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Mamta Garg Versus Commissioner of Cus. and C. Ex., Noida

2017 (2) TMI 1317 - CESTAT NEW DELHI

Penalty u/r 26 of CER 2001/2002 and Rule 13/15 of CCR 2002/2004 - whether when the main noticee M/s. HUF have been granted immunity from imposition of penalty by the Settlement Commission, whether penalty can be imposed upon the present appellants, who are charged with colluding and abbeting M/s. HUF? - Held that: - As per the majority order, the present appeals are not to be allowed on the basis of immunity available to them on account of main noticee having settled the issue before the Set .....

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DR, for the Respondent. ORDER [Order per : Archana Wadhwa, Member (J), (for the Bench)]. - All the appeals are being disposed of by a common order as they arise out of same impugned order passed by the Commissioner, Central Excise, Noida. The challenge in the present appeals is to penalties imposed upon the various applicants in terms of provisions of Rule 26 of Central Excise Rules, 2001/2002 and Rule 13/15 of Cenvat Credit Rules, 2002/2004 as detailed below :- 1. Shri Mukesh Garg Rs. 66,55,075 .....

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to manufacture the inputs and were neither registered with Central Excise Department. They were only issuing invoices, without supply of goods or inputs, on the basis of which M/s. HUF was availing the credit. It is seen that M/s. HUF along with other three co-noticees approached the Settlement Commission who vide their order FO No. 555/CE/07(PB), dated 5-7-2007 appropriated the entire amount of ₹ 2,20,00,975/- paid by M/s. HUF along with payment of interest at the rate of 10%. Further, th .....

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hey relied upon the Tribunal s decision in the case of S.K. Colombowala v. CCE [2007 (220) E.L.T. 492 (Tri.)]. They also referred to various decision of the Tribunal wherein penalties imposed upon the co-noticee were set aside, where the dispute in respect of main noticee was settled by the Settlement Commission. However, Commissioner did not accept the above contention of the appellant and imposed penalties, as detailed above. 4. After hearing both the sides, duly represented by Shri Mayan .....

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en that originally there was difference of opinion between two Members. Whereas Member Judicial by following the Hon ble Supreme Court decision in the case of Union of India v. Onkar S. Kanwar [2002 (145) E.L.T. 266 (S.C.)] held that settlement of dispute by the main declarant under Kar Vivad Samadhan Scheme to operate full and final settlement in respect of all other persons. As it was held by the Hon ble Supreme Court that abettor cannot be penalized more than the original importer, penalties .....

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KVS Scheme and those relating to settlement of cases under the Customs Act are not completely identical, the underlying objective in both the scheme is similar and it is for this reason that the case laws in respect of cases under KVSS including in the case of Onkar S. Kanwar do not become entirely irrelevant. (b) The question as to who played the main role is irrelevant for the reason that once the case is settled by the Settlement Commission, it is settled in its entirety and such a case then .....

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. v. CCE, Raigad [2008 (226) E.L.T. 566 (Tri-Mum)]. It was held that when the case is settled by the Settlement Commission in respect of main appellants, case against co-noticee also comes to an end. Penalty cannot be imposed upon the co-noticee for availment of ineligible credit especially when entire duty liability was deposited by the appellant. Similarly in the case of Vijay R Bohra v. CCE, Daman [2010 (260) E.L.T. 290 (Tri.-Ahmd.)], it was held that when the dispute is settled by Settlement .....

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n noticee is granted immunity from fine, penalty and prosecution, imposition of penalty on the co-noticee cannot be sustained. In the case of Shitala Prasad Sharma v. CCE, Mumbai [2005 (183) E.L.T. 21 (Tri.-Mum.)], it was held that co-accused cannot be vested with any higher penal consequences when the main accused stands absolved of penal consequences, no question of imposition of penalty on the appellants co-accused can arise. 6. In the case of Radiant Silk Mills v. CCE, Jaipur [2013 (288 .....

