Custom, Excise & Service Tax Tribunal
M/S. Radiant Silk Mills (P) Ltd vs Commissioner Of Customs on 1 August, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX
APPELLATE TRIBUNAL, NEW DELHI
PRINCIPAL BENCH, COURT NO. III
Excise Appeal No. 2467 of 2009 SM
Date of Hearing: 1.8.2012
[Arising out of Order-in-Appeal No. 337-338(DK)/CE/JPR-II/2009 dated 12.5.2009 passed by the Commissioner (Appeals II), Central Excise, Jaipur]
For approval and signature:
Hon'ble Ms. Archana Wadhwa, Member (Judicial)
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 : Yes
of the CESTAT (Procedure) Rules, 1982 for
publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair : Seen
copy of the Order?
4. Whether Order is to be circulated to the : Yes
Departmental authorities?
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M/s. Radiant Silk Mills (P) Ltd. Appellants
Vs.
Commissioner of Customs Respondent
& Central Excise, Jaipur
Appearance:
Shri Hrishikesh, Advocate for the Appellants
Shri G.K. Dixit, AR for the Respondent
ORAL ORDER NO . ________________________
Per Archana Wadhwa:
The challenge in the present appeal is to imposition of penalty of Rs.5 lakhs imposed upon the appellants in terms of provisions of Rule 26 of Central Excise Rules.
2. As per facts on record, the appellant is a merchant exporter of the goods of fabrics and got the man made fabrics processed from one M/s. Sona Processors (India) Ltd., Bhilwara. As per investigations conducted by the Revenue, M/s. Sona Processors availed excess deemed credit amounting to Rs. 15,19,430/- during the period from February, 2002 to November, 2002 on the grey fabrics sent by the present appellant. As per the allegations made by the revenue, such excess deemed credit was availed by M/s. Sona Processors in connivance with the appellant, by over valuing the processed man-made fabric by way of mis-declaring the weaving charges, processing charges and count of yarn etc.
3. It is seen that show cause notice was issued to all the noticees concerned proposing confirmation of excess deemed modvat credit as also for imposition of penalties. During the pendency of adjudication of show cause notice M/s. Sona Processors approached the Settlement Commissioner, who passed the Final Order No. A/559/CE/07 SC dated 31.1.07 directing M/s. Sona Processors to deposit the balance amount of excess deemed modvat credit within a period of 30 days from that order along with simple interest of 10%. M/s. Sona Processors complied with the said order and deposited all the dues. Settlement commissioner also granted immunity to M/s. Sona Processors from penalty and prosecution.
4. The original adjudicating authority while adjudicating the show cause notice observed the above fact of M/s Sona Processors approaching the Settlement Commission and as such did not pass any orders against M/s. Sona Processors. However, he imposed penalty of Rs.10 lakh on the appellant in terms of Rule 26. He also imposed penalty on the Managing Director of the appellant as also on their export executive and authorised signatory.
5. On appeal against the said order of Jt. Commissioner, Commissioner (Appeals) reduced the penalty to Rs.5 lakhs on the appellant. Penalty on the Managing Director was set aside by observing that he expired during proceedings. Penalty imposed on the export executive was set aside on the ground that he was merely a paid employee and there is no offence reflecting upon the role played by the said person.
6. Learned advocate appearing for the appellant submits that inasmuch as the main person against whom demand was proposed to be confirmed in the show cause notice i.e. M/s. Sona Processors, having approached Settlement Commission and the Settlement Commission having passed the final order directing M/s. Sona Processors to deposit the entire duty along with interest and having granted immunity to them from penalty and prosecution, the proceedings against all co-noticees are required to be closed and it was not open to the authorities below to impose penalties on the co-noticee. For the above proposition, they relied upon the Tribunals majority order in the case of S K Colombowala vs. CC(Import), Mumbai reported as [2007 (220) ELT 492 (Tri-Mum)] wherein in identical circumstances, the penalty on the co-noticee was set aside on the ground that the dispute between the main noticee and the revenue stands settled in Settlement Commission.
7. Learned DR appearing for the revenue draws my attention to Division Bench order passed in the case of M/s. K I International Ltd. vide Final Order No. 701-767/2012 dated 22.6.12 wherein the decision of the Tribunal in the case of S K Colombowala, cited (supra) was discussed but not followed by taking note of Supreme Court decision in the case of S P Chengalvaraya Naidu vs. Jagannath reported in [1994 (1) SCC 1]. As such, he submits that Tribunal is required to decide the issue on merits.
