Custom, Excise & Service Tax Tribunal
Royal Synthetics vs Cce Mumbai - I on 6 November, 2018
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: E/1650 & 1651/1998
[Arising out of Order-in-Original No: 201/97-COMMR dated 29th
November 1997 of Commissioner passed by the Central Excise &
Customs, Mumbai - III.]
For approval and signature:
Hon'ble Shri C J Mathew, Member (Technical)
Hon'ble Shri Ajay Sharma, Member (Judicial)
1. Whether Press Reporters may be allowed to see the
Order for publication as per Rule 27 of the : Yes
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of
CESTAT (Procedure) Rules, 1982 for publication : Yes
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
: Yes
Departmental authorities?
Royal Synthetics
Ajay Shah ... Appellant
versus
Commissioner of Central Excise
Mumbai - I ...Respondent
Appearance:
Shri JC Patel, Advocate for appellants Shri S Hasija, Superintendent (AR) for respondent E/1650 & 1651/1998 2 CORAM:
Hon'ble Shri C J Mathew, Member (Technical) Hon'ble Shri Ajay Sharma, Member (Judicial) Date of hearing: 10/07/2018 Date of decision: 06/11/2018 ORDER NO: A/ 87853-87854 / 2018 Per: C J Mathew The appellants, M/s Royal Synthetics and Shri Ajay Shah, seek the setting aside of penalties of ₹ 10,00,000 each imposed on them under rule 209A of Central Excise Rules, 1944 in order-in-original no.
201/97-COMMR dated 29th November 1997 of Commissioner of Central Excise & Customs, Mumbai-III in proceedings relating to alleged clandestine removal of goods by M/s Universal Polymers.
2. It is alleged that M/s Universal Polymers had evaded duties of central excise to the tune of ₹ 29,23,381 through unaccounted production and clandestine clearance using the cover of legitimate invoices repeatedly while recording the production of 'alkyd' and 'maleic' resin valued at ₹ 7,22,720; between 7th June 1995 and 1st July 1995; goods valued at ₹ 22,31,260 had been cleared without payment of duty of ₹ 2,23,126 against invoice no. 15, 16 and 17 repeatedly.
Between 1st April 1995 and 1st July 1995, goods valued at ₹ 59,17,040 E/1650 & 1651/1998 3 and between October 1994 and March 1995 goods valued at ₹ 1,06,02,960, with duty implication of ₹ 23,18,348, were also similarly removed. The link with M/s Royal Synthetics was the alleged clandestine clearance, between April 1994 in September 1995, of goods valued at ₹ 71,04,000 and, between April 1993 in March 1994, of goods valued at ₹ 47,88,653 thus evading duties to the extent of ₹ 5,15,600 and ₹ 89,433. It is alleged that these goods were received by the appellants despite being aware that these had been clandestinely removed.
3. It is the contention of Learned Authorised Representative that the manufacturer is not in appeal and, thereby, the finding of clandestine removal stands undisputed. According to Learned Counsel for the appellants, the statements relied upon for rendering the findings in the impugned order had been retracted and suffered from the taint of lack of relevancy in the absence of having been subject to scrutiny prescribed in section 9D of Central Excise Act, 1944. To sustain this line of argument, he places reliance on the decision of the Hon'ble High Court of Punjab & Haryana in G-Tech Industries v.
Union of India [2016 (339) ELT 209 (P&H)] and, in particular, to '18. It is only, therefore,-
(i) after the person whose statement has already been recorded before a Gazetted Central Excise officer is E/1650 & 1651/1998 4 examined as a witness before the adjudicating authority, and
(ii) the adjudicating authority arrives at a conclusion, for reasons to be recorded in writing, that the statement deserves to be admitted in evidence, that the question of offering the witness to the assessee, for cross-examination, can arise.
