having violated the principles of natural justice. As regards the duty liability, it depends upon the valuation of products cleared from the premises of the appellant and it cannot be restricted to the cash amount found with the appellants. He has further submitted that the excuse sought to be pleaded on behalf of the employees cannot be a ground to establish their innocence in the matter. The learned DR has further submitted that the term person under Rule 26 would include a company or a corporate body.
7. The learned Advocates for the appellants have placed reliance in the decisions of the Tribunal in the matters of Woodmen Industries Vs. CCE, Patna reported in 2004 (164) ELT 339 (Tri-Kol), Ponneri Steel Industries Vs. CCE, Pondichery reported in 2008 (221) 290 (Tri-Chennai), Universal Radiators Ltd. Vs. CCE, Caimbatore reported in 2008 (223) ELT 630 (Tri-Chennai), besides the Circular No. 207/09/2006 dated 08.09.2006. On the other hand, the learned SDR has placed reliance in the matter of Agarwal Trading Corporation and Others Vs. Assistant Collector of Customs, Calcutta and Others reported in 1983 (13) ELT 1467 (SC) and Madhumilan Syntex Ltd. Vs. Union of India reported in 2007 (210) ELT 484 (SC).
8. Considering the rival contentions sought to be canvassed in the matter and in the facts and circumstances of the case, following questions arise for consideration in these appeals: -
(i) Whether there has been violation of principles of natural justice vis-`-vis Company and its Directors on account of non-furnishing of the relied upon documents, non-rendering of unrelied seized documents and rejection of cross-examination of the persons whose statements were recorded?
(ii) Whether the duty liability of the company and the Directors has to be restricted to the amount found in cash in the premises of the appellants during the month of February and March, 2005?
(iii) Whether the employees of the appellant company could not be made liable to pay penalty in the facts and circumstances of the case?
(iv) Whether the appellant company namely M/s Kundil Ispat Ltd. is a person within the meaning of the said expression under Rule 26 of the said Rules and that, therefore could be subjected to pay the penalty under the said Rules?
9. As already stated above, the ground relating to failure on the part of the authorities to comply with the principles of natural justice relates to three factors namely non furnishing of all the relied upon documents, non return of un-relied seized documents and thirdly rejection of the prayer for cross examination of the persons whose statements were recorded in the course of investigation.
10. As regards the contention about failure on the part of the authorities to furnish all the relevant documents, the learned Advocate for the appellants drawing our attention to the correspondence between the appellant company and the department, submitted that the same reveal continued efforts on part of the appellants to demand copies of the documents relied upon in the show cause notice and negligence on the part of the department to furnish the same and undoubtedly even failure to give copies of some of the documents relied upon by the department. In this connection, specific attention was drawn to letter dated 01.08.2007 under which the appellants had specifically asked for copies of certain documents, which were either not supplied or which were not readable. He further submitted that the efforts on the part of the appellants continued till October 2008 to procure such copies without any success and this apparently disclose injustice to the appellants in the matter in hand. According to the learned Advocate, the order demanding duty and imposing penalty having been passed without giving reasonable opportunity to put forth their defence and without giving all the relevant documents relied upon by the department, the same cannot be sustained and it should be set aside and the matter should be remanded for fresh adjudication after directing to the department to furnish the copies of all the relied upon documents to the appellants.
11. As regards the failure on the part of the department to return the un-relied seized documents, he submitted that the law in this regard is well settled, and even a Circular issued by the Board clearly requires the department to return seized documents without fail and in any case within 30 days from the date of receipt of the show cause notice to the addressee. In that regard, our attention was drawn to the Circular No. 207/09/2006 dated 08.09.2006. He further submitted that the fact that seized documents were not returned within said time is not in dispute.
12. As regards the rejection of the prayer for the cross examination, our attention was drawn to the letter dated 1.8.2007, wherein there was specific prayer made for grant of permission for the cross examination of the persons whose statements were recorded in order to verify the truthfulness of their statements. According to the learned Advocate, the authorities below not only failed to grant such permission but totally ignored the same while deciding the matter and, therefore, it is a clear case for setting aside the impugned order and to remand the matter.