8. After carefully considering the submissions made by both sides,, I find that the most important question required to be decided in the present appeal is as to whether when the person against whom demand has been raised by way of show cause notice approaches Settlement Commission and get the dispute settled on terms and conditions, as contained in the order, whether the same would bring an end to the penal proceedings against the co-noticee, or not. I find that in the case of S K Colombowala referred supra, there was originally a difference of opinion between two Members. Such difference was referred to the Senior Vice President and was settled in favour of the appellant. For better appreciation, I would like to reproduce the relevant paragraphs from the said order:
Per Archana Wadhwa, Member (Judicial):
2. After hearing? the Ld. DR, we find that the Honble Supreme Court in the UOI of India v. Onkar S. Kanwar [2002 (145) E.L.T. 266 (S.C.)], held that settlement of dispute by main declarant under Kar Vivad Samadha Scheme to operate as full and final settlement in respect of all other person upon whom show cause notice was served in respect of the same matter. Further, in the case of V. Abdul Rehman Musaliyar v. Commissioner [2001 (133) E.L.T. 145 (Tribunal)], it was observed that abetter cannot be penalized more than the original importer. Similarly, in the case of D.P. Kothari v. Commissioner of Central Excise, Jaipur-I [2001 (135) E.L.T. 669 (Tri.-Del.)]. It was laid down that where principal noticee filed a declaration under Kar Vivad Samadhan Scheme and issue finally settled in favour of him, as a consequence, penalty imposed on co-noticee does not survive.
3. Ld. DR has? submitted that all the above decisions are in respect of settlement under Kar Vivad Samadhan Scheme, whereas in the present case the dispute has been settled by the main noticee in Settlement Commission. However, we find that this difference would not effect the ratio of law declared by the above decision. The principal which weighed with the authorities in holding as above, is that the co-accused should not be penalized more than the main accused. To simply state if an accused has been acquitted for murder, co-accuse cannot be held guilty for conspiracy to murder. In any case, we find that the Tribunals decision in the case Shitala Prasad Sharma v. Commissioner of Central Excise, Mumbai [2005 (183) E.L.T. 21 (Tri.-Mumbai)] is a judgment where the main accused settled the dispute before Settlement Commission and the penalty on the co-accused was set aside on the ground that where the Settlement Commissioner has granted immunity to the main accuse from levy of penalty, co-accused cannot be vested with any higher penal consequences than the main accused. In view of the above, we set aside, the impugned order of imposition of penalties upon the appellants and allow all the appeals with; consequential relief to them.
Per M. Veeraiyan, Member (Technical)
11. The leniency? shown to M/s. Amrit Laxmi Machine Works and its Director are in the mature of leniency shown by the criminal courts to approvers. In this case the major activities leading to the fraud have been undertaken by the following persons. (i) Ashwin Mehta of M/s. Nippon Bearings Pvt. Ltd., (ii) Manharlal H. Vora of M/s. Shalin Bearing Corporation. Therefore, the penalties imposed on them and their firms may not deserve to be set aside as they have not adduced any evidence to upset the findings or their involvement. However, taking into account the duty evasion caused and the role played, penalties can be reduced as mentioned below :
S. No. Name of the appellant Amounts (Rs.)
1.
Shri Manharlal H. Vora 1,00,000/-
2. Mr. Ashwin Shantilal Mehta 1,00,000/-
3. Nippon Bearing Pvt. Ltd.
50,000/-
4. Shalin Bearings Corporation 50,000/-
Per Jyoti Balasundaram, Vice President
23. To my mind, the consequence of final order of settlement passed by the Settlement Commission in the case of Amrit Laxmi is that the case, i.e. the show cause notice issued to the importer as well as the co-noticees (including the appellants) stood finally settled and closed. The scheme of settlement does not contemplate a situation where a case is settled partly for some applicants and remains pending for others. Reading of the provision relating to settlement makes it clear that only an importer (specified category of person) can file an application for settlement of a case and that once such a case is admitted and settled, the entire case gets settled. (emphasis supplied). The provisions in Section 127J relating to conclusiveness of matters stated in the settlement order and bar against re-opening of any matter covered by such order in any proceedings is clearly indicative of the legislatures intention of complete settlement of a case qua all parties involved in that case. The provisions of Sec. 127F fortify view that once an application for settlement has been allowed to be proceeded with, the proper officer who exercises jurisdiction over the case ceases to have any jurisdiction in relation to the case and it would be therefore, incongruous to hold that such an officer would continue to have jurisdiction qua other co-noticees, for the reason that such an interpretation would be against the plain language of Sec. 127F. Further, in the present case, the charge against the co-noticees who are the appellants herein is the applicability of provisions of Sec. 112 of the Customs Act against them, which Section can be invoked if the goods imported would become liable to confiscation under Sec. 111. The show cause notice issued to the importer invoking the provisions of Sec. 111 qua the goods imported by the importer and the case having been settled, penalty under Sec. 112 which is dependent upon the goods being held to be liable to confiscation under Sec. 111, cannot be imposed, as the order of settlement does not contain any finding to the effect that the goods were liable to confiscation under Sec. 111.
