TMI Blog2009 (6) TMI 510X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the sum of Rs.15,46,229/-. The challenge on behalf of the employees of the appellants is that they had carried out their duties under the instructions from their masters and, therefore, they could not have been penalized in the matter as they had not done anything with the intention of evading the duty but had merely performed their obligation towards their masters. The challenge on behalf of the purchaser is to the effect that the appellant is not covered by the expression “person” under Rule 26 of the Central Excise Rules, 2002 and that the company is not a natural person and hence could not have been subjected to penalty under the said Rule. Held that-. However, in this case, as we have already held that the failure on the part of the authorities to furnish all the relied upon relevant documents has resulted in violation of basic principles of natural justice and the same is sufficient to set aside the impugned order, it is not necessary to deal with the said issue in detail and suffice to observe that the respondents are duty bound to follow the said circular in relation to the seized documents, which are not relied upon. In the result, the appeals filed by the company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 has been ordered to pay penalty of Rs.5 lakhs. In addition, two others namely M/s. Ellenabad Steels Pvt. Ltd. and M/s. Shirdi Steel Rollers Pvt. Ltd., who are the purchasers of the product from the appellant company, have been ordered to pay penalty of Rs.5 lakhs each. 5. The impugned order is sought to be challenged by the company and its Directors on two grounds, namely, failure on the part of the authorities to comply with the basic principles of natural justice inasmuch as that the appellants were not furnished with copies of all the documents relied upon and the documents which were seized in the course of investigation were not returned and their request for cross examination of the persons whose statements were recorded was rejected and secondly on the ground that admittedly the cash amount, which was recovered in the course of investigation from the premises of the appellant company was to the tune of Rs.30,67,989/- in the month of February, 2005 and a sum of Rs.16,77,482/- in the month of March, 2005 and considering the same the duty amount could not have exceeded the sum of Rs.15,46,229/-. The challenge on behalf of the employees of the appellants is that they had car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s-a-vis Company and its Directors on account of non-furnishing of the relied upon documents, non-return of unrelied seized documents and rejection of cross-examination of the persons whose statements were recorded? (ii) Whether the duty liability of the company and the Directors has to be restricted to the amount found in cash in the premises of the appellants during the month of February and March, 2005? (iii) Whether the employees of the appellant company could not be made liable to pay penalty in the facts and circumstances of the case? (iv) Whether the appellant company namely M/s. Kundil Ispat Ltd. is a "person" within the meaning of the said expression under Rule 26 of the said Rules and that, therefore could be subjected to pay the penalty under the said Rules? 9. As already stated above, the ground relating to failure on the part of the authorities to comply with the principles of natural justice relates to three factors namely - non-furnishing of all the relied upon documents, non return of unrelied seized documents and thirdly rejection of the prayer for cross examination of the persons whose statements were recorded in the course of investigation. 10. As regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same while deciding the matter and, therefore, it is a clear case for setting aside the impugned order and to remand the matter. 13. The contention regarding the failure to comply with the principles of natural justice by the authorities below is sought to be countered by the learned SDR by referring to impugned order itself and drawing attention to the narration of the events before the lower authorities while contending that the said narration discloses the failure on the part of the appellants to render necessary co-operation to the authorities in deciding the matter expeditiously. Apart from the failure on part of the appellants to collect documents in time when it was called upon to do so, according to him, considering the conduct of the appellants, it cannot be said that there is any violation of the principles of natural justice. 14. Perusal of the letter dated 1-8-2007 on behalf of the appellants company to the respondent undoubtedly discloses the demand for copies of certain relied upon documents as well as request for grant of permission to cross examine certain persons whose statements were recorded. The names of such persons were enlisted in the said letter. Equally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted to know the outcome of the decision on cross-examination requested by them, whether it is allowed or not. 3 Vide this office letter F. No. VI/C/16/2007-08/CX-ADJ (HQRS) dated 6-11-2007, a personal hearing was granted to all the notices at 16 hrs. either on 3rd or 10th or 17th December, 2007. 