Gujarat High Court
Narendra C Solanki vs Commissioner Of Central Gst And Service ... on 28 August, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/470/2024 ORDER DATED: 28/08/2024
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 470 of 2024
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2023
In R/TAX APPEAL NO. 470 of 2024
With
R/TAX APPEAL NO. 465 of 2024
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2023
In R/TAX APPEAL NO. 465 of 2024
With
R/TAX APPEAL NO. 466 of 2024
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2023
In R/TAX APPEAL NO. 466 of 2024
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NARENDRA C SOLANKI
Versus
COMMISSIONER OF CENTRAL GST AND SERVICE TAX VADODARA II
================================================================
Appearance:
MR DHAVAL SHAH(2354) for the Appellant(s) No. 1
for the Opponent(s) No. 1
================================================================
CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 28/08/2024
COMMON ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr.Dhaval Shah for the appellants/applicants.
2. These Tax Appeals are filed under Section Page 1 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined 35 of the Central Excise Act, 1944 (for short 'the Act') arising out of the order dated 23.01.2023 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench, Ahmedabad (for short 'the CESTAT') in Excise Appeal No.1651 of 2010, 1652 of 2010 and 1654 of 2010.
3. The appellants have proposed the following common substantial questions of law arising from the impugned order of the CESTAT :
"(A) Whether penalty can be imposed upon the Appellant under Rule 26 of the Central Excise Rules, 2002 only because the Appellant was the in-charge Managing Director?
(B) Whether the Appellate Tribunal erred in law in upholding the Order In Original and confirming the penalty Page 2 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined under Rule 26 of the Central Excise Rules, 2002, without specifying which particular clause of Rule 26 had been allegedly contravened by the Appellant?
(C) Whether the penalty under Rule 26 can be imposed without there being any proposal and order for the confiscation of the goods in question?
(D) Whether the Appellate Tribunal is justified in relying upon the statement partly, which suits the version of the adjudicating authority and brushes aside the part which is in favour of the Appellant?
(E) Whether the Appellate Tribunal justified in upholding the penalty under Rule 26 of the Cenvat Credit Rules, though no mens rea was established?"
4. The brief facts of the case are as under :
Page 3 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined 4.1. M/s. Shree Sardar Co-operative Sugar Industries Limited was manufacturing Sugar and was supposed to sale the Sugar as per the fixed Government quota allowed to it.
4.2. However, it was found that the said Company was clearing Sugar in excess to the quota allowed and for such excess clearance, parallel invoices were issued and no duty was paid on such excess clearance. Thus, there was a clandestine removal of the Sugar by the said Company.
4.3. The Company recorded the clandestine clearance in the books of accounts as deposit of sale proceeds against the respective customers and such clearance was not reflected in Form ER-1 returns filed under the provisions of the Act.Page 4 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024
NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined 4.4. Accordingly, the demand was quantified by Order-in-Original dated 27.07.2010 and adjudicating authority also levied penalty upon the appellants under Rule 26 of the Central Excise Rules, 2002 (for short 'the Rules') as applicable at the relevant period during 2007-2008.
4.5. The adjudicating authority for levy of the penalty upon the appellants has observed as under :
"26.1. With regard to imposition of penalty under Rule 26 of the Central Excise Rules 2002 on S/Shri Jaykant Ambalal Patel - President, Devendra Ambalal Thakkar - Vice-President, N.C. Solanki - Incharge Managing Director, Kanubhal Patel - Ex-Managing Director, it has been contended on their behalf that being senior functionaries of the Page 5 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined Company, they do not attend to day-to-
day work related to clearances on
regular basis; that for the
administration and functioning of the
Company, the Company has appointed
other staff who looks after the
accounting and excise work; that it is not their decision alone as a whole to decide and sell the Sugar in the Market in excess of the allotted/ released quota, but were the decisions of the Board of Directors of the Company. It is thus submitted that they alone have not involved themselves directly in day-to-day activities and functioning of the Company. During the personal hearing held on 15.7.2010, it has also been argued on behalf of Shri Kanubhai Patel - Managing Director that he was not even subjected to investigations for imposing penalty. Therefore, It has been pleaded that these persons hardly had any opportunity to know, much less to interfere or involve themselves in normal working activities of the Page 6 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined Company so as to render them liable for penalty under Rule 26.
