Bombay High Court
The Commissioner Of Central Excise vs M/S.Ramesh Kumar Rajendra Kumar & Co on 14 September, 2010
Author: Vijay Daga
Bench: V.C.Daga, R.M.Savant
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
CENTRAL EXCISE APPEAL NO. 18 OF 2006
The Commissioner of Central Excise. ... Appellant.
V/s.
1. M/s.Ramesh Kumar Rajendra Kumar & Co.
2. Shri Rajendra Kumar Chaudhari. ... Respondents.
Pradeep S. Jetly for the appellant.
Manoj Sanklecha as Amicus Curie.
CORAM : V.C.DAGA AND R.M.SAVANT, JJ.
DATED : 14th September, 2010.
JUDGMENT :(Per Vijay Daga, J.) This appeal filed against the order dated 31st March, 2005 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Regional Bench, Mumbai ("Tribunal" for short) raises the following substantial question of law:
Whether in the facts and circumstances of the case and in law, the CESTAT is justified in setting aside the penalties imposed on Respondents herein holding that there is no provision under Central Excise Act or Rules made thereunder and the provisions of ::: Downloaded on - 09/06/2013 16:25:43 :::
2 cexa-18.06.sxw Section 132 of Customs Act, 1962 in particular ignoring the specific mention by the Adjudicating Authority that the Rule 209 A of Central Excise Rules, 1944 does provide penalties for such likes of offences under rule 209A of the Central Excise Rule 1944?
The Facts :
2. The factual matrix giving rise to the aforesaid question of law has its birth in the show cause notice dated 19th September, 1995 issued to the respondents calling upon them to show cause as to why modvat credit taken by them in the sum of Rs.24,31,436.55 and penalty imposed in the sum of Rs.50,000/- on each of the respondents should not be confirmed. The said show cause notice was replied by the respondents. The adjudicating authority adjudicated and confirmed the said show cause notice by the order dated 27th October, 1998.
3. Aggrieved by the aforesaid order, the respondents preferred appeal before the Tribunal. The Tribunal vide its order dated 31st March, 2005 set aside the said order with the following observations:
"3. There is no provision shown to us analogous of section 132 of the Customs Act, 1962 under the Central Excise Act, 1944 or the rules made thereunder, that Section 132 for wrongly producing a forged/fabricated document in a transaction would call for prosecution and not penalty by quasi judicial authority. Therefore, on ::: Downloaded on - 09/06/2013 16:25:43 ::: 3 cexa-18.06.sxw considering the charge, even if it is established, it is to be held that obtaining a fraudulent and forged documents by inducement or otherwise of the Superintendent and thereafter obtaining Modvat Credit by others cannot call for a penalty under the Central Excise Rules on the partnership firm and or its partner, as in this case.
4. We have considered the submission of the Ld. D.R. That confiscation under Rule 173Q(2) of plant and machinery of the Modvat availer have been arrived at which should be considered to be a liability raising and upholding the personal penalties under Rule 209A. We cannot accept the confiscation of the plant and machinery to be confiscation of Excisable goods, which would call for a penalty, since plant and machinery normally is embedded and may not even excisable and goods liable to confiscation under Rule 209A are only excisable goods and only handling such goods would call for penalty under the rule.
4. Being aggrieved by the aforesaid order of the Tribunal, appellate jurisdiction of this Court under section 35G of the Act is invoked by the appellant-
Revenue.
Rival Submissions :
5. Mr.Jetly, learned counsel appearing for the appellant- Revenue urged that the findings recorded by the Tribunal are not only erroneous but contrary to the law and procedure. In his submission, rule 209A of the Central ::: Downloaded on - 09/06/2013 16:25:43 ::: 4 cexa-18.06.sxw Excise Rules, 1994 ("Rules" for short) provides for certain offences and, hence, by setting aside the penalty the Tribunal has exceeded its jurisdiction. According to him, under rule 209A the penalty can be imposed without ordering confiscation of the goods. In other words, even in absence of confiscation of the respondents could be held liable for penalty. He placed heavy reliance on the judgment of the Tribunal in the case of V.K.Enterprises v. Commissioner of C.Ex., Panchkula, 2010 (249) ELT 462 (Tri-Del) in support of the contention raised.