13. The contention regarding the failure to comply with the principles of natural justice by the authorities below is sought to be countered by the learned SDR by referring to impugned order itself and drawing attention to the narration of the events before the lower authorities while contending that the said narration discloses the failure on the part of the appellants to render necessary co-operation to the authorities in deciding the matter expeditiously. Apart from the failure on part of the appellants to collect documents in time when it was called upon to do so, according to him, considering the conduct of the appellants, it cannot be said that there is any violation of the principles of natural justice.
14. Perusal of the letter dated 1.8.2007 on behalf of the appellant company to the respondent undoubtedly discloses the demand for copies of certain relied upon documents as well as request for grant of permission for cross examination of certain persons whose statements were recorded. The names of such persons were enlisted in the said letter. Equally it is true that the respondents had directed the appellants to collect the document. The correspondence also discloses that there were some efforts on the part of the appellants in approaching respondent authority to get the copies of the documents but they could not get the same on account of non-availability of the officers or non-availability of the relied upon documents at the relevant time. At the same time, it is also true that the narration of the events before the adjudicating authority in the impugned order summarizes the proceedings as well as various acts on part of the appellants and the respondents. The lower authority has recorded all events in chronological order in para 12.1 of the impugned order about the proceedings before the adjudicating authority and the same is worth reproducing :
Sr. No. Events in chronological order 1 Vide letter dated 1.8.2007 Noticees Counsel requested to supply relied upon documents at Sr. No. C-2(1) to C-2(11) in annexure C-2 as according to him, these were not supplied along with the show-cause notice. He also requested for documents not relied upon in the show-cause notice but seized. He also requested for legible copies of Annexure to the Mahazar dated 10.3.2005 and documents mentioned in Annexure C-I running from Sr. No. C-1(8) to C-1(10) as the documents supplied according to him were not legible at all. He requested for cross-examination of Shri Pawan Sharma, Administrative Officer of M/s Twenty First Century Wire Rods Ltd. Shri Shravan Garg, Director of Ellenabad Steel Pvt. Ltd., Shri Abhishek Lohia, Manager and authorized signatory of M.s Shirdi steel Rollers Pvt. Ltd., Shri Vijay Kashyap, Director of Kundil Ispat Ltd., Shri Minaz Baig, Proprietor of M/s MB Scrap, Sawantwado, Shri Shabiir Ahmed Ankalgi, proprietor of M/s Ankalgo Scrap Merchants, Shri Bajarang Jindal, Scrap Merchant and Shri Noor Ahmed, Killedar, Proprietor of M/s M.K. Enterprises Belgaum. As the charges are leveled in the notice on the basis of the statements of above persons, to enable them to verify the authenticity and ellicite the truth, permission for cross-examination of the above persons was sought.2
Noticees Counsel vide letter dated 13.10.2007 intimated that the legible copies of documents requested vide their earlier letter dated 1.8.2007 have not been received by them and they wanted to know the outcome of the decision on cross-examination requested by them, whether it is allowed or not.3
Vide this office letter F. No. VI/C/16/2007-08/CX-ADJ (HQRS) dated 6.11.2007, a personal hearing was granted to all the notices at 16 hrs. either on 3rd or 10th or 17th December, 2007.4
Noticees Counsel vide letter dated 14.12.2007 referred to this office letter dated 13.11.2007 addressed to Asstt. Director, DGCEI, Belgaum requesting them to supply copes of relied upon documents, and mentioned that they have not received any documents listed in the letter dated 1.8.2007. He requested to decide on the question of cross-examination of the witnesses as mentioned in letter dated 1.8.2007. He requested to adjourn the personal hearing.
5.
Letter was made to the Noticees on 26.12.2007 intimating them to approach to the Adjudication Cell Hqrs, Panji to collect the Xerox copies of the documents required by them on 4.1.2008.
6Since nobody approached on 4.1.2008, letter was written to Noticees Counsel himself with copy to his clients on 15.1.2008 stating that he along with his clients may visit this office on 21.1.2008 and take Xerox copies of all the documents required by them failing which will mean that they do not require any copies of documents.
7. Vide the letter dated 21.1.2008, Shri Raju Priolkar, authorized signatory of M/s TFCWRL acknowledged the receipt of the Xerox copies of annexure C-2(1) to C-2(11) in annexure C-2 to the show cause notice.
8Vide this office letter F. No. VI/C/16/2007-08/CX-ADJ (HQRS) dated 18.2.2008, a personal hearing was granted to all the notices at 16.30 hrs. on 10.3.2008.