19. Clearly, if this procedure, which is statutorily prescribed by plenary parliamentary legislation, is not followed, it has to be regarded, that the Revenue has given up the said witnesses, so that the reliance by the CCE, on the said statements, has to be regarded as misguided, and the said statements have to be eschewed from consideration, as they would not be relevant for proving the truth of the contents thereof.'
4. He also contends that the rule 209A of Central Excise Rules, 1944 is not applicable to individuals except for established active participation or abetment in evasion. Drawing attention to section 9AA of Central Excise Act, 1944 which, being pari materia with section 140 of Income Tax Act, 1961, could lead to parallel imposition of penalties on the company and individuals but not to partnership firms except, as held by the Hon'ble High Court of Bombay in Amritlakshmi Machine Works v. Commissioner of Customs (Import), Mumbai [2016 (335) ELT 225 (Bom)] in the special circumstances of E/1650 & 1651/1998 5 '39. In the light of our above discussion, we answer the two questions posed for our opinion as under :-
Question (a). - Yes. Simultaneous penalty can be imposed both on the partners and partnership firm under Section 112(a) of the Act where the charge on the firm is of acting or omitting to act rendering the goods liable for confiscation and the notice issued to the partner makes out a separate case of abetment on his part. This abetment should be in respect of the act and/or the omission to act on the part of the firm which has rendered the goods liable for confiscation under Section 111 of the Act or where the allegation on the firm is of abetment and/or mens rea, then Sections 135(1)(a) and 140 of the Act is applicable and simultaneous penalty is imposable. It is made clear that in all other cases falling under Section 112(a) of the Act simultaneous penalties upon the firm and its partner cannot be imposed. It is made clear that no penalty can be imposed upon the partner ipso facto merely on account of the fact that penalty is being imposed on partnership firm.
Question (b). - The decision in Textoplast Industries (supra), arrived at on first principle is the correct view only to the following extent :
(a) where the show cause notice makes out a case under Section 112(a) of the Act read with Section 135 of the Act then alone on application of Section 140 of the Act simultaneous penalties are imposable upon the firm and its managing partner; or
(b) where the show cause notice makes out an independent case of abetment upon the partner for the act or omission of the partnership firm which has rendered the goods liable for confiscation under Section 111 of the Act. This is on the plain reading of Section 112(a) of the Act, without any reference/reliance to Chapter XVI of the Act. The decision in Jupiter Exports (supra) holding that no separate penalty upon the firm and the partner can be imposed under Section 112(a) of the Act in all cases is not the correct E/1650 & 1651/1998 6 view.' which is absent here.
5. Learned Authorised Representative argues that it is not necessary to test the statements as the impugned order has placed reliance upon the parallel documents that were unearthed during the investigation. It is also his contention that cross examination had not been sought for; he places reliance on '92. The sequel to the above discussion is that the first question is required to be answered in the affirmative, that is simultaneous penalties can be imposed on the firm and the partners under the Act and more particularly under Section 112(a) of the Act. However as the Act itself stipulates, the same would be subject to the parties proving that the contravention has taken placed without their knowledge or despite exercise of all due diligence to prevent such contravention.
93. As regards the second question, the decision of the Division Bench of this Court in "Textoplast Industries v. Additional Commissioner of Customs" reported in 2011 (272) E.L.T. 513 (Bom.) lays down the correct law in holding that it is permissible to impose penalty separately on partnership firm and the partners in adjudication proceedings under the Customs Act.' in the decision in re Amritlakshmi Machine Works. According to him, the Larger Bench of the Tribunal has, in Gopal Industries Ltd v.
