TMI Blog2018 (2) TMI 1022X X X X Extracts X X X X X X X X Extracts X X X X ..... N was only issued to APPD and not to VSF and ALBW - penalty - principles of natural justice. Held that: - It has been a long received rule that no one is to be condemned, punished or deprived in any judicial proceeding unless, he has had an opportunity of being heard - This is the essence of the maxim Audi Alteram Partem, namely no man should be condemned unheard. The maxim, being a cardinal principle of justice, is required to be followed in all judicial proceedings - The Central Excise Act, 1944 also similarly requires that where recovery of duties not levied or not paid or short levied or short paid etc. is proposed to be recovered from any person the Central Excise officer shall serve notice on such person, inter alia requiring him to show cause why he should not pay the amount specified in the notice. In the two show cause notices dt. 08.11.2012 08.01.2013 and in the statement of demand dt. 30.12.2013 the proposals for imposition of penalties under Rule 25 / Rule 26 (1) of the Rules have been made against VSF, ALBW and also Managing Partners and Partners of VSF and ALBW. All these persons should have been separately asked to show cause in the notice why proposed penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machineries were found installed therein namely (a) Jamauna make peeling machine (b) Jamauna make cutting machine (c) Portable like cutting machine and (d) table cutting machine. Core stock of 80,000 sq.fts. was also found. It further appeared that the records of all the three units were kept at one place. Pursuant to investigations, the department took the view that although three units in the names of APPD, VSF, ALBW were apparently engaged in manufacture of Plywood and Block Boards, in reality only one unit APPD was manufacturing the said products and that the other two units were dummy units. Accordingly two Show Cause Notices dt. 08.11.2012 and 08.01.2013, and a Statement of Demand dated 30-12-2013 were issued to APPD proposing duty liability with interest thereon along with imposition of penalties in Section 11AC of the Central Excise Act, 1944 and under Rule 25 of the Central Excise Rules, 2002, the details of which are tabulated below : S. No. SCN No. Date Period involved Duty involved (Rs.) 1. 40/2012-Commissioner dt. 08.11.2012 April 2007 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on APPD. In addition, following penalties were also imposed : S. No. Name of person Penalty imposed (Rs.) 1. The Veera Silver Frames (VSF) 75,00,000/- 2. Ambigai Lumber Board Works (ALBW) 25,00,000/- 3. G. Madhan Kumar, Managing Partner of APPD 75,00,000/- 4. V. Sivaa Kumar, Managing Partner of APPD 75,00,000 5. Shri G. Vinoth Kumar, Partner of APPD 25,00,000 6. V. Veeraraghavan, Partner of APPD 25,00,000 7. G. Chendil Kumar, Partner of APPD 25,00,000 8. V. Veera Rajendran, Managing Partner of VSF 25,00,000 9. G.Kasthuri, Partner of VSF 15,00,000 10. V. Anitha, Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tri.-Che.) where Tribunal held that where the alleged dummy units having not been put to notice on the point of clubbing of clearance with reasons, the proceedings are liable to be set aside on this sole ground itself. The ld. Advocate submits that accordingly all the three SCNs get vitiated and the impugned order in adjudication will also get vitiated. 4.6 Ld. Advocate also contends that even as per the Supplementary Manual of Instructions for Central Excise, issued by CBEC, in Chapter 13, Part-I, it has been clearly laid down that before any action is taken against an assessee/party, he must be given reasonable opportunity of presenting his case. It is also advised therein that it is mandatory that a show cause notice is issued if the department contemplates any action prejudicial to the assessee. Thus, if on account of an infraction of the provisions of the Central Excise law it is considered appropriate to penalize the defaulter, it is necessary to first issue a show cause notice. The show cause notice would necessarily detail the provisions of law allegedly violated and ask the noticee to show cause why such penalty should not be imposed on him under the relevant provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst him, unless, indeed, the legislature has expressly or impliedly given an authority to act without that necessary preliminary . (Bonaker v. Evans, 16 QB 162 (171). The laws of God and man, said Fortescue, J., in Dr. Bentley's case, both gave the party an opportunity to make his defence, if he has any. And immemorial custom cannot avail in contravention of this principle. (Williams v. Ld. Bagot, 3 B C 772) . In conformity also with the elementary principle under consideration, when a complaint has been made or an information exhibited before a justice of the peace, the accused person has due notice given him, by summons or otherwise, of the accusation against him, in order that he may have an opportunity of answering it. (Bessel v. Wilson, 1 E B 489). This maxim being a cardinal principle of justice has been refined and adapted to govern the proceedings of bodies other than judicial tribunals; and a duty to act judicially in conformity with the rule has been imposed by the common law on administrative bodies not required by statute or contract to conduct themselves in a manner analogues to a court. Moreover, even in the absence of any charge, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, instead of this being done APPD have been asked to show cause why penalty should not be imposed not only on them but also on the other aforesaid persons. Surely, APPD cannot answer for VSF, ALBW or for that matter, their Managing Partners and other partners of those firms. They are different persons in law and each of them are legally entitled to be issued with notice and be given a chance to show cause why the action proposed in such notice should not be taken against them. 7.6 On the sanctity of legal maxim Audi Alteram Partem, the Hon'ble Supreme Court in the case of Nowabkhan Abbaskhan v. State of Gujarat, AIR 1974 SC 1471 (1480) held as under : An order which infringes a fundamental freedom passed in violation of the audi alteram partem rule is a nullity. 