6. Per contra, Mr.Manoj Sanklecha, learned counsel acting as Amicus Curie urged that the impugned order of the Tribunal is perfectly good and valid order. According to him, the findings of the learned Commissioner do not anywhere near satisfying the essential requisites of rule 209A under which penalty is required to be imposed. That there is no finding that the appellants had dealt with any excisable goods in any manner specified or contemplated under rule 209A. He, thus, submits that the impugned order does not require any interference at the hands of this Court. In his submission, in Jayantilal Thakkar & Co. v. Union of India, 2006 (195) ELT 9 (Bom.), rule 209A was interpreted by this Court to hold that the basic requirement of rule 209A is that the person charged must have dealt with the excisable goods either by acquiring possession thereof or by transporting, or by concealing or selling or purchasing or in any other manner with the knowledge or with a reason to believe that the goods dealt ::: Downloaded on - 09/06/2013 16:25:43 ::: 5 cexa-18.06.sxw with by him are liable for confiscation under the Act or the Rules. He, thus, submits that appeal is without any substance.
Consideration :
7. Having heard learned counsel for the appellant-
Revenue and Mr.Sanklecha as Amicus Curie, it is necessary to turn to rule 209A, which reads as under:
"Rule 209A. Penalty for certain of fences. - Any person who acquires possession of, or is 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 three times the value of such goods or five thousand rupees, whichever is greater."
The sine qua non for a penalty on any person under the above rule is: either he has acquired possession of any excisable goods with the knowledge or belief that the goods are liable to confiscation under the Act or Rules or he has been in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or has in any other manner dealt with any excisable goods with such knowledge or belief. Acquisition of possession of goods is, indisputably, a physical act i.e. the act which could not have been done without handling or movement of excisable goods as mentioned in the rule. The words "who ::: Downloaded on - 09/06/2013 16:25:43 ::: 6 cexa-18.06.sxw acquires possession" would indicate that the person sought to be penalized under this rule has to first acquire the possession and then do the activity of transportation etc. as contained in the rule. It is, thus, clear that the physical possession of the goods is a must for doing the activity of transporting referred in rule 209A. The ratio laid down by this Court in Jayantilal Thakkar & Co. (supra) covers the issue. In the said judgment, it is held that in the given situation, if the assess is only issuing invoices wherein there is no movement of the goods, they cannot be visited with penalty under rule 209A.
8. The reliance placed by Mr.Jetly on the judgment of the Tribunal in the case of V.K.Enterprises (supra) is misplaced. The said judgment of the Tribunal revolves around interpretation of rules 12 and 14 of the Cenvat Credit Rules, 2002. The said judgment does not directly deal with rule 209A.
9. The view of ours taken herein is in consonance with the legislative change. In the Central Excise Rules, 1944, rule 26 came to enacted which came in force with effect from 1st March, 2007. Rule 26 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 ::: Downloaded on - 09/06/2013 16:25:43 ::: 7 cexa-18.06.sxw rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees, which ever 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
(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.
10. Perusal of the aforesaid rule, which is brought on the Statute book with effect from 1st March, 2007, specifically, brings within its fold a person issuing an excise duty invoice without delivery of the goods specified therein or abets in making such invoice or 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 or refund is made to be liable to penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater. It is, thus, clear that in order to bring within its fold, the the case of a present nature. Rule 26 is enacted in March, 2007 whereas in the year 1995 when the ::: Downloaded on - 09/06/2013 16:25:43 ::: 8 cexa-18.06.sxw show cause notice in question was issued, the said rule was not in the statute book. Consequently, the present case needs to be considered on the basis of text of rule 209A of the Rules and not on the basis of rule 26 of the Rules referred hereinabove.
11. In the aforesaid view of the matter, the view taken by the Tribunal cannot be faulted. The question of law framed, thus, stands answered in favour of the Assessee and against the Revenue.
12. We place our appreciation on record for the valuable assistance given by Mr.Manoj Sanklecha as Amicus Curie.
13. Appeal is disposed of in terms of this order with no order as to costs.
(R.M.SAVANT, J.) (V.C.DAGA J.)
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