9Vide this office letter F. No. VI/C/16/2007-08/CX-ADJ (HQRS) dated 11.3.2008, a personal hearing was granted to TFCWRL, and their Directors, Shri Pawan Sharma and M/s Kundil Ispat at 16.00 Hrs. on 24.3.2008.
10Vide this office letter F. No. VI/C/16/2007-08/CX-ADJ (HQRS) dated 20.3.2008, it was intimated that personal hearing fixed 16.00 hrs on 24.3.2008 has been postponed to 27.3.2008 at 17.30 hrs. 11 Noticees Counsel vide fax dated 21.3.2008 requested to fix the personal hearing (PH) on 30.3.2008 as he was attending another PH on the same day.
12. Noticees Counsel filed a reply dted 26.3.2008. He requested for cross-examination of witnesses who could depose during the investigation the total amount and quantity of unaccounted sale of steel ingots and how much cash was given to his client as the case received did not tally with W entries.
13Vide this office letter dated 27.3.2008, above request was acceded to and PH was fixed on 31.3.2008 14 PH was conducted on 31.3.2008. Noticees Counsel arued that statements of Shri Shravan Garg and Shri Abhishek Sinha contained incomplete details and it was necessary to ascertain as to whether further statements of these persons were recorded so as to identify the exact quantum of clandestine clearances alleged in the notice and cash paid by them to the notice No. 1. He submitted that no legible copies of documents were provided.
15Vide this office letter dated 9.4.2008 Noticees Counsel was intimated that copies of documents could be taken on 12th to 14th May, 2008.
16Vide letter dated 11.4.2008 DGCEI was requested to return non-relied upon documents to the noticees, by this office.
17DGCEI vide their letter 29.4.2008 intimated that copies of relied upon documents listed in Annexure A, B and C-1 Duty calculation sheets in annexure D-1 to D-5 have been given to M/s TFCWRL. Regarding non-relied upon documents, M/s TFCWRL have been intimated to collect the documents during the second week of May 2008.
18On 3.7.2008 at 15.30 hrs, authorized signatory of M/s TFCWRL acknowledged the receipt of some documents at annexure C-1(1) pertaining to M/s Shirdi for the period 3/2 to 7/2/2005, documents at annexureC-1(8).
19PH granted on 24.7.2008, communicated on 7.7.2008 20 Noticees Counsel vide letter dated 11.7.2008 intimated that all the documents were not given to his client and also non-relied documents. He had mentioned that nothing has been heard regarding witnesses cross-examination. According to him without the documents and decision on cross-examination whether to be allowed or not, the PH would be just a formality.
21PH granted on 13.8.2008, communicated on 24.7.2008.
22Noticees Counsel vide letter dated 14.8.2008 requested to return seized documents and communicate the decision on cross-examination whether to be allowed or not and requested to adjourn the PH.
23PH granted on 01.9.2008, communicated on 22.8.2008.
24Shri Pritam Sharma, authorized signatory of M/s TFCWRL collected Xerox copies of Annexure C-1(8), Annexure C-1(9) and Annexure C-1(10) on 18.9.2008.
25Noticees Counsel vide letter dated 30.8.2008 requested for Xerox copies of certain documents requested vide their letter dated 1.8.2007 and to communicate the decision on cross-examination whether to be allowed or not and requested to adjourn the PH.
26On 18.9.2008 the authorized signatory of M/s TFCWRL collected legible copies of all documents mentioned under annexure C-2 i.e. C2(1) to C-2(11) and gave acknowledgement to that effect.
27PH granted on 15.10.2008, communicated on 23.9.2008.
28Vide letter 15.10.2008, notices intimated that PH granted on 15.10.2008 adjourned to 20.10.2008.
29. Noticees Counsel vide letter dated 10.10.2008 submitted that annexure C-2(1), C2(2), C-2(3), C2(4), C-2(5) and C-2(9) have not been supplied to the notice. Non-relied upon documents not supplied. Decision on cross-examination not intimated. Only then PH may be fixed giving reasonable time to file reply.
30DGCEI vide their letter dated 20.10.2008 wrote to Noticees Counsel informing about their letter dated 29.4.2008 permitting him to collect the documents on any working day with prior intimation.