7.7 The Tribunal, in the case of Expo Combines Vs CC Bombay 1995 (75) ELT 513 (Tribunal), which case law has also been relied upon by the Ld. Advocate for the appellant, has held that non-issue of SCNs is not regardable as a SCN. The relevant portion of the order is reproduced as under : 11. We have considered the submissions and perused the records. On the issue of trafficking of license we find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... From the above, it is now clear that law laid down by the Hon ble Apex Court is that other respondents should also be issued with the SCN, the breach of which would result in the proceedings being dismissed. A further civil appeal No.7964-65/1995 filed by the department was dismissed by the Hon ble Supreme Court as reported in Collector Vs Expo Combines - 2002 (145) ELT A58 (SC). While dismissing the appeal, the Supreme Court passed the following order : We have heard learned Counsel for the appellant. We find no reason to interfere with the order of the Tribunal. The appeals are dismissed. No order as to costs. 7.8 The ratio laid down in Expo Combines (supra) was followed by the Tribunal in the case of Ashok Kumar Motilal Shah Vs CCE Vadodara - 2000 (124) ELT 237 (Tribunal). The Tribunal held therein that when SCN was not served on the person but only a copy thereof endorsed to him, the proceedings were bad in law and could not sustain. 7.9 The Tribunal in the case of Kesat Chemicals Pvt. Ltd. Vs CCE Pune - 2006 (202) ELT 666 (Tri.-Mumbai), following the ratio laid down in the case of Expo Combines, inter alia held that the SCN therein did not contain any alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai Vs Sapna Engineering - 2017 (350) ELT 506 (Bom.) held that non-issue of SCN to the unit considered as a dummy unit vitiates the entire proceedings. The relevant portion of the above High Court's order is reproduced as under : 14. The Tribunal held that the Central Excise duty being what it is, namely, a duty on manufacture, and once the Commissioner concluded that the goods were manufactured and cleared through a fictitious unit which was very much capable of carrying on business and indeed carried on business, then, it should have been independently proceeded against by issuing a notice and calling for its explanation. Then that would proceed on the footing that it manufactured excisable goods. It manufactured excisable goods and yet it allowed the goods to be cleared as belonging to some other unit by permitting the usage of its own premises and that violates the law. That is how the Commissioner should have proceeded once he found that M/s. Neha Refrigeration is not a fictitious unit. Once M/s. Neha Refrigeration did not have the opportunity to establish the genuineness of the contents of the documents, then, all other findings of the Commissioner are vitiated. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in this case, we, therefore, dispose of this appeal. 7.14 The Hon'ble High Court of Gujarat in the case of Premier Heavy Engineering Corpn. Vs CCE 2016 (337) ELT 332 (Guj.) held that when SCN was issued only against the original noticee company and there was neither any proposal against to so-called dummy unit of original noticee, the requirements of hearing the so-called alleged dummy unit cannot be done away with. The Hon'ble High Court also held that the Tribunal was in error in expanding the scope of the appeal and ordering service of copy of SCN subsequently to the alleged dummy unit. The relevant portion of the aforesaid judgment is extracted below : 3.2 The Excise Department had issued show cause notice dated 29-2-2000 to one Foundry Agriculture Mining Equipment Pvt. Ltd. (hereinafter to be referred as the noticee). In such notice, the Department alleged that there was intelligence received by the Excise Department that the appellant-company is a dummy unit of the noticee and no manufacturing facilities are available at the site of the appellant-company. Upon visit by the officers of the Excise Department at the site of the appellant-company, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany would arise. It is this order that the appellant-company has challenged in this appeal. 4. Learned Counsel Shri Gupta for the appellant submitted that the Tribunal committed a grave error in expanding the scope of the appeal. The Department never served copy of the show cause notice to the appellant-company. There was no proposal under the show cause notice of any tax or penalty against the appellant. The Tribunal could not have expanded the scope of the show cause notice by including the appellant-company within the sweep of such proceedings. 5. On the other hand, learned Counsel Shri Varun Patel for the Department submitted that the appellant-company and the noticee were one and the same entities and the appellant-company is dummy of the noticee company. It was therefore, not necessary to hear the appellant separately before taking final decision of appropriation of the duty amount. 6. As can be seen from the record, the question relates to the appellant-company being dummy of the noticee company. It is not even the case of the Department that before declaring the appellant-company as a dummy, hearing was necessary. Merely because the notice was issued on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to that unit without calling upon them to show cause as to why their clearances should not be clubbed with the clearances of the principal unit, vitiates the entire proceedings; that even no duty is proposed to be confirmed against that dummy unit its status is proposed to be disturbed from an independent unit to a dummy unit which cannot be done without giving a notice to alleged dummy unit and without including that in the proceedings. The relevant portions of the decision are reproduced as under :- 17. The appellants have strongly argued that the entire proceedings are vitiated inasmuch as no show cause notice was issued to M/s. Reliable Corpn. whose clearances were proposed to be clubbed with the appellantsclearances by holding the same as dummy unit. For the above proposition reliance has been placed upon the following decisions of the Tribunal holding that non-issuance of a show cause notice to all the units whose clearances are proposed to be clubbed vitiates the proceedings. 1. Dawn Fire Works Factory Ors. v. CCE, Madurai - 1999 (31) RLT 104 2. Ramsay Pharma Pvt. