Customs, Excise and Gold Tribunal - Mumbai
Factil Electronics Pvt. Ltd. vs Collector Of Central Excise on 12 November, 1986
Equivalent citations: 1987(12)ECC191, 1987(12)ECR173(TRI.-MUMBAI), 1987(28)ELT315(TRI-MUMBAI)
ORDER
K. Gopal Member (J)
1. This appeal arises out of and is directed against the Order No. V(30)15-47/Adj/79/2669 dated 26-7-82 passed by the Collector of Central Excise, Bombay-II.
2. The facts necessary for the disposal of this appeal remain undisputed. Stated briefly the facts are : that the Officers of the Central Excise, Preventive & Intelligence, Kalyan 1st Division paid a surprise visit to Factil Electronics (Private) Ltd. (appellant's firm) on 5-12-1978. On verification of the stock of electric motors in the Bonded Store Room and R.G.I Register, they noticed that 6 electric motors bearing serial numbers (1) 770097, (2) 770010, (3) 780339, (4) 770012, (5) 780294 and (6) 7801U were actually found in the Bonded Store Room even though electric motors bearing same serial numbers had been cleared earlier under Central Excise Gate Passes. The assessee had, neither intimated the facts of receipt of duty-paid goods in the factory premises nor filed any D-3 declaration. The said motors were also not accounted for in the Form V-Register. The officers therefore seized the said 6 motors under panchnama dated 8-12-78. They further noticed that 8 electric motors stored in the Bonded Store Room without entering in the R.G.I register. But in the production register a remark has been kept against the said 8 electric motors to the effect that these motors were not lying in the Bonded Store Room and therefore, the said 8 electric motors were also seized. On verification of the Gate Passes for the period from May, 1978 to September, 1978, the Officers observed that the assessee had issued duplicate numbers to electric motors manufactured and cleared by them, under G.P.I. Certain other irregularities were also noticed.
3. After issue of show cause notice and after affording personal hearing, the Collector ordered confiscation of 14 electric motors which were seized but allowed redemption on payment of fine of Rs. 1600/-. He also imposed a personal penalty of Rs. 500/-. Being aggrieved by the order of the Collector, as stated earlier, the appellant had preferred this appeal.
4. During the hearing of this appeal, Shri H.C. Jain, the appellant's learned Advocate did not challenge the order of confiscation of the seized motors. He, however, contended that the Collector ought not to have levied a penalty of Rs. 500/- on the firm. Shri Jain contended that the appellant's factory at Panvel was in charge of a Technical Director, Shri A.S. Rajwade. Neither the appellant nor the other Directors took any interest in the working and management of the said factory. As a matter of fact, the seizure of 14 electric motors was not even intimated to the other Directors. It was only when the second seizure took place in 1979 in the factory as well as in the Head Office, the firm and the other Directors came to know of the misdeeds of Shri Rajwade. All the manipulations were made by Shri Rajwade. The penalty should have been levied on Shri Rajwade and not on the firm. The firm as well as the other Directors were innocent. Therefore, the penalty should not have been imposed on the firm.
5. Shri Pattekar for the Respondent Collector, however, submitted that the licensee is the firm. The activities of the firm are carried out by the Directors of the firm. If any of the Director commits any irregularity or illegality, the firm becomes liable to be dealt with under the Central Excise Rules. Rule 225 of the Central Excise Rules provide for imposition of penalty on the licensee and therefore the firm, which is the licensee, had been rightly penalised by the Collector. Shri Jain, in reply urged that Rule 225 has no application to the facts of the case. It applies for unauthorised removal of the goods. Further, for the fraud committed by the Technical Director who has been even prosecuted by the State for the criminal offence, the firm cannot be penalised. He, therefore, prayed that the penalty may be set aside.
6. Having regard to the rival contentions, the only question that arises for consideration is "whether the Collector committed an error in law in imposing the penalty on the firm." It is not in dispute that the Pactil Electronics (P) Ltd. was the licence-holder at the relevant time. It being a Company registered under the Companies Act, its activities shall have to be carried out by the Board of Directors. Admittedly, besides the Technical Director, Shri Rajwade, there were two other Directors. Shri K.L. Shah was the Managing Director. He was looking after sales of electric motors at the Head Office at Bombay. Shri Rajwade was to look after the manufacture activities as well as the maintenance of Central Excise records. Thus there was division of work between the Directors but then, under law, the Company would be liable for the commissions and omissions of the Directors unless the Company is able to establish that the acts or omissions of the Directors was ultra-vires of the memorandum or articles of association. No such plea had been put forward by the appellant. The only contention raised before us was that Shri Rajwade, the Technical Director was all in all in so far as the manufacture, as well as maintenance of accounts and he committed the irregularities and the illegalities detected by the Central Excise Department. Therefore, the personal penalty should be only on Shri Rajwade and not on the firm. We are unable to accept Shri Jain's contention that the penalty cannot be levied on the firm for the acts and omissions of its Directors. The Central Excise Licence was in the name of the firm and not in the name of the Directors. It is the firm that would be accountable to the Central Excise Department and not the individual Directors. The firm cannot escape its responsibility by putting the blame of the irregularities and illegalities on its Directors. The finding of the Collector that 14 electric motors were not accounted for in the R.G.I and they were liable to confiscation, has not been challenged. The further finding of the Collector, that six motors were manufactured and given duplicate numbers and not accounted for in the R.G.I, also remains unchallenged. The show cause notice was issued to the firm which was the licensee calling upon them to show cause why penalty should not be imposed under Rule 173Q(1) of the Central Excise Rules. It was alleged in the show cause notice that the provisions of Section 173-G(4) read with Rule 53 of Central Excise Rules had been contravened in as much as the firm had failed to account for 14 electric motors in R.G.I register As stated earlier, the Collector who held the adjudication found the allegation contained in the show cause notice established by the evidence on record. Shri Jain did not challenge the findings of the Collector. In the said circumstances, the contention of Shri Jain that no penalty can be levied on the firm is not only not sound but wholly untenable. Confiscation and penalty is provided in Rule 173Q. It reads:
"If any manufacturer, producer or licensee of a warehouse,-
(a) removes any excisable goods in contravention of any of the provisions of these rules, or
(b) does not account for any excisable goods manufactured, produced or stored by him, or
(c) engages in the manufacture, production or storage of any excisable goods without having applied for the licence required under section 6 of the Act, or
(d) contravenes any of the provisions of these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the manufacturer, producer or licensee of the warehouse, as the case may be, shall be liable to a penalty not exceeding three times the value of the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (c) or clause (d) has been committed, or five thousand rupees, whichever is greater.
Having regard to the abovesaid provision, we are not persuaded to agree with Shri Jain that the firm cannot be made liable to pay penalty for the acts and commissions of its Directors. The firm acts through its Directors and therefore the firm, in law, is liable for the acts and commissions of the Directors. Unlike the Customs and Gold Control Law, the Central Excise Law does not provide for imposing penalty on the Directors or the Partners of a firm for their individual acts. The provisions similar to Section 140 of the Customs Act and Section 284 of the Gold Control Act, are not found in the Central Excise Act or Rules.
7. After careful consideration of all the aspects, we reject Shri Jain's contention that on the facts and in the circumstances of the case, no penalty can be levied on the firm. We see no infirmity in the order passed by the Collector. The Collector's order in imposing the penalty on the firm is not only legal but just and proper. We, therefore, reject this appeal.