TMI Blog2017 (4) TMI 690X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee-appellant that they have inflated their production figures of receipt of grey fabric to avail bank loan facility for replacing old machinery of the factory does not carry sufficient force as there is no evidence to corroborate the same. On the other hand, there are enough corroborative evidences to prove that the appellant-assessee namely M/s RKSM procured extra grey fabrics and clandestinely manufactured and removed the processed fabrics from their factory - demand upheld. Extended period of limitation - Held that: - considering the suppression of facts with intention to evade payment of duty it cannot be said that show cause notice was to be issued within one year from the relevant date. The period involved is from April, 2002 onwards and demand has been issued within the five year period from the relevant date as per the provisions of Section 11A of the Central Excise Act, 1944. Therefore, it cannot be said that on this count that the demand is not recoverable from the assessee-appellant. Penalty on 4 companies - Held that: - Rule 26 of Central Excise Rules, 2002 (Rule 209A of erstwhile Central Excise Rules, 1944) is not imposed on a company but only on a person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same lot nos. for various consignments of grey fabrics received by them. DGCEI officers placed under seizure 9933.75 mtrs. of processed fabrics valued at ₹ 5,96,025/- under the reasonable belief that the same were offending in nature and liable for confiscation under Central Excise Act, 1944 and the Rules framed thereunder since the same were manufactured out of the unaccounted grey fabrics and kept unaccounted in RG-1 register in the factory with an intention to remove the same without the cover of Central Excise invoice(s) and without payment of Central Excise duty. 2.2 Based on further investigation and the statements recorded of various persons and the documents recovered, the Revenue issued a show cause notice (SCN) dated 03.02.2007 to M/s RKSM and other appellants inter alia for recovery of Central Excise duty of ₹ 1,54,87,744/- involved on 18,91,549.94 mtrs. of processed fabrics valued at ₹ 10,94,76,736/- alongwith interest and proposing equivalent penalty. The show cause notice also proposed imposition of penalties on other appellant-noticees. 2.3 Commissioner vide the impugned order dated 24.04.2008 inter alia confirmed demand alongwith interest an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essed fabrics without documents from M/s RKSM, the statement of Sh. Jagdish Bhutani was forcefully taken; they seek cross-examination of the following: a. Sh. Rajender Kumar Gupta and b. Sh. R. K. Goel, Director M/s RKSM ii) The Commissioner of Central Excise, Jaipur however imposed penalty of ₹ 2.50 lakhs on the appellants under Rule 26 of the Central Excise Rules on the ground that they indulged in abetting the commission of offence by concerning themselves with receipt of unaccounted for and non-duty paid processed fabrics. To establish that the appellant was falsely implicated; they sought cross-examination of Sh. Rajender Kumar Gupta and Sh. R.K. Goel, Director M/s RKSM which was denied without assigning any reasons in the impugned order. Thus, there has been a violation of the principles of natural justice. iii) Even otherwise, the impugned order is perverse and arbitrary as the provisions of Rule 26 of Central Excise Rules clearly mandates that the penalty to be imposed cannot exceed the duty involved towards the goods in dispute. Without ascertaining the value of the goods and the duty involved, the ld. Commissioner proceeded to impose penalty of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f invoice (para 19, internal page 9 of impugned order refers): The duty on said fabrics comes to ₹ 15,503/- (i.e. @ 8.19% of ₹ 1,89,286/- on pro-rata basis). The value of 9013.6 mtrs. @ 54.82 per mtr. comes to ₹ 4,54,126/- and duty @ 8.19% comes to ₹ 40,569/-. ii) The ld. Adjudicating authority has incorrectly and exorbitantly imposed penalty of ₹ 2,50,000/- under Rule 26 of Central Excise Rules, 2002 against duty involvement of ₹ 15,503/- or maximum of ₹ 40469/-. The Rule 26 ibid stipulates imposition of penalty not exceeding the duty involved on the goods or ₹ 10,000/- whichever is higher. 6. After having gone through the case record and submissions of both the sides, it appears that there are sufficient incriminating evidences available on the record to sustain the demand of duty of Central Excise of ₹ 1,54,87,744/- against the appellant assessee M/s RKSM. The argument of the assessee-appellant that they have inflated their production figures of receipt of grey fabric to avail bank loan facility for replacing old machinery of the factory does not carry sufficient force as there is no evidence to corroborate the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Apart from the above, M/s Palson Fabrics Pvt. Ltd., M/s Hari Om Textile, M/s Berry Brothers, M/s Orion Fabrics Pvt. Ltd, M/s Anand Prakash Sons (HUF), M/s Sri Sai Shanti Textile (SSST), M/s Ankur Sulz Pvt. Ltd. , Shri Dev Raj Sindhal S/o Shri Bishan Dass Sindhal, M/s Shevellon Fabrics, M/s Nishu Fabrics, M/s Pioneer Suitings Pvt. Ltd., M/s Miglon Synthetics have all in their respective statement admitted having sent the unaccounted grey fabrics to RKSM for processing and received the same after processing without payment of Central Excise duty and Central Excise invoices. They have also admitted the fact of paying the processing charges in cash to RKSM. e. The IN OUT Register maintained at the office godown of RKSM at Delhi seized on 08.07.03 also contained the details of dispatch of grey fabrics by the vehile No. HR 38F9586 and receipt of processed fabrics from RKSM Khairthal through the