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M/s. NGA Steels (P) Ltd. Versus The Customs, Excise & Service Tax Appellate Tribunal, The Commissioner of Central Excise

2017 (2) TMI 717 - MADRAS HIGH COURT

Clandestine removal - levy of redemption fine in lieu of confiscation - M.S. Ingots - removal of goods without issuance of invoice - imposition of penalty u/r 25 of CEA - Held that: - the appellant cannot wriggle out from under in the guise of trying to assert that there was no intention to evade duty. Though confiscation of the material was not made at the premises of M/s.Sri Krishna Alloys, but made at the premises of the appellant, the appellant being a person holding safe custody of the mate .....

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C of the CER - the finding arrived by the Tribunal that penalty is not imposable in view of the fact that the appellant would not fall within any of the four categories enumerated u/r 25 of the CER cannot be said to be erroneous. - The factum of non-raising of invoice had come to light only due to the surprise inspection conducted by the Department - There was no revenue loss to the exchequer. However, mere payment of duty before issuance of show cause notice would not preclude the Departmen .....

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Respondents : Mr. S.Rajasekar for R-2 JUDGMENT Huluvadi G. Ramesh, J. The present appeal is directed against the order passed by the 1st respondent, viz., Customs, Excise & Service Tax Appellate Tribunal, whereby and whereunder, the Tribunal had modified the order by imposing fine of ₹ 2,00,263/-, in lieu of confiscation of the goods. 2. The facts, which has culminated in the filing of this appeal, could be briefly summarised as under :- An inspection was conducted by the authorities o .....

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r accounting, the relevant records were seized by the officers of the inspection unit. The statement recorded from the Accounts-in-charge, revealed that due to the non-availability of the Managing Partner, who is the authorised signatory of the invoice, due to urgent requirement of the purchaser, viz., M/s.NGA Steels, the quantity was supplied without the necessary invoices. 3. On 27.12.2006, the officers also visited the factory premises of the appellant factory, wherein on physical verificatio .....

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out the cover of invoices and for not having accounted the said receipt in their accounts, show cause notice was issued on M/s.NGA Steels Pvt. Ltd., to show cause why imposition of duty should not be levied and also as to why penalty should not be imposed under Rule 25 of the Central Excise Rules in addition to demand of interest under Section 11AB of the Central Excise Act. Further the show cause notice also contemplated confiscation of the goods received under Rule 25 of the Central Excise Rul .....

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77; 2,00,263/- (Rupees Two Lakhs Two Hundred and Sixty Three only) (Cenvat ₹ 1,96,336/- and Edu. Cess ₹ 3,927/-) under Section 11A (1) of the Central Excise Act, 1944. (ii) I demand appropriate interest on the above duty amount under Section 11AB of the Central Excise Act, 1944. (iii) I confiscate the 67.475 MT of M.S. Ingots valued at ₹ 12,27,100/- seized under a mahazar on 27.12.2006 and deposited for safe custody with M/s.NGA Steels Private Ltd., in terms of Rule 25 of the C .....

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only) on M/s.NGA Steels Private Limited, Morur under Rule 25 of the Central Excise Rules, 2002. (vi) I impose a penalty of ₹ 10,000/- on Shri N.Anbalagan, Managing Partner of M/s.Sri Krishna Alloys, Sankari, in terms of Rule 26 of the Central Excise Rules, ibid. (vii) I impose a penalty of ₹ 10,000/- on Shri A.Rajarajan, Director of M/s.NGA Steels Private Ltd., in terms of Rule 26 of the Central Excise Rules ibid. (viii) I impose a penalty of ₹ 10,000/- on Shri K.Duraisamy, Ac .....

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the Central Excise Act along with interest on duty under Section 11AB of the Act imposed on M/s. Sri Krishna Alloys, however penalty imposed under Rule 25 of the Central Excise Rules, imposed on M/s.Sri Krishna Alloys, was reduced to ₹ 50,066/-. Insofar as the present appellant is concerned, while penalty under Rule 25 of the Central Excise Rules was reduced to ₹ 50,066/-, however confiscation of the goods as ordered under Rule 25 of the Central Excise Rules was upheld, while redempt .....

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of redemption fine imposed on the appellant, however, set aside the penalty imposed under Rule 25 of the Central Excise Rules on the ground that the appellant herein does not fall under any of the four categories covered by the said Rule and, therefore, imposition of penalty on the appellant was not justified. Aggrieved against the order of the Tribunal in confirming the redemption fine, while setting aside the penalty imposed under Rule 25 of the Central Excise Rules, the appellant is before t .....

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le 25 of Central Excise Rules 9. Learned counsel appearing for the appellant submitted that the violation observed by the authorities of the 2nd respondent is only a procedural irregularity and it cannot be construed as an act to defraud the exchequer of its rightful share by way of levy of duty. It is the further submission of the learned counsel for the appellant that the appellant is entitled to cenvat credit on inputs received by it and, therefore, there is no intention on the part of the ap .....

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the categories enumerated under Rule 25 and, therefore, redemption fine is equally liable to be set aside as there would be no revenue loss to the exchequer. The Tribunal, having found that levy of penalty is unsustainable as the appellant does not fall under any of the categories listed under Rule 25 of the Central Excise Rules, has, however, gone on a tangent by upholding the redemption fine on the basis of the acceptance of the offence of clearance of goods without invoice by M/s. Sri Krishna .....