Commissioner of Central Excise, Indore [2007 (214) ELT 19 (Tri-
E/1650 & 1651/1998 7 LB)], approved of the validity of private records to establish clandestine removal thus 18.1 The "Daily report tin factory" note-book contained details of production and issue of tin containers by the appellant, which did not reflect in the statutory record. The details of production and clearance of tin containers were also shown in the note-book 'Daily production report' separately in respect of the appellant firm which tallied with the figures shown in the 'Daily report tin factory' which contained figures both for the 'new' tin factory as well in the name of the appellant. In this context, it will be noticed that the managing partner Shri Yogesh Garg confirmed in his statement recorded on 29-9-1998 that the documents recovered under the panchnama on 1-9-1998 were pertaining to production and clearance of tin containers by their factory. He stated that these documents consisted of daily production reports written in note-books, delivery challans, stock record of tins etc. The documents recovered pertained to production and clearance of tin containers. He also stated that amongst other supervisors, even Awadesh Kumar Saxena, Electronics Engineer looked after the production and clearance of the goods of the factory. The authorized signatory of the appellant Girijesh Kumar Rai, confirmed in his statement recorded on 28-9-1998 that the records shown to him were withdrawn from the factory of the appellant in his presence and that he had put his signatures on the said documents at the time of withdrawal on 1-9-1998. The Electronics Engineer, Shri Awadesh Kumar Saxena in his statement dated 28-9-1998 admitted that the portion of daily production reports note-book pertaining to the appellants was prepared by him and that challans and daily production reports which bear his signatures, were prepared by him and they were of E/1650 & 1651/1998 8 the appellant firm. According to him, the daily production report depicted the number of tin containers produced/ manufactured on a specific day. Whenever, he prepared the daily production report/challan he submitted the original copy to the Managing Director. The facts revealed by the Managing Director, Shri Yogesh Garg, the authorized signatory, Shri Girijesh Rai and Shri Awadesh Kumar Saxena make it clear that the said private documents recovered from the appellant premises on 1-9-1998 were maintained by the appellant and that the record, namely, the daily production reports, challans etc. were pertaining to the clandestine production and removal of tin containers without payment of duty. We have perused copies of these two note-books containing the private record and we find that there were signatures of Awadesh Kumar Saxena, Electronics Engineer at various places. The daily report showed particulars of the opening stock, production and the closing stock of the said excisable goods. Admittedly, the production of the tin containers, which was recorded in these daily record books and which were removed, did not appear in the statutory record i.e. RG. 1 register of the appellant. This not a case where mere private record without anything more is relied upon. The private record was recovered from the factory of the appellant, and it is established beyond doubt and not even disputed that it was so recovered and that it belonged to the appellant. The nature of particulars contained in this private record clearly go to show their intrinsic authenticity about the clandestine production and removal of the excisable goods by the appellants who had obtained the excise registration for the manufacture of such goods in the firm name. There cannot be more authentic evidence than recovery of the said private record from the appellant's factory which admittedly was prepared and bears the signatures of the supervisors of the appellant, and which is E/1650 & 1651/1998 9 proved to have been maintained in the factory, from the statements of the partner Shri Yogesh Garg, the Electronics Engineer, Shri Awadesh Kumar Saxena who has made several daily reports in the said book, and the authorized signatory, Shri Girijesh Rai in whose presence the note-books were recovered under a panchnama. In answer to question No. 18, Shri Awadesh Kumar Saxena who was shown the Daily production reports, stated in his statement dated 29-9- 1998 that all these pertained to the appellants who manufactured the tin containers and that these contained information regarding production and clearance. He also stated in reply to question No. 19 that all challans were prepared by Shri Rajeev Agarwal and others whose signatures he recognized. The authenticity of the recovered documents was admitted by the partner Yogesh Garg [noticee No. (2)] and noticee No. (6) (Girijesh Rai) who also admitted that the record pertained to unaccounted for production and clearance of the tin containers by the appellant. Any subsequent retraction by Shri Awadesh Kumar Saxena has been rightly held to be an afterthought to protect the noticees. This is not a case where any defence was taken up about less consumption of electricity that would have impelled the Revenue Officers to examine consumption of electricity. When production and removal of excisable goods in a clandestine manner is established by such positive documentary evidence and the oral evidence of the managing partner and the supervisor, it cannot be said that the Commissioner committed any error in holding that the appellant had manufactured and cleared tin containers in a clandestine manner. The quantum of liability which is worked out, has not been disputed before us. We find ourselves in complete agreement with the reasoning and findings of the learned Commissioner in holding that the charge of clandestine removal of tin containers by the appellants was established E/1650 & 1651/1998 10 beyond doubt. No further corroboration was required in view of the clinching nature of the oral and documentary evidence establishing clandestine production and removal of tin containers by the appellant. It is evident that Shri Yogesh Garg, noticee No. (2), partner of the appellant, was in charge of the unit and was having overall control of the affairs of the unit. It was, therefore, rightly held that he was aware that the goods clandestinely manufactured and removed in the name of his partnership firm were liable to be confiscated.