same vehicle. f. The total quantity of fuel consumed evidently for operating machinery is numerous even during the period when the production was shown as NIL . g. The recovery of parallel invoice No. 29 dated 06.07.03 amongst the records / documents seized from their office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly mentioned that the names of the parties were written in coded forms in the reports. Shri R. K. Goel, Director, RKSM and Shri R. K. Gupta, Authorised Signatory of RKSM Khairthal were asked to give the full addresses of he parties whose names were written in coded forms in the reports to complete the investigation at their end, but they did not co-operate and did not furnish the addresses. Some of the coded names were deciphered during investigation and their statements were recorded. However, statements of remaining parties could not be recorded in the absence of their full addresses. Shri R. K. Gupta also admitted the fact of processing the grey fabrics without accounting for in the records ..... (Emphasis supplied) 6.2 The Assessee has argued that there has been a gap of more than one year from the searches in issuing the show cause notice; therefore, the show cause notice is time barred. However, considering the suppression of facts with intention to evade payment of duty it cannot be said that show cause notice was to be issued within one year from the relevant date. The period involved is from April, 2002 onwards and demand has been issued within the five year p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company. However, provisions of Rule 26 are very clear that any person who is concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, is liable to a penalty under Rule 26 of the Central Excise Rules. Shri R. K. Gupta, being Authorised Signatory of assessee M/s RKSM cannot abdicate himself of his responsibility of complying with the law of Central Excise and he cannot state that he was not concerned with the excisable goods on which duty was liable to be paid. Here, the Central Excise duty has been evaded to the tune of ₹ 1,54,87,744/- and as per facts and evidences on record he is liable to be penalised under Rule 26 of the Central Excise Rules, 2002. The impugned order imposed penalty of ₹ 2,50,000/- on Shri R. K. Gupta. However, considering the totality of facts and circumstances of the case where the appellant-assessee has been imposed penalty of ₹ 1,54,87,744/-, and Shri R. K. Gupta being an employee of the assessee, we take a lenient view and therefore, his penalty is reduc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rily. However, there is on record confessional statement of Sh. Jagdish Bhutani of M/s Hari Om Textiles. Therefore, M/s Hari Om Textiles has been concerned with the despatch of unaccounted grey fabric and receipt of processed man-made fabric on which Central Excise duty has not been paid. Consequently, penalty is liable to be imposed under Rule 26 of the Central Excise Rules. On the penalty imposed on M/s Hari Om Textiles is ₹ 2,50,000/- , which considering the totality of the facts and circumstances, we find unreasonably high. We, therefore, reduce the said penalty from ₹ 2,50,000/- to ₹ 50,000/- (fifty thousand only), which is 20% of the penalty imposed by the impugned order. 12. M/s Sri Sai Shanti Textiles, a partnership firm has inter alia pleaded that they are only doing trading in processed fabrics. They submit that they being partnership firm have different legal entity than the partners, therefore, penalty under Rule 26 cannot be imposed on them. However, larger Bench of Tribunal in Gopal Industries Ltd. vs. CCE, Indore 2007 (214) ELT 19 (Tri. LB) holds that by mere joining hands, a different and distinct legal entity or legal personality is not broug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 firm. 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 ability, unless it is proved by them that the contention took place without their knowledge or they exercised all due diligence to prevent such contravention . 12.2 Following above observations of the Hon ble Supreme Court (supra) and the CESTAT in case of Gopal Industries Ltd. (supra), when there are enough evidences corroborating the fact that appellant M/s Sri Sai Shanti Textile sent unaccounted grey fabrics to RKSM for processing and received the same after processing without proper invoices and without payment of Central Excise duty, the penalty is deserved to be imposed on them under R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03 their business activity was closed and thereafter from 01.04.2003 to 15.11.2003 they took only the job work of M/s Pioneer Suitings Pvt. Ltd., Alwar. However, impugned order in para 34 makes a mention that how M/s Nishu Fabrics is concerned with the present case of evasion of duty of Central Excise made mainly against the appellant- assessee M/s RKSM. Therefore, the appellant M/s Nishu Fabrics s argument that they are not concerned with the present case, cannot be accepted as it is. However, considering the overall facts and circumstances of the case, the penalty imposed on them seems to be high, the same is, therefore, reduced to ₹ 50,000/- (fifty thousand only), which is 20% of the penalty imposed by the impugned order. 17. The main pleading of Shri Dev Raj Sindhal is that he did not have any premises to deal with the fabric. He is only a consultant and he has got diploma in weaving. Considering the submissions of Shri Dev Raj Sindhal we do not find his direct involvement in evasion of duty of Central Excise. Therefore, the penalty imposed on Shri Dev Raj Sindhal is hereby dropped. 18. Shri Mahender Kumar Miglani, Prop. M/s Miglon Synthetics has pleaded that he did ..... X X X X Extracts X X X X X X X X Extracts X X X X
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