4 Noticees' Counsel vide letter dated 14-12-2007 referred to this office letter dated 13-11-2007 addressed to Asstt. Director, DGCEI, Belgaum requesting them to supply copies of relied upon documents, and mentioned that they have not received any documents listed in the letter dated 1-8-2007. He requested to decide on the question of cross-examination of the witnesses as mentioned in letter dated 1-8-2007. He requested to adjourn the personal hearing. 5 Letter was made to the Noticees on 26-12-2007 intimating them to approach to the Adjudication Cell Hqrs, Panaji to collect the Xerox copies of the documents required by them on 4-1-2008. 6 Since nobody approached on 4-1-2008, letter was written to Noticees' Counsel himself with copy to his clients on 15-1-2008 stating that he along with his clients may visit this office on 21-1-2008 and ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re A, B and C-1 Duty calculation sheets in annexure D-1 to D-5 have been given to M/s. TFCWRL. Regarding non-relied upon documents, M/s. TFCWRL have been intimated to collect the documents during the second week of May 2008. 18 On 3-7-2008 at 15.30 hrs, authorized signatory of M/s. TFCWRL acknowledged the receipt of some documents at annexure C-1(1) pertaining to M/s. Shirdi for the period 3/2 to 7/2/2005, documents at annexure C-1(8). 19 PH granted on 24.7.2008, communicated on 7-7-2008 20 Noticees' Counsel vide letter dated 11-7-2008 intimated that all the documents were not given to his client and also non-relied documents. He had mentioned that nothing has been heard regarding witnesses' cross-examination. According to him without the documents and decision on cross-examination whether to be allowed or not, the PH would be just a formality. 21 PH granted on 13-8-2008, communicated on 24-7-2008. 22 Noticees' Counsel vide letter dated 14-8-2008 requested to return seized documents and communicate the decision on cross-examination whether to be allowed or not and requested to adjourn the PH. 23 PH grante ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the relevancy of the documents in relation to the matter which is sought to be decided as well as the prejudice that may be caused to the assessees on account of failure on the part of the department to make such copies available to the assessee in time. 17. In the case in hand, undoubtedly, the appellants had made grievance in the course of the hearing of the matter before the adjudicating authority about non-receipt of copies of certain documents relied upon by the department in support of allegation against the appellants. However, the impugned order does not disclose consideration of the contention raised in that regard by the appellants before the adjudicating authority. Having noted it, it is also necessary to ascertain as to whether the appellants have been able to make out a case that the alleged failure has been exclusively on account of negligence on the part of the respondent in that regard and that the same has resulted in failure of justice in the matter and/or has caused prejudice to the appellants so as to warrant our interference in the impugned order on the said ground. 18. As regards the rejection of permission for cross-examination of the persons whose sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he suppliers by the M/s. TFCWRL showing the details of the quantities received in the factory vide the respective vehicle number), grade of the scrap and the quantity of each grade, the rate of each grade and the total amount payable. In respect of some scrap suppliers, the payments had been made immediately on receipt in the factory and an endorsement "cash" was made before the said entry. Apart from the purchase of scrap, there were entries of purchase of sponge iron and pig iron also. The book numbered 77 contained the details of scrap purchased from various suppliers on the daily basis. 4.5 If was found from the small books numbered 79 and 80 seized from the factory of the M/s. TFCWRL and listed at Annexure C-2 to the Notice that the steel ingots were manufactured from the sponge iron, pig iron and scrap purchased and some of the quantities manufactured were not accounted and were cleared clandestinely. The small book numbered 80 contained the details of raw materials (which included MS scrap, Sponge Iron and Pig Iron) purchased and used in the production on a daily basis for the month of October 2004 to February 2005. Further, there were entries of steel ingots produced and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be disputed that the duty liability has to be fixed on the basis of the entire documentary evidence collected in the course of investigation, including the fact about the cash transaction by the appellants in relation to the products, which were manufactured and clandestinely removed from the appellant's premises. Being so, the contention of the appellants that there has been failure of principles of natural justice vis-a-vis the appellant company and Directors cannot be totally rejected. 23. It is true that conduct of the appellants in the proceedings before the adjudicating authority does not disclose necessary co-operation, which was required to be rendered to the adjudicating authority, however, it cannot be the ground to deny fair opportunity to the appellants in relation to the documents, which are relevant for the purpose of ascertaining and quantifying the duty liability of the appellants. 