15. The events as recorded and reproduced hereinabove undoubtedly disclose enough opportunity for personal hearing having been granted to the appellants. It also discloses and refers to various correspondences regarding the fixation of the personal hearing as also about the demand by the appellants for the copies and for cross-examination, as also the letters written by the department in answer thereof, grievances made by the appellants regarding non-supply of copies and intimation to the appellants for collecting the copies etc.
16. The question as to whether there has been denial of fair opportunity and/or whether there is failure to comply with the principles of natural justice is essentially a question of fact to be decided depending upon the facts of each case. There cannot be a general proposition of law that moments therein failure to give certain copies of the relied upon documents to the assessee would result in violation of principles of natural justice. It would depend upon the relevancy of the documents in relation to the matter which is sought to be decided as well as the prejudice that may be caused to the assessees on account of failure on the part of the department to make such copies available to the assessee in time.
17. In the case in hand, undoubtedly, the appellants had made grievance in the course of the hearing of the matter before the adjudicating authority about non-receipt of copies of certain documents relied upon by the department in support of allegation against the appellants. However, the impugned order does not disclose consideration of the contention raised in that regard by the appellants before the adjudicating authority. Having noted it, it is also necessary to ascertain as to whether the appellants have been able to make out a case that the same has been exclusively on account of failure on the part of the respondent in that regard and that the same has resulted in failure of justice in the matter and/or has caused prejudice to the appellants so as to warrant our interference in the impugned order on the said ground.
18. As regards the rejection of permission for cross-examination of the persons whose statements were recorded, undoubtedly the adjudicating authority has dealt with the contentions in that regard in detail in the impugned order. One of the person whose statement was sought to be relied upon was the appellant in appeal No. 297 of 2009 namely Shri Kishan Sharma and the other one was Shri Pawan Sharma in appeal No. 296 of 2009. The findings arrived at by the lower authority disclose that the effort to secure the presence of Kishan Sharma could not materialize nor there was necessary co-operation in this regard from the appellant company. The findings also disclose that the Director in spite of having issued notice did not appear before the authority and preferred to be represented by the authorized representative even in relation to recording of the statement and this conduct on part of the said appellant undoubtedly discloses failure on the part of the appellants to render necessary co-operation to the authorities in deciding the matter expeditiously. Being so, on plain reading of the recording of events chronologically as noted above as also findings regarding failure to render necessary co-operation by the appellants, the respondent would be justified in contending that there is no substance in grievance sought to be made about the failure of the principles of natural justice on this count. In that regard, the respondent will also be justified in contending that mere refusal of cross-examination of certain person could not be a ground to contend that no fair opportunity was given to the appellants, unless it is established by the appellants that it was on the basis of those statements that the authorities have decided the liability of the appellants. The impugned order does not disclose that the authorities having given much credence to the statements of the various persons, but rather has decided the matter on the basis of other evidence collected in the course of the investigation by the Department.
19. The impugned order also refers certain relevant facts and para 4.4 and 4.5 in that regard are worth reproducing. The same read as under: -
4.4 The quantity of scrap and sponge iron purchased was accounted on a day to day basis in the private records in the form of small books numbered (72, 73 and 74 listed at Annexure C-(20 to the SCN) containing the details of vehicle number, name of the suppliers (in some cases the slip issued to the suppliers by the M/s TFCWRL showing the details of the quantities received in the factory vide the respective vehicle number), grade of the scrap and the quantity of each grade, the rate of each grade and the total amount payable. In respect of some scrap suppliers, the payments had been made immediately on receipt in the factory and an endorsement cash was made before the said entry. Apart from the purchase of scrap, there were entries of purchase of sponge iron and pig iron also. The book numbered 77 contained the details of scrap purchased from various suppliers on the daily basis.
4.5 If was found from the small books numbered 79 and 80 seized from the factory of the M/s TFCWRL and listed at Annexure C-2 to the Notice that the steel ingots were manufactured from the sponge iron, pig iron and scrap purchased and some of the quantities manufactured were not accounted and were cleared clandestinely. The small book numbered 80 contained the details of raw materials (which included MS scrap, Sponge Iron and Pig Iron) purchased and used in the production on a daily basis for the month of October 2004 to February 29995. Further, there were entries of steel ingots produced and dispatched on a daily basis for the said period. Book No. 79 contained the details of sales made to various customers like Shirdi Rollomg Mills, Kundil Ispat and Ellenabad Steel on a daily basis showing the details as date, vehicles number, number of steel ingots, weight, rate and the value. Further, there were remarks such as (B) and (W) in fron of these entries, which appeared to have indicated that these quantities had been cleared on bills and without bills respectively. The quantities of inputs used and the steel ingots cleared, which were shown in book numbered 80 tallied with the quantities purchased (shown in book numbered 72, 73 & 74) as well as the clearance shown in the book numbered 79. The quantities of production and sale were in excess of the quantities reflected in their statutory records such as the RG-1 Register and the Form IV Register.