26.2. Further, in the separate defence arguments advanced on behalf of. Shri Parantap Joshi - Managing Director, it has been contended that he was only implementing the decisions of the entire governing committee, and not gaining anything individually out of the procedural regularities as alleged. It has been submitted that, in absence of any allegation much less on account of actual confiscation of goods, no personal penalty under Rule 26 can be imposed.
26.3. I have gone through the evidences available on records all of which clearly shows that the practice of illicit clearances of sugar, viz., claimed as "over-selling" has been going on in the factory premises of the assessee over very long period and that too, with active knowledge and connivance of all the Noticees, whether Page 7 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined it is Managing Director, other Directors, President, Vice-President, and other employees working under their instructions and guidance. The total quantity of such illicitly cleared Sugar is to the tune of 215845 quintals, the value of which is to the tune in excess of Rs. 25 Crores and the Central Excise duty that has been evaded is to the tune of Rs.1.98 Crores, and hence this is not a meager quantity or amount to escape the attention and knowledge of any senior functionary of the Company, let alone Directors. It remains admitted by every person who has been subjected to investigations in the present proceedings, that the practice of over- selling has been in vogue since long in their Company, and that they were resorting to such illicit removals of Sugar manufactured in order to meet their financial obligations.
26.4. It is also pertinent to quote relevant facts revedled from the Page 8 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined statements of the above Noticees, in as much as:
a) In the statement dated 21.1.2009 of Shri Narendra C. Solanki -
Managing Director discussed in Para 3.5 of the SCN, it stands admitted by him that during his tenure as in- charge Managing Director, the practice of overselling of sugar was taking place that they were maintaining two sets of Central Excise Invoices and daily stock registers, out of which one set was used for central excise purposes and another set was used for maintaining the record of overselling sugar; that he had also signed ER-1 returns submitted to the Central Excise department wherein only quantity of released quota sugar has been shown in the column representing clearance.
b) In the statement dated 16.2.2009 of Shri Parantap Joshi-Managing Page 9 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined Director, discussed in Para 3.9 of the SCN, it remains admitted that in case they needed further financial requirement, the management committee used to take decision to sell the sugar beyond released quote; that he was also one of the ex-officio members of the management committee to carry out the orders of the management and to execute the same; that to create the fund, he had to implement the policy discussed in the meeting though it was not regularized by written resolution; that advance payment received from the customers has been deposited in their regular bank account but they had not shown the said transaction as actual sale, though they have cleared the sugar against so much of amount by issuing another set of invoices which is not declared to the Central Excise department; that two sets of invoices were maintained, one regular set for central excise Page 10 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined purposes and the other set which was not reported to Central Excise department nor reflected in ER-1 returns; that he knew that clearance of sugar without payment of Ceniral Excise duty by issuing duplicate invoices is an offence but that offence was not commitied in his individual capacity but was committed due to the scarcity of fund, and to survive in the cooperative society: that whatever the information submilted / declared to the Central Excise department was wrong and misleading information as the sugar sold beyond released quota was not mentioned in the ER-i returns and that he had also signed some of such ER-1 returns for which he is responsible.
26.5. The above statements have not been retracted till date and on the contrary remain admitted even during adjudication proceedings. These facts also find coroboration from other Page 11 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined available documentary evidences which have been relied upon for the purpose of this show cause notice.
26.6. I also find that in so far as Shri Jayant Patel - President, Shri Devendra Thakar - Vice President and Shri Kanubhai Patel - Managing Director, in spite of efforts made by the investigating officers, they could not be interrogated due to their non- appearance before the officers. Hence efforts were made to ascertain from the records of The District Registrar of Co-operative Society, Vadodara who were also simultaneously carrying on certain investigation on their account, to identify their roles in commission or offence, the details of which have been discussed in Para 7 of the SCN.