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lant, is neither justified nor warranted and would be against the settled proposition of law in the above referred matters. 8. We find no fairness in the argument of learned DR that S.K. Colombowala decision could not be followed and the appellants appeal should be decided on merits, after considering their role in the entire bogus transaction. When the legal issues stand decided by the precedent decision of the Tribunal, and their being no contra decision, the same are required to be follo .....

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l have due deference and regard for decisions rendered by the Tribunal, the elements of certainty and consistency in the judicial process which lie at the heart of judicial functioning would be seriously disrupted. 9. Before we part with the matter, we would like to observe that the stay order passed by the Tribunal directing the appellant to deposit 25% of the penalty was challenged before Delhi High Court and as reported in 2012 (278) E.L.T. 303 (Del.) by Mukesh Garg wherein the Hon ble H .....

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er, are carrying persuasive value. In any case, having discussed entire case law on the subject, we are of the view that penalties imposed upon all the appellants are required to be set aside. We order accordingly and allow all the appeals with consequential relief to the appellants. (Pronounced in the open Court on.) Sd./- Archana Wadhwa Member (Judicial) [Order per : Manmohan Singh, Member (T)]. - I have gone through the draft order recorded by Hon ble Member (Judicial) granting immunity from .....

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ailment of Cenvat credit on the strength of paper transactions without accompaniment of the goods resulting in credit being availed fraudulently in which main party M/s. Minda and other co-noticees have actively participated in completing the fraud. 12. I have further examined the facts and modus operandi followed and subsequent proceeding before Settlement Commission vis-a-vis legal provision of Settlement Commission and prevailing legal precedents etc. Para 2 and Para 3 of Member (Judicia .....

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with Central Excise department. They were only issuing invoices, without supply of goods or inputs, on the basis of which M/s. HUF was availing the credit. It is seen that M/s. HUF along with other three co-noticee approached the Settlement Commission who vide their order FO No. 555/C.E./07/(PB), dated 5-7-2007 appropriated the entire amount of ₹ 2,20,00,975/- paid by M/s. HUF along with payment of interest at the rate of 10%. Further, the said M/s. HUF along with the other co-appellants w .....

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case of S.K. Colombowala v. CCE [2007 (220) E.L.T. 492 (Tri.)]. They also referred to various decision of the Tribunal wherein penalties imposed upon the co-noticee were set aside, where the dispute in respect of main noticee was settled by the Settlement Commission. However, Commissioner did not accept the above contention of the appellant and imposed penalties, as detailed above. 13. Four appellants namely Ms. Mamta Garg, (Proprietor of M/s. SRG Machines) w/o Shri Mukesh Garg, Nataji Sub .....

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e come before Tribunal against Order-in-Original No. 34/AAYUKT/NOIDA/2008, dated 27-8-2008. 14. To appreciate the reason for differences being recorded, it is necessary to understand role of the parties in adjudication. It comes out from the fact that the so called suppliers of paper invoices did not consign goods but merely passed on papers to enable the user thereof to claim Cenvat credit at the cost of Revenue for their unjust enrichment, indulging in the fraudulent activity to deceive r .....

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ich could not be produced. In case of a unit called M/s. Glass Plastics. Ghaziabad. no machine were found to have been installed. A Company in the name and style of M/s. Ashish alloys casting was found without electric connection. In HSN Engineering, though unit was found to have been engaged in the manufacture, it had no facility to manufacture specified parts of automobile lock/sets was not found. Same is the case with M/s. Meerut Steels, Modinagar and M/s. Vas Techno Engineers, Ghaziabad. M/s .....

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g fake and bogus invoices enabling MHL to illegally enrich themselves at the cost of the exchequer by the extent of Cenvat credit taken on the strength of such bogus/fake invoices. They colluded and abetted with MHL to evade payment of Central Excise duty deliberately and defrauded Government passing on illegal Cenvat credit without manufacturing and supplying any goods mentioned in the fake invoices. 16. On the above factual background and on perusal of draft order and interpretation adopt .....

