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2023 (12) TMI 248 - AT - Central ExcisePrayer for restricting the penalty to the extent of pre-deposit, which they have already paid - relevance of statements - obligation of law as per Sec. 9D of the Central Excise Act, 1944 not met - Illegal availment of CENVAT credit of CVD paid on the imported goods by the manufacturers of aluminium products without physically receiving the goods - Misuse of imported goods - evasion of Central Excise Duty - HELD THAT - It is seen that section 9D is relevant for the purpose of proving the truth of a fact, in any prosecution launched for an offence under the Central Excise act, 1944. The impugned order does not emanate from a proceeding of prosecution. A five judge Bench of the Apex Court by a majority decision in THOMAS DANA VERSUS STATE OF PUNJAB 1958 (11) TMI 7 - SUPREME COURT held that there is no escape from the conclusion that the proceedings before the Sea Customs Authorities under s. 167(8) (which was a pre-cursor to the Customs Act, 1962, a sister Act to the FA 1994 and CEA, 1944), were not prosecution within the meaning of Art. 20 (2) of the Constitution. The judgement above makes it clear that offences and penalties are of two distinct kinds. First there are contraventions of the Act and Rules thereunder which are dealt with by Customs officers and the penalty for which is imposed by them, called customs offences. Besides these there are criminal offences which are dealt with by Magistrates and which result in conviction and sentence of imprisonment and/or fine. Action by quasi-judicial officers under CEA 1944 is not done as per the provisions of criminal law. Prosecution of offenders are launched separately in a criminal court. The principal idea in this case is as per section 9D(1) of the Central Excise Act 1944, which clearly states that it is concerned with a statement which shall be relevant, for the purpose of proving, in any prosecution for an offence under the Act. Detailed Criminal Court procedures are not expected for proceedings having only civil consequences - there are no lacunae in the proceedings by the Adjudicating Authority and the impugned order does not deviate from the provisions of section 9D ibid. Whether Appellants had prior knowledge of the clandestine activity? - HELD THAT - The charges against the appellants have been made after a very detailed investigation of clandestine activity by a group of people who have abetted to evade payment of duty by misusing high-sea sales and CENVAT schemes. It is difficult to find direct evidence in such cases and they are mostly proved by a mix of direct and indirect evidence, as duty evasion is seldom an open affair. The blame worthy act has hence to be inferred from the circumstances and the conduct of the people involved - The circumstances as brought out in the impugned order taken cumulatively form a chain leading to the conclusion that the Appellants were fully involved and abetted with the main notice in the clandestine scheme to wrongly utilise inadmissible CENVAT credit at the cost of the exchequer. Also, the discussion in the impugned order has established the role and knowledge of the appellants in the clandestine activity designed to misuse CENVAT credit. Imposition of penalty - prayer of the Appellants is to confine the penalty to the amounts of pre-deposits made - HELD THAT - The involvement of the Appellants has been established mainly on the basis of collaborative statements, perhaps due to the clandestine nature of the activity and the lack of proper documentation in such cases, as discussed above. However, the imposition of stiff penalties requires stronger evidence. Hence to that extent the penalties imposed on the Appellants are disproportionate and needs to be modified - it is also found that the matter relates to a very old issue and there would be no purpose in extending the litigation on the matter of penalty. Appeal disposed off.
Issues Involved:
1. Compliance with Section 9D of the Central Excise Act, 1944. 2. Prior knowledge of the appellants regarding the clandestine activity. 3. Imposition of penalty. Summary: 1. Compliance with Section 9D of the Central Excise Act, 1944: The appellants argued that the statements recorded under Section 14 did not comply with Section 9D of the Central Excise Act, 1944, before being admitted in evidence. The Tribunal examined Section 9D, which pertains to the relevancy of statements in prosecution cases. It was noted that the impugned order did not emanate from a prosecution proceeding. The Tribunal referenced multiple judgments, including those from the Apex Court, to clarify that departmental proceedings do not equate to prosecution. It was established that the adjudicating authority had allowed cross-examination, which the appellants did not avail, thus validating the reliance on the statements. The Tribunal concluded that the legal issue of admissibility of the statements in evidence was valid. 2. Prior knowledge of the appellants regarding the clandestine activity: The Tribunal found that the charges against the appellants were based on a detailed investigation revealing a scheme to evade duty by misusing high-sea sales and CENVAT credit. The investigation showed that the appellants were aware of the clandestine nature of the activities. Specific roles and knowledge of individual appellants were detailed, establishing their involvement and abetment in the scheme. The main noticee did not pursue his appeal, bringing finality to the issue of duty evasion. 3. Imposition of penalty: The appellants requested that penalties be restricted to the amounts of pre-deposits made. The Tribunal acknowledged the involvement of the appellants but noted that the evidence was primarily based on collaborative statements due to the clandestine nature of the activity. It was decided that the penalties imposed were disproportionate and should be modified. The Tribunal ordered that the penalties be restricted to the pre-deposits made by the appellants, as follows: - Vaibhav Metals: Rs. 3,00,000/- - Bothra Metals and Alloys Ltd.: Rs. 50,000/- - Yash Industries: Rs. 25,000/- - Shri Padmavathi Metals: Rs. 75,000/- - Shrinivas Impex: Rs. 2,00,000/- The appeals were disposed of accordingly.
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