Therefore, it is not that no
investigations were carried out in
respect of these persons, but the
investigations were hampered due to
non-appearance of the concerned
Noticees. However, the charges have
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NEUTRAL CITATION
C/TAXAP/470/2024 ORDER DATED: 28/08/2024
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been framed on the basis of concrete evidences against them as discussed in Para 7 of the SCN. In view of the above, I do not find any merits in the arguments of the Noticees in this regard."
4.6. Being aggrieved by the Order-in-
Original, the appellants preferred the appeals before the CESTAT which were disposed of by the impugned order wherein, the CESTAT while confirming the penalty levied in Order-in-
Original by the adjudicating authority held as under:
"5. I find that the fact of clandestine removal done by the company M/s Shree Sardar Co-operative Sugar Industries Limited is not under dispute as the company has issued parallel invoices on which no duty was paid. The transaction were also not booked properly in the books of accounts. Against the said Page 13 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined parallel invoices, the company also received the payment which intentionally not shown in the sales iccount but shown as deposit against the respective customers, therefore it clearly transpires that the company and its board under systematic modus operardi, carried out the clandestine removal of the excisable goods. As per the facts of this case, the entire modus operandi can only be done by the board of the company which includes all the directors, it is beyond imagination that such a systematic act of clandestine removal and in proper accounting of the payment in the books as deposit can be done without the knowledge of the Directors of the company. Such type of act cannot be accepted from the employee of the company. It is also served that the employee in their stateinent clearly stated that for the entire act, information is available with Shri Narendra C Solanki. Mereover, even Shri Solanki also in his statement accepted Page 14 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined about entire modus operandi. As regard, the other two namely, Shri Devendra Ambalal Thakar and Shri Jaykant Ambalal Patel, even though the statements were not recorded, the fact is not under dispute that they are the directors in the company and without their knowledge, this entire modus operandi cannot be concluded, therefore, even if any statement was not recorded, that too due to their non-cooperation in the investigation, they cannot be at solved from the penalty for the charge of abatement in evasion of excise duty by the company. The judgements relied upon by the appellant are on different facts. Penalty under Rule 26 is decided on the basis of the fact of each case depending on the role of the person which varies from case to case. Therefore, considering the fact of the present case, the judgments are not applicable. Accordingly, do not find any infirmity in the impugned order imposing penalty on the present appellants. Hence, tie penalties are Page 15 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined sustained. Appeals are dismissed."
5.1. Learned advocate Mr.Dhaval Shah for the appellants submitted that the respondents have failed to consider the applicability of the Rule 26 of the Rules, as under breach of Sub-rule (1) or (2), the penalty is levied as stated in the Order-in-Original.
5.2. In support of his submission, reliance was placed on the decision of the Hon'ble Supreme Court in case of Amrit Foods Versus Commissioner of Central Excise, U.P. wherein, the Hon'ble Apex Court has held that it was necessary for the respondent to put the assessee on notice as to the exact nature of the penalty to be levied. It was therefore submitted that the respondent-adjudicating authority has neither stated the relevant Rule either in the show-cause notice or in the Page 16 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined Order-in-Original and only on the basis of the facts which are found from the records and only because the appellants are either Managing Director, President or Vice-President of the Company, the penalty is levied without adjudicating upon the involvement of the appellants for alleged clandestine removal of the Sugar by the said Company.
5.3. It was further submitted that the penalty by invoking Rule 26 of the Rules could not have been levied without there being any proposal in order for the confiscation of the goods (in question). It was pointed out from the Order-in-Original that the adjudicating authority has only raised the demand of Rs.1,98,20,491/- to be recovered from the Company under first provisio to Sub-section (1) of Section 11A of the Act along with the Page 17 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined interest without there being any order to confiscate the goods. It was therefore submitted that in absence of any order of confiscation, Rule 26 of the Rules could not be applicable for levy of the penalty.