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26) E.L.T. 679 (S.C.) where it was held that immunity granted by the Court is confined to the party who carried the matter in controversy to that Court. Para 25 of the said judgment is reproduced for appreciation of the law as under : 25. In the above case, the question was whether the immunity granted under the KVSS 1998 could also cover proceedings under the Kerala Sales Tax Act in respect of the same assessee. The learned Judges again referred in paragraph 15 to Sushila Rani s case as al .....

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itted under direct tax enactment or indirect tax enactment, but by no stretch of imagination, the same would be granted in respect of offences under the Prevention of Corruption Act. A person may commit several offences under different Acts; immunity granted in relation to one Act would not mean that immunity granted would automatically extend to others. By way of example, we may notice that a person may be prosecuted for commission of an offence in relation to property under the Penal Code as a .....

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to a tax-payer who had made declaration under Section 88 of the Finance Act. 17. Reliance was placed on Supreme Court judgment in the case of Onkar S. Kanwar [2002 (145) E.L.T. 266 (S.C.)] by Hon ble Tribunal without appreciation of the principle laid down in that judgment. Hon ble Court repelling the arguments of the assessee that once immunity is granted to the company under Kar Vivad Scheme, that immunity is extended to its Directors, held in Para 12 of the judgment as under :- 11.  .....

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for any offence and from imposition of penalty. He submitted that once the Company settled under the said scheme, there was immunity in respect of the matter for which the show cause notice was issued. He submitted that penalty was sought to be imposed on the Director/Officers for the same matter in respect of which the show cause noticee had been issued on the Company. He submitted that once the Company got immunity in respect of that matter, nothing survived even against the Director/Officers .....

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le a declaration separately. The settlement is in respect of each declaration. Section 91 only gives immunity in respect of matters covered in the declaration. The matter covered in the declaration by the company is the tax arrears of the Company. The declaration by the Company admittedly does not cover the tax arrears of the Directors/Officers. Thus they get no immunity under Section 91 on a settlement by the Company. 18. Thus law is well-settled to limit the relief granted to a party only .....

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stake of law under which he has paid the tax nor can he claim that he is entitled to prefer a writ petition or to institute a suit within three years of such alleged discovery of mistake of law. A person, whether a manufacturer or importer, must fight his own battle and must succeed or fail in such proceedings. Once the assessment of levy has become final in his case, he cannot seek to reopen it nor can he claim refund without reopening such assessment/order on the ground of a decision in anothe .....

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mphasis supplied] 19. Hon ble High Court of Punjab & Haryana too in the case of M/s. Vee Kay Enterprises v. C.C.E. reported in 2011 (266) E.L.T. 436 (P & H) held that penalty under Rule 26 ibid is imposable on Dealers of Cenvatable goods when only invoices are raised to pass on Cenvat Credit while no raw materials are supplied by the Dealers. The relevant para 10 of the judgment is reproduced for appreciation : 10. In spite of non-applicability of Rule 26(2), penalty could be l .....

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ed invoices without delivery of goods with intent to enable evasion of duty to which effect a finding has been recorded and which finding has not been challenged. We are, thus, unable to hold that appellant was not liable to pay any penalty. 20. It is observed that in the present case relating to M/s. Minda and other co-noticees (other than employees of M/s. Minda as co-noticees before Settlement Commission) all manufacturers who issued paper invoices indulged in fraudulent preparations of .....

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nai, reported in 2012 (282) E.L.T. 67 (Tri.-Chennai), has rightly held that immunity granted to some specific noticees by the Settlement Commission cannot operate as an immunity to other co-noticees and that order of Settlement Commission were not binding on Tribunal to grant relief to persons who were not before the Settlement Commission. To reach to such conclusion, the Tribunal relied upon the decision of the Apex Court in Chengal Varayanaidu v. Jagannath as reported in AIR-1994-S.C.-853. Thu .....

