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2015 (8) TMI 1235 - CESTAT NEW DELHI

2015 (8) TMI 1235 - CESTAT NEW DELHI - TMI - Recovery of wrongly taken cenvat credit - personal penalty whereas the company is under liquidation - Imposition of penalty under Rule 26 - Held that:- Show cause notice had been issued not only to the appellant company M/s. DTL, Unit-II (Aluminium Division) but also to the Managing Director, Shri M.B. Baheti, Shri Ravindernath Jain, Joint Managing Director and Shri Rajesh Maheshwari, Manager (Finance). Even if the Commissioner could not adjudicate th .....

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as correct or not.

Statement dated 28.07.2003 of Shri M.Baheti, Managing Director, which is being used against him, is that after taking stock of the situations in the wake of search of Unit M/s. DTL, Unit-II, he had removed Shri Rajesh Maheshwari from M/s. DTL as he found him solely responsible for this act. From this statement, no conclusion can be drawn that Shri M. Baheti was involved in day-to-day functions of the Aluminium Division of M/s.DTL or had knowledge about its activity .....

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nt, it is clear that it is Shri Ravinder Jain, who was running the Aluminium Division and Shri M. Baheti was not involved in day-to-day functions of this Unit. In our view, therefore, the evidences on record are not sufficient to conclude that Shri Baheti was, in any way, concerned in removal of the clandestinely cleared goods from M/s. DTL. In view of this, the imposition of penalty under Rule 26 of the Central Excise Rules on Shri M. Baheti would not be sustainable and has to be set aside. - D .....

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nufacture of Aluminium Sections, etc. While Shri M.B. Baheti, is the Managing Director of the appellant company, Shri Ravinder Jain is Joint Managing Director of the Appellant company in charge of Unit III, against whom the present case has been booked. There is another unit No.I of the appellant company which is engaged in the manufacture of copper products and Shri M.B. Baheti is looking after that Division. Shri Rajesh Maheshwari is the Manager (Finance) of the appellant unit i.e. Unit No.III .....

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a, Advisor in the appellant company and Shri Ravindernath Jain, Joint Managing Director of the appellant company. During inquiry it was also found that Shri Rajesh Maheshwari, was the proprietor of M/s Shree Mahakal Metal Works (SMMW) and similarly, another employee of the appellant unit, Shri Ashen Nagar was the proprietor of another trading unit, M/s. Maa Bhagwati Metals Works (MBMW) and both SMMW and MBMW appeared to be the units being fully under the control of the appellant company. After c .....

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minium Sections, cleared clandestinely during 2001-2002 and 2002-2003 period without payment of duty alongwith interest thereon under Section 11 AB and also for imposition of penalty on it under Section 11 AC; (b) Appropriation of an amount of ₹ 7,18,431/- already paid by M/s.DTL during investigation; (c) Recovery of wrongly taken cenvat credit of ₹ 1,72,162/- from DTL in respect of clearance of 12659 kgs. of cenvat credit availed of Aluminium Billets removed without reversal of the .....

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ted 25.10.2005, at the time of adjudication proceedings before the Commissioner, Shri P. Asawa of M/s Asawa & Associates, Indore had appeared on behalf of the appellant unit and its Managing Director, Shri M.B. Baheti and Shri Ramesh Nair, Advocate had appeared on behalf of Shri Rajesh Maheshwari and prior to the hearing they had also filed the detailed reply to the show cause notice. The Commissioner by this order confirmed the above mentioned duty demand against the appellant company along .....

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Commissioner, Shri M.B. Baheti and Shri Rajesh Maheshwari have filed these appeals. It appears that no appeals have been filed by M/s.DTL as the company is in liquidation. 2. Heard both the sides. 3 Shri L.P. Asthana, Advocate representing Shri M.B. Baheti pleaded that in terms of Section 446 of the Company Act, 1956 when a winding up order has been made or the Official Liquidator has been appointed as provisional liquidator, no suit or other legal proceeding shall be commenced, or if pending a .....

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eti and Shri Rajesh Maheshwari is linked with the question of duty demand against the appellant company - M/s.DTL and since the adjudication proceedings in respect of M/s.DTL are illegal, the Commissioner's order imposing penalty on Shri M.B. Baheti and Shri Rajesh Maheshwari is also contrary to the provisions of law, that in any case, there is absolutely no justification for imposing penalty on Shri M.B. Baheti as he was Managing Director of Group Company M/s.DTL which has three divisions a .....

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referred to BIFR for rehabilitation and hence, it was decided to sell the assets of the company to Shri Ravindernath Jain and the same was included in the BIFR scheme and to keep the unit running for various benefits to employees, creditors and as per BIFR proposal, Sh. Ravinder Jain was inducted to run the Aluminium Division, that from this, it is clear that Shri M.B. Baheti was not in-charge of day-to-day affairs of the Aluminium Division, that no adverse conclusion can be drawn from his stat .....