5.4. It was further submitted that the appellants were never provided any opportunity of cross-examination or put to notice for levy of the penalty, more particularly, when none of the appellants were looking after day to day affairs of the Company, more particularly, Shri Devendra Ambalal Thakkar and Shri Jaykant Ambalal Patel were only President and Vice-
President of the Company without being involved in day to day affairs.
5.5. It was also pointed out that the adjudicating authority has also not carried Page 18 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined out any investigation so far as the above two appellants are concerned and only because the appellants did not come forward to record the statement, adjudicating authority could not have relied upon the allegations made in paragraph No.7 of the show-cause notice to levy the penalty. It was therefore pointed out that the CESTAT without considering contentions raised on behalf of the appellants, confirmed the penalty only on the ground that Mr.Narendrabhai Solanki in his statement had admitted about the clandestine removal by the Company.
5.6. Learned advocate Mr.Dhaval Shah also referred to the statement of Mr.Narendrabhai Solanki which was reproduced in the Order-in-
Original which is placed in the paperbook to point out that Mr.Narendrabhai Solanki was an Page 19 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined In-charge Managing Director and he has categorically stated in his statement that on coming to know about such illegal clandestine removal of the Company, he had opposed the same and had given instruction to dis-continue such "overselling" of the Sugar by the Company as the same was over and above the quota fixed by the Government. It was therefore submitted that no penalty could have been levied upon the appellants by the adjudicating authority and the Tribunal has committed an error in confirming the same contrary to Rule 26 of the Rules.
6. Considering the submissions made by the learned advocate for the appellants, it is not in dispute that the appellants were in knowledge of the clandestine removal of the goods by the Company.
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7. Rule 26 of the Rules prevailing at the relevant time reads as under :
"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 *[rupees two thousand,] whichever is greater.
[2] Any person, who issues -
(i)an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or Page 21 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined
(ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater."
8. On bare perusal of the above Rule, it is clear that any person who is in any way concerned in removing the excisable goods which he knows or has reason to believe are liable to confiscation under the Act or the Rules shall be liable to a penalty.
Admittedly, in the facts of the case, the appellants were concerned with the removal of the goods by the Company and from the Page 22 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined statement of Mr.Narendrabhai Solanki which was recorded during the course of investigation, there is a clear admission on his part which is reproduced in the order-in-original and reads as under :
"3.5. In a statement of Shri Narendra Chandubhai Solanki, Managing Director of M/s Vadodara District Co-operative Sugar Cane Growers Union Ltd., Gandhara, Tal- Karjan Vadodara and acting as In-charge Managing Director of the assessee, during the period from 06.07.2007 to 28.10.2008, which was recorded on 21.01.2009, he interalia stated that his function as Managing Director was to look after the whole administrative work of the assessee and as a Managing Director he also had to look after the production and clearances of sugar and molasses in the company. But there was no production during his tenure because of the slack season; that as per the Government norms, the sugar producing Page 23 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined company has to sell the quantity of sugar only to the extent of quota released by the Central Government; that they sold the sugar after getting advance by way of Demand Draft from the customers and never sold the sugar on credit basis; that the clearance of sugar was in cash only; that the amount mentioned in the demand draft received from the customers included the value of sugar plus all applicable taxes of Central Government and State Government; that they had also received the Central Excise duty from the customers at the material time; that after receipt of demand draft by the sales department, they issued two memos, one memo for Godown keeper and second for Chief Accountant along with the demand draft for posting in the books of accounts; that the Memo issued to the godown keeper indicated the information viz. name of the customer, quantity of sugar to be sold, truck number and other relevant information: that on arrival of memo, Godown keeper used to load the Page 24 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined sugar in the specified truck and prepared the Central Excise Invoice and handed over the same to the customers. He admitted that they sold the sugar according to the quota allotted by Central Government and also sold sugar beyond the quota so released / allotted by the Central Government; that the Sugar sold beyond the quota is known as "overselling" in sugar Industry; that he admitted that during his tenure as In charge Managing Director of the assessee, the practice of overselling of sugar was taking place: that while they recorded the quantity of released quota of sugar in the Central Excise records, they did not record the quantity of overselling sugar in the Central Excise records viz. Daily stock register/ returns etc; that the quantity of released quota, as well as, overselling of sugar was cleared under the Central Excise Invoices and that they have already collected the Central Excise duty including Education cess from the customers; that the practice of Page 25 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined overselling sugar was prevailing since long by the assessee, and such practice has also continued during his tenure:
that when this practice came into his knowledge, he verbally ordered sales department to discontinue the overselling practice; that they were maintaining two sets of Central Excise Invoices and daily stock register (RG-
1). While one set of invoice and daily stock register was used for Central Excise purpose another set of records was used for maintaining the records of overselling sugar; that the overselling of sugar used to be adjusted against the subsequent quota released by the Government in the succeeding months by way of issuing fresh Central Excise Invoices. The Central Excise duty in respect of such over-sold quantity of sugar, though already collected at the time of over selling. was paid to the Govt, account only in the month during which such quantity was adjusted against the released quota; that such invoices raised for overselling of sugar were Page 26 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined destroyed after issuing the fresh invoices; that pending such adjustments, the amount along with the Central Excise duty relating to overselling of sugar recovered from the customers was credited as an advance from the customers to show that the factory had not cleared any sugar beyond the released quota permitted by the Director of sugar, Delhi; that he had also signed the ER-I returns submitted to the Central Excise department wherein only quantity of released quota has been shown in the column relating to clearance; that he had submitted two statements showing the details of sales under the letter no, Sardar/ adm/ 2008-
09 dated 19.12.2008 under his signature; that presently he was not associated with the assessee so he had obtained the figures of clearances from the officer working with the assessee. He categorically admitted that during his tenure, extra set of RG-1 was maintained, and that such practice was prevailing with the assessee, even Page 27 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined before he took the charge as the In charge Managing Director of the assessee; that when it came to his knowledge, he ordered to the sales department that such practice to be discontinued: that overselling was the decision of the management committee consisting of Chairman, Vice Chairman and members of Executive Committee and as per such decision, overselling had been carried on by the assessee. On being shown the statements of (i) Shri Pranay Amin recorded on 13.01.2009 and (il) Shri Kamlesh Bhatt recorded on 16.01.2009, after carefully going through the contents of both the above statements, he agreed with the contents and in token of having seen and agreed, placed his dated signature thereon."
9. From the above statement given by Mr.Narendrabhai Solanki, it cannot be said that the Adjudicating Authority or Tribunal Page 28 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined has committed any error in invoking Rule 26 of the Rules for levy of the penalty. The contention raised on behalf of the appellants that the adjudicating authority has failed to point out which of the Sub-rule is applicable in the facts of the case is without any basis inasmuch as on perusal of Rule 26 of the Rules, it is clear that the Sub-rule (2) would never be applicable to the facts of the case as it pertains to the person who issues invoices or any other documents. The appellants being Managing Director, President or Vice-President are not required to issue any invoice or any other document and therefore, as per the allegations made in the show-cause notice, it is apparent that the adjudicating authority has invoked Rule 26(1) of the Rules and by merely not mentioning Sub-
rule (1), it cannot be said that the Page 29 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined appellants were not put to notice about the invocation of Rule 26(1) of the Rules which is very clear from paragraph No.7 of the show-
cause notice which reads as under :
"7.1.1. During the course of investigations, vide laters F.No. IV/6- Prev./94/Gr.DEF/08- dated 6.5.2009 & 3.3.2010, The District Registrar, Co- operative Society, Narmada Bhavan, Vadodara was requested to provide copy of re-audit report of M/s. Shree Sugar Industries Ltd., for the financial years 2005-06, 2006-07 & 2007-08 along with the charges framed in the police complaint filed against the President, Vice-President, Managing Directors and others. Accordingly a copy of the statutory audit report for the year 2007-08, conducted by Shri Manoj C. Shah & Associates was provided by the District Registrar.Page 30 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024
NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined 7.1.2. Whereas, it appears from the said statutory audit report dated 16.4.2009 of Shri Manoi C. Shah & Associates, Chartered Accountants, who was entrusted to carry out the statutory audit for the year 2007-08 of the assessee's factory by the Director of Sugar, Govt. of Gujarat, Gandhinagar, that after having carried out the Audit, the Auditor, inter-alia, has held the following persons responsible for overselling of sugar on fake invoices, maintaining fake / duplicate RG-1, filing incorrect / fake ER-I returns and making short payment of Central Excise duty by ignoring the duty on overselling of sugar made in excess than the released quota:
(i). S/Shri Jaykantbhai Ambalal Patel. President;
(ii). Devendrabhai Ambalal Thakar, Vice-President;
(iii). Kanubhai A. Patel, Managing Director:Page 31 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024
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(iv). Narendrabhai Solanki, Managing Director;
(v). Parantap Joshi, Managing Director.