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.L.T. 67 (Tri.-Chennai), referred the matter to Larger Bench as reported in Rajesh v. C.C. Tuticorin as reported in 2013 (296) E.L.T. 520 (T-Ch), the Larger Bench declined to answer stating that the decision in K.I. International is pending before Hon ble High Court of Madras and returned the reference with an advice to the Single Bench to decide the issue on merits as reported in 2013 (298) E.L.T. 540 (Tri.- LB). 22. In view of above, I differ with findings and decision recorded by Hon ble .....

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dings recorded by adjudicating authority. Role of all these appellants is highlighted in para 15, para 16, para 17 and para 18. For easy reference, paras 16.1, 16.2 17.4, 17.5 17.6, 17.10, para 18 (relating to M/s. Techno Engineers, M/s. SRG Machines, M/s. Ajanata Enterprises, M/s. HSN, Engineering) are reproduced. Para 16.1 It is to mention that M/s. Minda HUF Limited, Noida engaged in the manufacture of automobile lockers, falling under chapter 87 of CETA, 1985, were availing facility of .....

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with the Cenvat credit on the strength of invoices issued by these non-existent, fake suppliers without receiving any goods or inputs said to be covered under these documents, Accordingly, an enquiry was initiated to ascertain factual position by way of scrutiny of various documents resumed from their premises and statements of key functionaries of MHL were also recorded. Para 17.4 In the case of M/s. S.R.G. Machines, Modinagar, the firm was found engaged in the production of steel wire an .....

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No facility to manufacture goods covered under invoices issued by them was found M/s. Glass Plastic and Chem Industries was found running under two sheds were no machine was found installed. In the case of M/s. Ashish Alloy and Castings Pvt. Ltd., Ghaziabad, the unit was found manufacturing FRP sheets. As per manufacturing process of FRP it came to notice that facility of manufacture of goods namely automobile lock parts was not available there. M/s. FISN Engg., Ghaziabad was found engaged in th .....

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of Shri Madhav Srivatava dated 9-11-2006 and statement of Anil Kumar Maheshwari dated 15-11-2006 vide which Shri Maheshwari has provided details of items purchased from above said suppliers, but the said suppliers were not having such facility to manufacture said specific items. Thus, I am inclined to conclude that these firms were not having any facility to manufacture goods shown as supplied to MHIL, of which they have availed Cenvat credit. Para 17.5 Some suppliers were not registered w .....

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as concluded that MHL was using invoices issued by these non existent/fake firms to avail irregular Cenvat credit, I find that non-receipt of goods at MHL has been admitted by various key persons of MHL who were incharge for receipt of the goods, making entry thereof in the gate record, generation of internal record, payment, transportation of the goods, etc. I find that this observation made because of various statements of key functionaries is correct and forcefully depicts the modus operandi .....

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, In the SCN it has been shown in detail that the said suppliers were instrumental in the withdrawal of sale proceeds in cash and return of the same to MHL after retaining their commission amount. The above said fact has been admitted by Shri Y.K. Parasher of M/s. G.S. Machines and Engg, Shri Suneel Kumar Gupta of M/s. A.S. Steels/M/s. S.S. Enterprises, Shri Dinesh Sharma of M/s. Krishana Machine Tools and Shri N.P Gupta of M/s. Sagar Welding Electric Stores. Similar transactions are also notice .....

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to ascertain factual position. In most of the cases, the concerned person already admitted non-dispatch of goods. Role of four appellants in compliance is depicted below : (i) M/s. SRG Machines, Near Vishal Dharamkanta, Modinagar : (Owner - Ms. Mamta Garg) The unit was found located in the given address but engaged in the manufacture of steel wire raw and iron recovered from MHL revealed that automobile lock parts having different specifications etc. Non-receipt of goods under the cover of the i .....

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ation of steel parts. He stated that the items shown consigned to MHL were made as per drawing supplied by MHL but he failed to produce any such drawing. However, when the facts stated by him thereof could not be manufactured through fabrication being specialized parts of automobile locks. (iii) M/s. Techno Engineers, Netaji Subahash Nagar, Near Vishal Dharamkanta, Modinagar (Distt. Ghaziabad). (Owner Mrs. Aruna Aggarwal) On verification, no unit in the name and style was found in existence of t .....