24. Although the? distinction between the KVS Scheme and the Settlement mechanism is that, while the KVS Scheme provides for settlement of tax arrears of each individual person, including those of co-noticees, settlement mechanism provides for settlement of the entire case as a whole, the fact that only the person liable to pay duty can make an application for settlement does not mean that the case in so far as the remaining co-noticees can continue even after a final order of settlement has been passed in relation to the case.
9. As is seen from the above, the dispute was resolved in favour of the appellant by referring to the Honble Supreme Court decision in the case of Union of India vs. Onkar S Kanwar [2002(145) ELT 266 (SC)], Tribunals decision in the case of V. Abdul Rehman Musaliyar vs. Commissioner [2001 (133) ELT 145(Tri)] and another Tribunal decision in the case of D P Kothari vs. Commissioner of Central Excise Jaipur I [2001 (135) ELT 669 (Tri-Del)] as also in the case of Shitala Prasad Sharma vs. Commissioner of Central Excise Mumbai [2005 (183) ELT 21 (Tri-Mum)]. Similarly, while deciding the difference of opinion, learned Vice President referred to the provisions of Section 127A, 127B and 127J and resolved the dispute in the light of the provisions of above sections.
10. Learned DR has drawn my attention to recent Division Bench decision in the case of K I International referred supra, wherein the majority decision in the case of S K Colombowala does not stand followed by observing as under:-
It was plea of the appellants covered by adjudication orders Nos. 6949/07 dated 30.11.2007, 6947/2007 dated 30.11.2007, 6944/07 dated 30.11.2007, 6948/2007 dated 30.11.2007, 6946/2007 dated 30.11.2007 and 7453/2007 dated 25.3.2008 that the importers covered by the said adjudications having settled their dispute before Settlement Commission and immunity from penalty and prosecution having been granted to them, the trader, broker and sub-broker appellants covered by those adjudications cannot be called upon to pay penalty out of same adjudication. Honble Supreme Court in the case of S.P. Chengalvaraya Naidu V. Jagannath reported in (1994)1 SCC 1 laid down the law that the principle of finality of litigation cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are meant for imparting justice between the parties. One who comes to the court, must come with clean hands. We are constrained to say that more often than not, process of the court is being abused. Property-grabbers, tax-evaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the court-process a convenient lever to retain the illegal gains indefinitely. We have no hesitation to say that a person, whos case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation. Thus plea of these appellants are baseless and being misconceived are devoid of merit and they are liable to penalty under law for the unlawful act. The order of the Tribunal in the case of S.K.Colombowala V CC (Import) Mumbai 2007 (220) ELT 492 (Tri.-Mum.) does not come to rescue of these appellants since that decision did not take into consideration the law laid down by Apex court in the case of Chengalvaraya Naidu (supra). Accordingly, the orders passed by Settlement Commission in case of importers are not binding on Tribunal to grant relief to the appellants who were not before the Settlement Commission and fraud and Justice being sworn enemy of each other, the appellants in aforesaid appeals are barred to take undue advantage of orders of Settlement Commission since they were not before the Commission. Further, the doctrine of finality does not immune these appellants who defrauded Revenue.
11. As is seen from the above, the Division Bench has not followed the majority decision of the Tribunal in the case of S K Colombowala by observing that the said decision did not take into consideration the law laid down by Apex Court in the case of S.P. Chengalvaraya Naidu referred supra.
12. I have looked into the said decision of the Honble Supreme Court in the case of S.P. Chengalvaraya Naidu. On going through the entire judgement, I find that the same was in respect of judgement or decree obtained by fraud and without disclosing the factual position. The Honble Court observed that decree obtained by non-disclosure of the release deed amounted to fraud on court and hence decree liable to be set aside. The facts of the said decision of the Honble Supreme Court are entirely different from the facts of the instant case or the facts available in the case of S K Colombowala. The proceedings are under the Central Excise Act as regards imposition of penalty in terms of Rule 26 of Central Excise Rules. The question of obtaining any decree or order by mis-representing the facts of the case or by fraudulently representing the case, as was the case before the Honble Supreme Court, are not involved in the present appeal. While delivering the majority judgement, the majority Members have relied upon the decision of the Honble Supreme Court as also of the Tribunal, which were pari materia on facts and in law and analysed the provisions of section 127. As such, it cannot be said that majority order, which stand passed in precedent decision involving identical facts and law is not required to be followed as the same has not taken into consideration the Supreme Court judgement in the case of S.P. Chengalvaraya Naidu. The said judgement of the Honble Supreme Court was in altogether different facts and circumstances and under different provisions of law.
13. Having said so, I set aside the imposition of penalty of rs.5 lakhs on the present appellant in terms of declaration of law by Tribunal in the case of S K Colombowala, referred supra.
(Pronounced in the open court )
( Archana Wadhwa ) Member(Judicial)
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