and has also approved the imposition of separate penalties on partners and the firm therein.
6. In the facts and circumstances of the undisputed clandestine removal, the sole issue for determination is the culpability of the two appellants to be brought within the scope of rule 209A of Central Excise Rules, 1944. Notwithstanding the various decisions cited by Learned Authorised Representative, the test prescribed by the majority decision of the Hon'ble High Court of Bombay in re Amritlakshmi Machine Works would determine the imposition of penalty on Shri Ajay Shah. It is seen from the impugned order in '56. In view of the above facts and evidence on records, I find that Shri M.P.Choksy of M/s Universal Polymer with Shri Ajay Shah of M/s Royal Synthetics with his trading racket have conspired for systematic evasion of Central Excise duty. M/s. Royal Synthetics have supplied raw material and M/s. Universal Polymers have manufactured Alkyd Resin. The relation of Shri Ajay Shah of M/s. Royal Synthetics and Shri M.P.Choksy of M/s. Universal Polymer is as Principal E/1650 & 1651/1998 11 manufacturer and Job worker. From the raw materials supplied by M/s. Royal Synthetics, the assessee (M/s. Universal Polymer) have manufactured Alkyd Resin and cleared under paralle set of invoice and evaded Central Excise duty. This finished product i.e. Alkyd Resin was delivered to M/s. Royal Synthetic who with the help of his trading racket managed entire sale as trading sale and evaded Central Excise duty.
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58. I find that M/s. Royal Synthetic have actively and knowingly aided and abetted the commission of the offence of evasion of Central Excise duty, liable for penalty under Rule 209 A of Central Excise Rules, 1944.' that the proceedings against Shri Ajay Shah is not based on a separate set of evidences relating to his particular role as distinct from M/s Royal Synthetics. Therefore, the imposition of penalty on him under rule 209A of Central Excise Rules, 1944 is not in accordance with the law.
7. The impugned order has rendered elaborate findings on the manner in which M/s Royal Synthetics stood to gain from the handing of goods that had been clandestinely removed from the premises of M/s Universal Polymers and the active collaboration that enabled the disposal of unaccounted production of M/s Universal Polymers. The findings per se are not contributed by Learned Counsel for appellants.
On the other hand, it is his contention that the statements, by failing to adhere to the relevancy prescription in section 9D of Central Excise E/1650 & 1651/1998 12 Act, 1944, have been erroneously relied upon. On the other hand, the submission of Learned Authorised Representative that the existence of parallel documents, unchallenged as they are, and the lack of challenge to the determination of clandestine removal by M/s Universal Polymers renders credibility to the statements even in the absence of cross-examination of the persons from whom these were recorded has a certain undeniable acceptability. We are satisfied that the unquestioned documentary evidence would suffice to establish the clandestine removal and the handling of such goods by M/s Royal Synthetics. In the circumstances, the appeal of M/s Royal Synthetics fails to find favour.
8. In view of the above findings, we set aside the penalty imposed on Shri Ajay Shah while confirming the penalty imposed on M/s Royal Synthetics.
(Pronounced in Court on 06/11/2018)
(Ajay Sharma) (C J Mathew)
Member (Judicial) Member (Technical)
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