7.2. Moreover, the investigations also appears to have brought concrete evidences that following important / key functionaries of the assessee, were knowingly and deliberately indulging in contravening the provisions of the Central Excise Act, 1944 and the Rules made there-under, in asmuchas:
i. Shri. Narendra Chandubhai Solanki, Managing Director of the assessee, in his-statement recorded on 21.1.2009, inter-alia, admitted that during his tenure as Managing Director of the assessee, the practice of overselling of sugar was taking place; that they were not mentioning the quantity of overselling sugar in the Central Excise records Viz. Daily Stock Registers, ER-1 Returns etc. He further admitted that though the Page 32 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined Central Excise duty was collected from the customers on overselling of sugar, it was not deposited with the Department;
ii. Shri. Parantap Joshi, in his statement recorded on 16.2.09, inter-alia, admitted that he was functioning as Managing Director of assessee during the period: October 2007 to June 2008; that it was the decision of Management Committee, i.e., the Boards of Director (including himself) to sell sugar beyond release quota. and accordingy he executed the decision and sold sugar beyond release quota. He further categorically admitted that two sets of invoices were being maintained by the assessee, one for regular quota and other for beyond sanctioned quota and the clearances of sugar beyond sanctioned quota was not being reported to Central Excise as he knew it was illegal.Page 33 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024
NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined iii. Shri. Jayand Joshi in his statement recorded on 27.1.2009, inter-alia, admitted that he was a Chief Chemist and in charge of the Godown; that he had signed the that as per the direction of Shri. Parantap Joshi Managing Director and Shri, Sanjay Joshi Chief Accountant, he knowingly effected clearances of the sugar beyond release quota. He further categorically admitted that they were maintaining two sets of invoices i.e. one set for released quota and other for clearance of sugar beyond release quota and both the sets of invoices had been signed by him in the capacity of an authorised signatory.
iv. Shri. Pranav Amin, in his statement recorded on 13.1.2009, inter-alia, admitted that parallel sets of RG-l were being maintained by them with the clear knowledge of Shri. N.C.Solanki - Managing Director, as well as, the Chief Page 34 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined Chemist of assessee. He further admitted that he was fully aware about the maintenance of two sets of RG-Is and he also had signed on these two sets of RG-Is (entries for the period 1.10.07 to 14.11.2007) as well as ER-I for the Month of July 2008 as per the instruction of Managing Director. V. Shri Atul Gokalbhai Patel, in his statement recorded on 21.1.2009 categorically admitted that he was knowingly maintaining two sets of invoices as per the instruction given by Shri Jaynand Joshi, Chief Chemist; that the excess sugar sold beyond release quota were not recorded in central excise records even though the central excise duty was recovered from the customers at the time sale; and that he was recording in ER-l returns/RG-I only the quantity sold as per the release quota.