20. Likewise, para 4.6 deals with the aspect of payments in cash and reads thus: -
4.6 The payments in respect of unaccounted transactions had been made and received in cash. From the books numbered 75 and 76, it was noticed that the payment received which were in the form of self drawn cheques or cash payments, from the customers were entered on the left side pages and the cash payments made which included payment made to the scrap suppliers, freight payments made and other miscellaneous payments made were entered on the right side pages of the said books.
21. Perusal of the above paras apparently discloses that the most relevant documents, which were taken into consideration to ascertain and quantify the duty liability of the appellants, are Books No. 72, 73, 74, 75, 76, 77, 79 & 80. It is pertinent to note that under letter dated 10.10.2008, the appellants had specifically brought to the notice of the concerned authorities that they were not furnished with the copies of the various pages of the books namely Book No. 72, 73, 74, 75, 79 and 80. As already seen above, the relevant documents, the authorities have sought to rely upon, comprises of the documents regarding which grievance was made about non-receipt of copies of certain pages of those documents.
22. Undoubtedly, there is finding regarding the cash amount, and the records disclose that they were required by the appellants in relation to certain products manufactured by the appellants and clandestinely removed. It cannot be disputed that the duty liability has to be fixed on the basis of the entire documentary evidence collected in the course of investigation, including the fact about the cash transaction by the appellants in relation to the products, which were manufactured and clandestinely removed from the appellants premises. Being so, the contention of the appellants that there has been failure of principles of natural justice as regards vis-`-vis with appellant company and Directors, cannot be totally rejected.
23. It is true that conduct of the appellants in the proceedings before the adjudicating authority does not disclose the co-operation, which was required to be rendered to the adjudicating authority, however, it cannot be the ground to deny fair opportunity to the appellants in relation to the documents, which are relevant for the purpose of ascertaining and quantifying the duty liability of the appellants.
24. As regards the second ground of the appellant that the duty liability cannot exceed beyond Rs.15,46,229/- on the basis of the records pertaining to the cash receipt for the month of February and March, 2005 is concerned, it is difficult to accept the said contention. The cash receipt cannot be sole basis for quantification of the duty liability. Besides, as rightly pointed out by the learned DR that the duty liability should have been discharged during the relevant period by the appellants. Being so, we do not find any substance in the second ground of the appellants.
25. As regards the appeals No. 268, 269 & 270 of 2009, the same are bound to succeed in the first ground of challenge and to get the remand of the matter to the adjudicating authority for giving proper opportunity to the appellants to put forth their defence before him and to get all the copies of relied upon documents.
26. As regards the appeals by the Shri Pawan Sharma and Kishan Sharma being appeal No. 296 and 297 of 2009, obviously their liability will depend on the findings by the adjudicating authority and the findings in the matter in relation to the liability of the company and being so, while rejecting the contention that merely because they were employees and they could not be held liable for misconducts of the company, their appeals are also liable to succeed on a limited ground as above and the matter to be remanded for fresh adjudication.
27. As regards the appeal by M/s Kundil Ispat Ltd. in the appeal No. 319 of 2009, the challenge is on the ground that the appellant company does not constitute person within the meaning of the person under the Rule 26 of the said Central Excise Rules, 2002.
28. The said Rules reads thus: -
26. Penalty for certain offences 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 rupees ten thousand, whichever is greater.
29. The contention is that the term person under the said rules does not include corporate body or any non-living person. According to learned Advocate for the appellants, it only refers to the natural person. The contention sought to be made the decisions of the Tribunal in the matter of Woodmen Industries (supra), Ponneri Steel Industries (supra) and Universal Radiators Ltd. (supra). In fact both the later decisions are essentially based on the decision of the Tribunal in the case of Woodmen Industries. It is also sought to be pointed out that the decisions in the Woodmen Industries case was sought to be challenged before the Honble Supreme Court, but without any success and, therefore, view taken by the Tribunal was confirmed by the Honble Supreme Court.
