TMI Blog2017 (2) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/- 2. Ms. Mamta Garg Rs. 47,80,983/- 3. Shri Naveen Agarwal Rs. 13,33,321/- 4. Ms. Aruna Agarwal Rs. 2,09,760/- 2. Briefly discussed the facts of the case are that one M/s. Minda HUF Ltd. (herein referred to as HUF) was engaged in the manufacture of automobile locksets and was availing the benefit of Cenvat credit of duty paid on various inputs and capital goods. Inquiries were conducted and it was found that some of the firms, including the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 on the co-noticee was set aside. The said order was differed by learned Member Technical who was of the view that since the Supreme Court decision in the case of Onkar S. Kanwar was in respect of Kar Vivad Samadhan Scheme, the same would not be applicable to settlement of dispute before the Settlement Commission. The third Member, resolved the said difference of opinion by observing as under :- 26. The points of difference are therefore, are answered as under : - (a) While the provisions of 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 cannot be adjudicated qua other co-noticees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, who are only charged with colliding and abeting the main appellant, 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 followed. Hon ble Bombay High Court in the case of Tejus Proprietary Concern of Tejus Rohitkumar Kapadia v. Union of India reported at 2012 (275) E.L.T. 175 (Bom.) has observed that Tribunal is duty bound to follow the binding precedent and further observed that the CESTAT as a judicial body, must realize the importance of doctrine of precedent as in our legal system. Deference to judgements of the Supreme Court is a matter of constitutional principle. Equally unless Coordinate Benches of the Tribunal have due deference and regard for decisions rendered by the Tribunal, the elements of certainty and consistency in the judicial proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e reproduced for easy reference Para 2 . Briefly discussed the facts of the case are that one M/s. Minda HUF Ltd. (herein referred to as HUF) was engaged in the manufacture of automobile locksets and was availing the benefit of Cenvat credit of duty paid on various inputs and capital goods. Inquiries were conducted and it was found that the some of the firms, including the present applicants, were not having the facility 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-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 were granted full immunity from fine, penalty and prosecution. Para 3 . The present appellants during the course of adjudication, pleaded before the Commissioner that inasmuch main appellant has not been imposed w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Saoar Welding Electrodes, Modinagar s partner Shri N.P. Gupta admitted that he never supplied any goods of MHL with the invoices. 15. Transport enquiry showed that there was no transportation of goods in vehicles shown to be used for the same. The vehicles were either non-existent or not capable of transporting the goods shown to have been dispatched by the supplier. That leads to the conclusion that the Noticee no. 5 to Noticee no. 20 were indulging in passing of the Cenvat credit issuing 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not. Thus this Court accepted the principle that the Immunity could not cover certain other offences than those covered in direct and indirect tax enactments. The Court also accepted that the immunity could not be granted to any other person automatically merely it was granted 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. Mr. Vellapally, on the other hand, submitted that only one show cause notice had been issued. He submitted that in the same show cause notice the Company was called upon to show cause why excise duty and penalty be not levied and the Directors/Officers were also called upon to show cause why penalty be not levied on them. He submitted that Section 91 of the Kar Vivad Samadhan Scheme makes it clear that on payment bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 another person s case. Any proposition to the contrary not only results in substantial prejudice to public interest but is offensive to several well established principles of law. It also leads to grave public mischief. Section 72 of the Contract Act, or for that matter Section 17(1)(c) of the Limitation Act, 1962, has no application to such a claim for refund . [Emphasis 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 levied as the appellant was concerned in selling or dealing with the goods which were liable to confiscation inasmuch as the appellant claimed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Member (Judicial) and hold that immunity cannot be extended to appellants who were not before Settlement Commission. 23. Once I have arrived at the findings that immunity cannot be extended to the four appellants namely Ms. Mamta Garg, M/s. Mukesh Garg, Shri Naveen Agarwal and Ms. Aruna Agarwal. It is also necessary to crystalise their role in perpetuating fraud of fraudulent passing of illegal credit on the strength of fake invoices. In this regard I have perused detailed and in depth findings 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not available with them. No manufacturing facility was noticed at M/s. Meerut Steels, Ghaziabad and at M/s. Vas Techno Engineers, Ghaziabad. Further, M/s. Sagar Welding Electrode, Modinagar were found engaged in the manufacture of wire drawn out of wire rod. In this context, I would like to mention statement of Shri Deeraj Singh dated 27-10-2006 and 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 with the department. I find that the most of the above said firms were issuing central excise invoices without obtaining proper registration from the central Excise department as mentioned in first part of notice. Instead, they used fake registration number in the Cenvatable invoices. Para 17.6 Non-receipt of the goods at the premises of MHL I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 invoices issued by M/s. SRG Machines at MHL, is clear from the statement of various key officials of MHL, bank enquiries, transport enquiries. (ii) M/s. Ajanta Enterprises, Near Vishal Dharmkanta Modinagar : (Owner - Shri Mukesh Garg ) The units found located in the given address was engaged in the manufacture of steel wire [by using wire rod mostly received from SAIL]. Shri Mukesh Garg, proprietor of the unit stated that this firm is engaged in manufacture of steel wire, wire products and fabrication 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). ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 338.25 lac. To my firm view, the act of the petitioner may be termed as Royal Thievery which is opposed to both democracy and society order. Evading excise duty or tax which is required to be paid by the industrialists or businessmen, 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 economy in the State which may pose a serious threat to the nation. In the present state of affairs, the economic offences are undoubtedly more grave in nature than those offences which are otherwise said to be grave. 25. As regards to imposition of penalty which is quasi criminal in nature considering the tax fraud engineered by the appellants they are no less than evaders causing serious threat to economy and also enriched at the cost of revenue, no imposition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 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. 28. The Original Authority proceeded to adjudicate the case in respect of 16 other noticees, who are not party to the settlement. He imposed penalties on each one of them in terms of Rule 26 of Central Excise Rules 2001/2002 read with Rule 13/Rule 15 of Cenvat Credit Rules 2002/2004. The four appellants involved in the present appeals were imposed with penalties as above on the ground that the evidences brought out during the investigation had established that the appellants either did not 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 imposed on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Director approached the Settlement Commission and got immunity from penalty and 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 the Hon ble Supreme Court, para-14 of which clearly shows that the Hon ble Supreme Court was specifically dealing with KVSS Scheme read with 8-12-1998 order of the Government and clarificatory note dated 16-12-1998 :- 14. We have heard the parties. In our view, a reading of the Kar Vivad Samadhan Scheme (Removal of Difficulties) Order shows that where a declaration had been made in respect of a tax arrear and where in respect of the same matter a show cause notice had also been issued to any other person, then the settlement in favour of the declarant has to be deemed to be full and final in respect of othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... persons, on whom show cause notice was issued in respect of the same matter. Reliance on the said decision of the Hon ble Supreme Court to hold that the settlement of case by the main noticee before the Settlement Commission in terms of Section 127 (J) of Customs Act, 1962 will conclude that the proceeding against all co-noticees is not legally sustainable. The Tribunal emphasised that the expression case refers to any proceedings under Customs Act or any other Act for assessment and 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 combined investigation, will automatically deemed to have been involved in one single case only. Such inference will be factually incorrect in many cases. It is not in-frequent that the investigations are conducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, 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 this Act or any other Act for the levy, assessment and collection of excise duty pending before an Adjudicating Authority on the date, on which application under sub-Section (1) of Section 32E is made. As already noted, that the proceedings against the appellants are for imposing penalties for various contraventions of the provisions of Central Excise Law. It is not for assessment of duty payable by them. In other words, without there being a case of any short payment or non-payment by the main noticee 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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