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Rules is set aside, no redemption fine could be imposed on the appellant :- i) Birla Yamha Works Vs Commissioner of Central Excise, Meerut 2005 (183) ELT 194 (Tri. Del.) ; ii) Anchal Prints Pvt. Ltd. - Vs Commissioner of Central Excise, Surat-I 2009 (235) ELT 117 (Tri. Ahmd.) ; iii) Commissioner of Central Excise, Ludhiana Vs Ruby Dyeing & Finishing Mills 2009 (244) ELT 106 (Tri. Del.) ; and iv) 2011 (274) ELT 582 (Tri. Mumbai) 11. Per contra, learned counsel appearing for the Department su .....

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of the learned counsel for the Department that the Tribunal, though has rightly confirmed the redemption fine imposed on the appellant, however, has set aside the penalty on the ground that the appellant does not fall under any of the four categories envisaged under Rule 25 of the Central Excise Rules. The said finding of the Tribunal, is per se erroneous and is against the very spirit of the provision. Rule 25 of the Central Excise Rules contemplates confiscation and penalty on the producer, ma .....

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and unsustainable in law. 12. Heard the learned counsel appearing for the appellant and the learned counsel appearing for the Department and also considered the relevant provisions of law and the judgments relied on by the learned counsel for the appellant. 13. Before embarking upon deciding the contentions advanced by the learned counsel for the appellant vis-a-vis the learned counsel for the 2nd respondent/Department on the question of levy of redemption fine in lieu of confiscation and answer .....

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registered person of a warehouse or a registered dealer, - (a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or (b) does not account for any excisable goods produced or manufactured or stored by him; or (c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or (d) contravenes any of the provisions .....

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usand], whichever is greater. An order under sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice. 15. It is the stand of the appellants, as held by the Tribunal, that they do not fall under any of the four categories adumbrated under Rule 25 of the Central Excise Rules, whereas the 2nd respondent/Department contends that the goods, viz., M.S. Ingots, having been manufactured/produced by M/s. Sri Krishna Alloys would not fall within the meaning .....

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. Bars and Rods, for which the basic input is M.S. Ingots, the same could be taken by the appellant by payment of redemption fine, as the appellant was also in collusion with M/s.Sri Krishna Alloys in the matter of clandestine removal of the inputs. Therefore, levying of redemption fine could not be said to be erroneous. It is further contended that the appellant having acted with mala fide intention and in collusion with M/s. Sri Krishna Alloys and having contravened the provisions as envisaged .....

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t inclined to look into the issue as is reflected in the eyes of the Department. The Tribunal having held that the act of the appellant does not fall within any of the four categories as envisaged under Rule 25, it is submitted by the appellant that at best it could be termed as technical procedural lapse, which act would not warrant imposition of penalty. The contention, as advanced by the appellant, merits acceptance. A cursory reading of Rule 25 of the Central Excise Rules reveal that if any .....

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Tribunal, the appellant will not fall within any of the four categories as envisaged under Rule 25 of the Central Excise Rules. 17. However, confiscation would still survive on considering the entire factual matrix. Rule 25 of the Central Excise Rules has to be read in continuation with Section 11AC of the Central Excise Act. Section 11AC of the Central Excise Act deals with penalty for short-levy or non-levy of duty in certain cases. For better clarity, Section 11AC is extracted hereunder :- Pe .....

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penalty equal to the duty so determined : (Emphasis Supplied) [Provided that where such duty as determined under sub-section (2) of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent. of the duty so determined : Provided further that the benefit of reduced .....

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e the duty determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the first proviso shall be available, if the amount of duty so increased, the interest payable thereon and twenty-five per cent. of the consequential increase of penalty have also been paid within thirty days of the communication of the order by which such increase in the duty takes effect. Explanation. - For the remo .....

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due from such person.] 18. From a reading of Section 11AC, it is unambiguously clear that where any duty has not been paid, more particularly with an intention to evade payment of duty, the person is liable to pay duty as determined under sub-section (2) of Section 11A and is also liable to pay penalty equal to duty so determined. 19. In the case on hand, there is no dispute that the materials were moved from one place to another place and stored in the destination place without preparation of .....

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M/s.Sri Krishna Alloys have come out with an explanation that for want of the signatory to sign the invoice, the invoice was not sent, but that would not absolve the seller of the liability to pay duty and the material so seized could be confiscated under Rule 25 of the Central Excise Rules. The explanation offered by the appellant as well as M/s.Sri Krishna Alloys cannot be said to be a plausible explanation so as to brush aside the stake of the department to its rightful share of duty claim. I .....

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here was no intention to evade duty. Though confiscation of the material was not made at the premises of M/s.Sri Krishna Alloys, but made at the premises of the appellant, the appellant being a person holding safe custody of the materials, without there being any valid invoice for receipt of the same as raw material, if wishes to retain the confiscated materials, could redeem the same on payment of fine, as has been ordered. 20. In the case on hand, the the appellant having received the material .....

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e 25 of the Central Excise Rules cannot be said to be erroneous. 21. The appellant has challenged the levy of redemption fine, which has been confirmed by the Tribunal, based on the finding of the Tribunal that the appellant does not fall within the four categories enumerated under Rule 25 of the Central Excise Rules. The factum of non-raising of invoice had come to light only due to the surprise inspection conducted by the Department, if not for which the action of M/s. Sri Krishna Alloys and t .....

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