30. In Woodmen Industries case, the Tribunal in para 9 of the decision has held thus: -
Coming to the appeal of the other appellants viz. the buyer of the goods (M/s Kitply Industries Ltd.) when the allegations against the main appellants have not been brought home, the penalty imposed on this appellant for abetment is not sustainable. Further, penalty on this appellant has been imposed under Rule 26 of the C.E. Rules (erstwhile Rule 209A). The said rule permits imposition of penalty on a person and not on the firm as held in the case of Aditya steel Industries V. CCE, Hyderabad reported in 1996 (84) ELT 229. There was no confiscation of the goods either. On this score, also the penalty on this appellant cannot sustain. We also observe that the Commissioner has referred to the provisions of Income-Tax Act regarding issue of cheque for payment in excess of Rs.25,000/-. If there was any violation of the provisions of the I.T. Act, it was for the Income-tax authorities to have taken objection in that regard. The Central Excise Law does not permit the Commissioner of Central Excise to assume power under the Income-Tax Act. There was, therefore, no need for the Commissioner to have recorded such a finding when he is discharging the functions of Commissioner of Central Excise. With the observation, we set aside the impugned order and allow the appeal with consequential relief, if any.
31. Plain reading of said para-9 discloses that the Tribunal in Woodmen Industries case has not laid down any law in relation to interpretation of the term person as found in Rule 26 of the said Rules. It has merely observed that Further, penalty on this appellant has been imposed under Rule 26 of the C.E. Rules (erstwhile Rule 209A). The said rule permits imposition of penalty on a person and not on the firm as held in the case of Aditya Steel Industries V. CCE, Hyderabad reported in 1996 (84) ELT 229. Obviously the matter proceeded on the assumption that the Rule 26 permits imposition of penalty on a person and not on a firm without analyzing the scope of the said rule. There was no decision of the Tribunal in the Woodmen Industries case on the aspect of interpretation of the term person under Rule 26 of the said Rules. Being so, merely because the appeal carried to the Supreme Court did not succeed it cannot be concluded that therein the word person under Rule 26 has been interpreted to refer to only living persons and not to any corporate body or the company.
32. The Apex Court in the case of Agarwal Trading Corporation (supra), while dealing with the matter under Foreign Exchange Regulation Act and referring to Section 2 (42) of General Clauses Act, 1897, had held as under: -
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 of 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 firms. 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 than the contravention took place without their knowledge or they exercised all due diligence to prevent such contravention. Undoubtedly the matter was relating to the criminal liability for offences under the Act.
33. The Apex Court in Madhumilan Syntexs case again dealing with the aspect of prosecution as well as penalty under the taxing statute held that once a statute requires to pay tax and stipulates period within which such payment is to be made, the payment must be made within that period. If the payment is not made within that period, there is default and an appropriate action can be taken under the Act. Interpretation canvassed by the learned Counsel would make the provision relating to prosecution nugatory.
34. The point as to whether the provisions made for imposition of penalty is mandatory or not came for consideration before the Apex Court in the case of Union of India Vs. Dharmendra Textile Processors reported in 2008 (231) ELT 3 and therein while referring to the earlier decision of the Apex Court in the case of Chairman, SEBI Vs. Shriram Mutual Fund reported in 2006 (5) SCC 361 and it was held in the said case that the penalty was mandatory and it was pointed out that the nature of obligation in relation to the breach of the duty pertaining to the demand of duty is of civil nature and is different from the criminal liability. It was specifically recorded that the mens-rea is not an essential part for breach of civil obligation. While holding so, the Apex Court has reiterated its views expressed on this aspect in its earlier decision in the matter of Director of Enforcement Vs. M/s MCTM Corporation Pvt. Ltd. and Others reported in AIR 1996 SC 1100, (1996) 2 SCC 471, wherein it was held thus: -
It is thus the breach of a civil obligation which attracts penalty under Section 23(1)(a) FERA, 1947 and a finding that the delinquent has contravened the provisions of Section 10, FERA, 1947 would immediately attract the levy of penalty under Section 23, irrespective of the fact whether the contravention was made by the defaulter with any guilty intention or not. Therefore, unlike in a criminal case, where it is essential for the prosecution to establish that the accused had the necessary guilty intention or in other words the requisite mens-rea to commit the alleged offence with which he is charged before recording his conviction, the obligation on the part of the Directorate of Enforcement, in cases of contravention of the provisions of Section 10 of FERA, would be discharged where it is shown that the blameworthy conduct of the delinquent had been established by willful contravention by him of the provisions of Section 10, FERA, 1947. It is the delinquency of the defaulter itself which establishes his blameworthy conduct, attracting the provisions of Section 23(1)(a) of FERA, 1947 without any further proof of the existence of mens-rea. Even after an adjudication by the authorities and levy of penalty under Section 23(1)(a) of FERA, 1947, the defaulter can still be tried and punished for the commission of an offence under the penal law, where the act of the defaulter also amounts to an offence under the penal law and the bar under Article 20(2) of the Constitution of India in such a case would not be attracted. The failure to pay the penalty by itself attracts prosecution under Section 23F and on conviction by the said offence imprisonment may follow.