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Further, non-receipt of goods under the cover of invoices at MHL issued by this firms, is also clear from statement of various key officials of MHL, bank enquiries, transport enquiries. Thus, it is clear that M/s. Techno Engineers aided and abetted MHL to avail Cenvat credit fraudulently, which comes to ₹ 2,09,760.00. [TABLE-V of show cause notice]. (iv) M/s. HSN Engineering, Ram Nagar, Suman Cinema, Sikri Kalan, Modinagar, Ghaziabad : (Owner - Shri Naveen Aggarwal) The unit was found enga .....

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gment of Hon ble High Court of Rajasthan in the case of Rajesh Goyal v. Union of India - 2012 (284) E.L.T. 164 (Raj.) expressing anxiety over consequences of tax fraud in the following language. Para 7 Albeit, leaned counsel for both the parties have argues ad longtum on mixed questions of law and fact, but here, we are confined merely to the adjudication of the instant bail petition. It is true that the alleged offence is non-cognizable and also compoundable as envisaged by Section 9A of t .....

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, if not paid honestly by them is also an indirect from of corruption in this civilized society of democratic State. Such act of evasion of excise duty not only affects the economy of the State but destroy the cultural heritage also. Unless nipped in the bud at the earliest, it is likely to cause turbulence shaking of the socio-economic-political system in an otherwise healthy, wealthy, effective and vibrant society and ultimately, such excise duty or the tax evaders can create a parallel econom .....

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the society that evasion is rewarded with incentive. Judgment of Hon ble High Court of Punjab & Haryana in the case of V.K. Enterprises as referred in previous paras is also relevant. Therefore, it is justified to uphold the penalties imposed by adjudicating authority in his adjudication order 34/Aayukt/Noida/2008, dated 27-8-2008. 25. Order accordingly. Sd./- Manmohan Singh Member (Technical) In view of our difference in decision as above, following question arise for reference to the .....

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rising out of order dated 27-8-2008 of Commissioner of Central Excise, Noida. The appeals were heard by Division Bench and on conclusion, a difference of opinion arose between the members. The said difference of opinion was referred to me for a resolution, as a third member. 27. The brief facts of the case are that the Central Excise officers conducted a certain investigation regarding loss of revenue due to misuse of Cenvat credit facilities. After a detailed investigation, proceedings wer .....

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rnment. Accordingly, show cause notice dated 12-2-2007 was issued to large number of persons including the four, who are in appeals now. M/s. Minda HUF Ltd. along with three other noticees approached the Settlement Commission. The Settlement Commission vide Final order dated 5-7-2007 appropriated duty of ₹ 2,20,00,975/- paid by the main applicant along with interest of 10%. Immunity was granted from fine, penalty and prosecution to the applicants, who approached the Settlement Commission. .....

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have any manufacturing facility for manufacture of the alleged inputs shown to have been sold to M/s. Minda HUF Ltd. or they do not exist in the given address. All the appellants found to have been issued invoices without supplying the goods. This enabled M/s. Minda HUF Ltd. to avail improper Cenvat credit. 29. On appeal, the Member (J) held that since the main noticee, M/s. Minda HUF have approached and have been granted immunity from penalty by the Settlement Commission, the penalties imp .....

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granted to the person, who availed Cenvat credit fraudulently, cannot be automatically extended to the present appellants, though co-noticees in the same proceedings, as they are liable for penal action independently. He relies on the decision of the Tribunal in K.I. International - 2012 (282) E.L.T. 67 (T-Chennai). He accordingly held that the appellants are liable to penalty and the appeals are to be dismissed. 30. Before proceeding with the resolution of the difference of opinion, it has .....

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nalty imposed on the appellant is not being examined now. 31. I have heard ld. Counsel for the appellant and ld. AR for the Revenue elaborately. I have also perused the appeal records including the written submissions and various case laws relied upon by both the sides. 32. To begin with, I note that the Member (J) as well as ld. Counsel for the appellants heavily relied on the decision of the Tribunal in S.K. Colombowala (supra). In the said case, the Tribunal was examining the liabil .....