24. As regards the second ground of the appellant that the duty liability cannot exceed beyond Rs.15,46,229/- on the basis of the records pertaining to the cash receipt for the month of February and March, 2005 is concerned, it is difficult to accept the said contention. The cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal in the case of Woodmen Industries. It is also sought to be pointed out that the decisions in Woodmen Industries case was sought to be challenged before the Hon'ble Supreme Court, but without any success and, therefore, view taken by the Tribunal was confirmed by the Hon'ble Supreme Court. 30. In Woodmen Industries case, the Tribunal in para 9 of the decision has held thus: - "Coming to the appeal of the other appellants viz. the buyer of the goods (M/s. Kitply Industries Ltd.) when the allegations against the main appellants have not been brought home, the penalty imposed on this appellant for abetment is not sustainable. Further, penalty on this appellant has been imposed under Rule 26 of the C.E. Rules (erstwhile Rule 209A). The said rule permits imposition of penalty on a person and not on the firm as held in the case of Aditya steel Industries v. CCE, Hyderabad reported in 1996 (84) E.L.T. 229. There was no confiscation of the goods either. On this score, also the penalty on this appellant cannot sustain. We also observe that the Commissioner has referred to the provisions of Income-Tax Act regarding issue of cheque for payment in excess of Rs.25,000/-. If there w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncorporated or not. It is of course contended that this definition does not apply to a firm which is not a natural person and has no legal existence, as such clauses (3), (8) and (37) of Section 167 of the Sea Customs Act are inapplicable to the appellant firm. In our view, the explanation to Section 23C clearly negatives this contention. In that a company for the purposes in that section is defined to mean any body corporate and includes a firm or other association of individuals and a Director in relation to a firm means a partner in the firms. The High Court was clearly right in holding that once it is found that there has been a contravention of any of the provisions of the Foreign Exchange Regulation Act read with Sea Customs Act by a firm, the partners of it who are in-charge of its business or are responsible for the conduct of the same, cannot escape liability, unless it is proved by them than the contravention took place without their knowledge or they exercised all due diligence to prevent such contravention." Undoubtedly the matter was relating to the criminal liability for offences under the Act. 33. The Apex Court in Madhumilan Syntex's case again dealing with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of Section 10, FERA, 1947. It is the delinquency of the defaulter itself which establishes his "blameworthy conduct", attracting the provisions of Section 23(l)(a) of FERA, 1947 without any further proof of the existence of "mens rea". Even after an adjudication by the authorities and levy of penalty under Section 23(1)(a) of FERA, 1947, the defaulter can still be tried and punished for the commission of an offence under the penal law, where the act of the defaulter also amounts to an offence under the penal law and the bar under Article 20(2) of the Constitution of India in such a case would not be attracted. The failure to pay the penalty by itself attracts 'prosecution' under Section 23F and on conviction by the said offence imprisonment may follow." 35. The Apex Court in Dharamendra Textiles Processors' case has also referred to its earlier decision in J.K. Industries Ltd. v. Chief Inspector of Factories and Boilers, wherein it was held as under: - "42. The offences under the Act are not a part of general penal law but arise from the breach of a duty provided in a special beneficial social defence legislation, which creates absolute or strict liability without proof of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... porate body or the company. Once the Apex Court has clearly ruled in the case of Director of Enforcement (supra), in no uncertain terms that it is not necessary to establish the mens rea for the purpose of imposition of penalty for the breach of "civil obligation" and once it has also held that "penalty should be imposed on any tax payer as a civil obligation", needless to say that a "person" under Rule 26 would include living as well as non-living person and, therefore, there is no substance in the above ground of challenge by the appellants in Kundil Ispat Ltd's case. As no other ground is sought to be canvassed in the said appeal, the same is bound to fail. 39. As regards the contention relating to the non-return of the un-relied seized records, the learned Advocate for the appellants has drawn our attention to Circular No. 207/09/2006-C.X.6, dated 8-9-2006. Undoubtedly, the circular being issued by the Board, the authorities are bound by the said circular. However, in this case, as we have already held that the failure on the part of the authorities to furnish all the relied upon relevant documents has resulted in violation of basic principles of natural justice and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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