35. The Apex Court in Dharmendra Textiles Processors case has also referred to its earlier decision in J.K. Industries Ltd. Vs. Chief Inspector of Factories and Boilers, wherein it was held as under: -
42. The offences under the Act are not a part of general penal law but arise from the breach of a duty provided in a special beneficial social defence legislation, which creates absolute or strict liability without proof of any mens-rea. The offences are strict statutory offences for which establishment of mens-rea is not an essential ingredient. The omission or commission of the statutory breach is itself the offence. Similar type of offences based on the principle of strict liability, which means liability without fault or mens-rea, exist in many statutes relating to economic crimes as well as in laws concerning the industry, food adulteration, prevention of pollution, etc. in India and abroad. Absolute offences are not criminal offences in any real sense but acts which are prohibited in the interest of welfare of the public and the prohibition is backed by sanction of penalty.
36. The decision in Dharmendra Textiles Processors case was further reiterated and explained in recent decision in the matter of Union of India Vs. Rajasthan Spinning & Weaving Mills reported in 2009 (238) ELT 3 (SC).
37. The Section 2(42) of the General Clauses Act, 1897, the term person is defined as inclusive of any company or association or body of individuals whether incorporated or not. Section 9AA(1) of the Central Excise Act, 1944 provides that where an offence under this Act has been committed by a company, every person who, at the time the offence was committed was in charge of, and was responsible to, the company for the conduct of the business of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished accordingly; provided that nothing contained in this sub-section shall render any such person liable to any punishment provided in this Act, if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence.
38. Undoubtedly, the provision is regarding criminal liability of the company but it discloses the intention of the legislature that the company is also liable for its each of the offence, which was committed by the said body. This discloses that a company is also liable for any illegality committed in the name of the company. The decision of the Apex Court referred to above and the provisions of law, therefore, apparently disclose that the term person as is found under Rule 26 does not merely relate to living person but every tax payer comes within its net including the corporate body or the company. Once the Apex Court has clearly ruled in the case of Director of Enforcement (supra), no uncertain terms that there is no requirement to establish the mens-rea for the purpose of imposition of penalty for the breach of civil obligation and once it has also held that penalty should be imposed on any tax payers as a civil obligation, needless to say that a person under Rule 26 would include living as well as non-living person and, therefore, there is no substance in the above ground of challenge by the appellants in Kundil Ispat Ltds case. As no other ground is sought to be canvassed in the said appeal, the same is bound to.
39. As regards the contention relating to the non-return of the un-relied seized records, the learned Advocate for the appellants has drawn our attention to Circular No. 207/09/2006-CX.6 dated 8.9.2006. Undoubtedly, the circular being issued by the Board, the authorities are bound by the said circular. However, in this case, as we have already held that the failure on the part of the authorities to furnish all the relied upon relevant documents has resulted in violation of basic principles of natural justice and the same is sufficient to set aside the impugned order, it is not necessary to deal with the said issue in detail and suffice to observe that the respondents are duty bound to follow the said circular in relation to the seized documents, which are not relied upon.
40. In the result, the appeals filed by the company and its Directors as well as its employees in appeals No. 268, 269, 270, 296 and 297 are allowed in the above terms and the matters are remanded to the adjudicating authority for fresh decision on the basis of observation given above.
41. As far as the appeal No. 319 of 2009 is concerned, the same is dismissed.
(Justice R.M.S. Khandeparkar) President (A.K. Srivastava) Member (Technical) Sinha 2