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here is absolutely no justification for imposition of penalty on him under Rule 26 of the Rules. It was, therefore, pleaded that the impugned order imposing penalty of ₹ 10 lakh on Shri M.B. Baheti is not sustainable. 4. With regard to the other appellant, Shri Rajesh Maheshwari, his counsel pleaded that he was only an employee of the DTL, who was acting on the instructions of Shri Ravinder Jain and Shri H.P. Gupta and therefore imposition of penalty on him under Section 26 is not justifie .....

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nal-Delhi) , wherein it was held that penalty under Section 112 of the Customs Act, 1962 is not imposable on an employee of the company carrying out orders given to them as he was not the person in charge responsible for conduct of its business of the company. He, therefore, pleaded that imposition of penalty of ₹ 10 lakh on Shri Rajesh Maheshwari is not justified. 5. Shri Ranjan Khanna, ld. Departmental Representative defended the impugned order with regard to imposition of penalty impose .....

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ods cleared clandestinely from DTL to SMMW were being sold from there and thus, Shri Rajesh Maheshwari is the person who is involved in sale of the goods cleared without payment of duty and while having knowledge that the goods cleared by DTL to SMMW without payment of duty were liable for confiscation. Besides, he also pointed out to para19 (iii) of the order-in-original wherein it has been stated that for the purpose of removing goods without payment of duty, a firm named M/s. SMMW under propr .....

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jesh Maheshwari and Shri Maheshwari in his statement had explained that the entries in the diaries contained details of day-to-day sales and purchase of the goods manufactured and raw materials procured by M/s.DTL. He also stated that from his premises, a file containing 65 invoices of M/s.DTL had been recovered out of 51 invoices were identified to be fake invoices after comparison with the records and Shri Maheshwari admitted that no excise duty was paid on the excisable goods cleared under th .....

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orically stated that after taking stock of the situation in the wake of search he had removed Shri Rajesh Maheshwari from M/s.DTL as he found him solely responsible for this act. He also stated that being Managing Director of DTL, Shri Baheti cannot absolve himself from his overall responsibility by merely shifting the responsibility for others. He, therefore, pleaded that penalty under Rule 26 has been correctly imposed on Shri Baheti. 6. We have considered the submissions from both the sides a .....

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or other legal proceeding shall be commenced, or if pending at the date of the winding up order, shall be proceeded with, against the company, except by leave of the Tribunal and subject to such terms as the Tribunal may impose". In the present case, the show cause notice had been issued not only to the appellant company M/s. DTL, Unit-II (Aluminium Division) but also to the Managing Director, Shri M.B. Baheti, Shri Ravindernath Jain, Joint Managing Director and Shri Rajesh Maheshwari, Man .....

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as to whether the confirmation of duty demand against M/s.DTL was correct or not. In these appeals, we are only required to go into the question as to whether penalty under Rule 26 of the Central Excise Rules, 2002 was imposable on Shri M.B. Baheti, Managing Director of the appellant company and Shri Rajesh Maheshwari, Manager (Finance) of the appellant company and whether in this regard, there is an adequate evidence on record. 8. Under Rule 26 of the Central Excise Rules, 2002, "any pers .....

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satisfied. "(1) The person must have acquired possession of any excisable goods, or is in any manner concerned in selling, purchasing, transporting, removing, depositing, keeping, concealing or any other manner dealing with the excisable which are liable for confiscation. 2. The person should have knowledge that the excisable goods dealt with by him are liable for confiscation." This provision of Central Excise Rules, 2002 is analogous to Section 112 (b) of the Act, 1962 with a signifi .....

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criminating documents have been recovered from his residence, he in his statement has also admitted to have been involved in clandestine removal of the goods manufactured by DTL without payment of duty. Not only this, as recorded by the Commissioner in para-19 of the impugned order, he has also admitted that for the purpose of removing the goods without payment of duty two firms viz. M/s. SMMW, Indore under his proprietorship and another firm, M/s.MBMW, Indore under proprietorship of Shri Ashen .....

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ered to be mere an employee who was acting purely on the direction of the Managing Director. Therefore Shri Rajesh Maheshwari has to be treated the person who was involved in acquiring possession of and in sale of the clandestinely cleared goods while having knowledge that the same were liable for confiscation. Therefore, imposition of penalty on Shri Rajesh Maheshwari under Rule 26 has to be upheld. 10. As regards, Shri M.B. Baheti, Managing Director of M/s. DTL, the Commissioner's findings .....

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owledge of clandestine activities undertook by Noticee No.I, it cannot be accepted that such large-scale evasion involving huge funds is possible without his active knowledge. The Noticee No.4 had categorically mentioned that he was reporting all the nefarious activities to Shri Baheti and Shri Jain. Being Managing Director of M/s. DTL, Shri Baheti cannot absolve from his overall responsibility by merely thrusting the responsibility on others. From the above facts and evidences on record, it is .....

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