7.3. Thus, from all the above relied upon confessional statements, it Page 35 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined appears that it was a deliberate and consclous decision of the Management Committee i.e., the Board of Directors, to sell the sugar beyond release quota in order to meet the financlai requirements, by resorting to clandestine removal of excisable goods viz., sugar, under the cover of first set of invoices, with active involvement of their key employees. In view of the same, all such persons appears to have indulged themselves in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner dealt with, the excisable goods, viz., sugar, which they knew or had reason to believe are liable to confiscation under the Act or these rules. Thus such deliberate acts of contravention on part of the above persons, who were all key functionaries and authorized signatories of the assessee, appears to constitute offences of the nature covered under the provision of Rule 26 of the Central Excise Rules, 2002 and Page 36 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined thereby rendering themselves liable for appropriate penalty thereunder.
9. S/Shri. Jaykant Patel -
President, Devendra Thakkar - Vice- President, Parantap Joshi - then Managing Director, N.C.Solanki - In- charge Managing Director, Kanubhai Patel - Managing Director, Jayanand Joshi - Chief Chemist, Pranay K. Amin - Office Superintendent, and Atul G. Patel - Godown Keeper, all of whom were working with M/s. Shree Sardar Coop. Sugar Industries Ltd, are hereby, severally, called upon to show cause to the Commissioner of Central Excise & Customs, Vadodara - II having office at 1st floor, Central Excise Building, Arkee Garba Ground, Near Telephone Exchange, Subhanpura, Vadodara-390 023, as to why appropriate penalty should not be imposed on them for their acts of contraventions as discussed above, under Rule 26 of the Central Excise Rules, 2002."
Page 37 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined
10. In view of the above, the reliance placed on the decision of the Hon'ble Apex Court in case of the Amrit Foods (Supra) would not be applicable in the facts of the case as the appellants were put to notice as to the exact nature of contravention for which the appellants were made liable for penalty under Rule 26 of the Rules. As the show-cause notice and the Order-in-Original have explained in detail about the nature of the offence for which the penalty is levied, it cannot be said that there is a breach of any of the requirement for levy of penalty by the respondent-authority. With regard to the contention raised on behalf of the two appellants namely, Devendra Ambalal Thakkar and Jaykant Ambalal Patel, it is required to be noted that both of them have abstained from Page 38 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined investigation and have not co-operated for recording their statements and in spite of that the respondent-authority is not supposed to make further inquiries when the facts are not in dispute to the effect that both of them were holding the charge of the President and the Vice-President who having knowledge of the affairs of the Company. It is also required to be noted that Mr.Narendrabhai Solanki, in his statement has categorically stated that overselling was the decision of the Managing Committee consisting of Chairman, Vice-
Chairman and members of the Executive Committee. Therefore, the respondent-authority has rightly levied the penalty upon the appellants after considering the statutory audit report of Chartered Accountant M/s.Manoj C. Shah and Associates who was entrusted to carry out the statutory audit for the year Page 39 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined 2007-08 of the factory of the Company by the Director, Sugar Government of Gujarat, Gandhinagar wherein, it was held that all the three appellants were responsible for overselling of the Sugar on the fake invoices, maintaining fake/duplicate RG-I, filing incorrect/fake ER-1 returns and making short payments of Central Excise Duty by ignoring the duty on the overselling of the Sugar made in excess than the released quota.
11. In view of the foregoing reasons and considering the concurrent findings of fact arrived at by the both the authorities below, we are of the opinion that no question of law, much less any substantial question of law arises from the impugned orders passed by the CESTAT. The appeals therefore being devoid of any merit, are accordingly dismissed. Civil Page 40 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024 NEUTRAL CITATION C/TAXAP/470/2024 ORDER DATED: 28/08/2024 undefined Applications are also stand disposed of in view of the dismissal of the Tax Appeals.
(BHARGAV D. KARIA, J) (NIRAL R. MEHTA,J) PALAK Page 41 of 41 Uploaded by PALAK BRAHMBHATT(HC01391) on Fri Sep 13 2024 Downloaded on : Fri Sep 13 21:43:17 IST 2024