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nd prosecution. The Original Authority imposed penalties on the other noticees. It is to be noted that the case dealt with was one composite fraudulent act of misusing advance licence with fraudulent intent, in which certain individuals and CHA and its Director were also imposed with penalty. The Tribunal in S.K. Colombowala (supra) relied on the decision of the Hon ble Supreme Court in Union of India v. Onkar S. Kanwar - 2002 (145) E.L.T. 266 (S.C.). 33. I have perused the said decision of .....

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ny other person, then the settlement in favour of the declarant has to be deemed to be full and final in respect of other persons on whom show cause notices had been issued. It is settled law that when an appeal is pending there is no finality to the proceedings. The proceedings are then deemed to be continuing. Undoubtedly, at one place the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order seems does state that the show cause notice should be pending adjudication. However, the same orde .....

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in respect of the same matter. Thus read as a whole the words pending adjudication cannot be read to exclude cases where the proceedings are still pending in appeal. Even otherwise the order has to be read along with the Kar Vivad Samadhan Scheme. Under the Kar Vivad Samadhan Scheme a party can file a declaration so long as the proceedings are pending. Thus, even though the show cause notice may have been adjudicated upon and an appeal is pending a party could still take the benefit of the Kar .....

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avoided. An interpretation, as suggested by Mr. Ganesh, would also be against the object of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order. It is therefore not possible to accept the submissions of Mr. Ganesh. In our view the reasoning given by the High Court of Kerala is correct and needs to be upheld. It is apparent that the KVSS scheme and the order issued by the Government clearly provided for settlement by the main declarant to operate as full and final settlement in respect .....

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nd collection of customs duty. 34. First of all, the reliance placed by the Tribunal in S.K. Colombowala (supra) on the decision of the Hon ble Supreme Court in Onkar S. Kanwar (supra) is not appropriate as the issue dealt with is different in scope and application. The same is very clear from the findings of the Hon ble Supreme Court reproduced above. Even otherwise, the term co-noticee cannot be interpreted in such a manner that all the persons, who received same show cause notice in a co .....

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, it does not mean that simply because of that various other assessees involved in the same investigation proceedings and issued with said notices will automatically get immunity. In this context, the term co-noticee has to be examined for the legal implications - are they party to the same single offending act or they are party to distinct offending acts, which can be penalized independently without even reference to the other person s role. Examined in this angle, it is apparent that no summar .....

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It is necessary to examine the role of each of the noticees to appreciate whether they had committed an act, which, independently, is liable for penal action. If their act is directly linked to the main offence as part and parcel of the same offence or they are involved only in abetting the main offence, then they may be covered for immunity based on the ratio followed in S.K. Colombowala (supra). However, on examination, if it is found that any of the co-noticees, who did not approach the Sett .....

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irrespective of the main noticee, who availed irregular Cenvat credit, getting immunity from Settlement Commission, the appellants herein cannot automatically get their penalty set aside on that ground alone. The merits of the case against the appellants are to be examined separately. 35. Section 32E of the Central Excise Act, 1944 deals with application for settlement of cases before the Settlement Commission. Section 31(c) defines the scope of term case which means any proceedings under t .....

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oticee in the present case, a case against the appellant will stand on its own, based on the allegations made. The merit of the allegations are to be decided in these appeals. To say that all the allegations against various parties in a single notice will abate once the main party gets matter settled, is not applicable in cases where there are distinct violations alleged for different noticees, though the investigation may be common. A reference can be made to the decision of the Hon ble Supreme .....

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roperty-grabbers, tax-evaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the court-process a convenient lever to retain the illegal gains indefinitely. We have no hesitation to say that a person, whose case is based on falsehood, has no right to approach the court. He can be summarily thrown out at any stage of the litigation. 36. The Hon ble Bombay High Court in Yogesh Korani - 2003 (159) E.L.T. 3 (Bombay), as affirmed by the Hon ble Supreme Court reporte .....

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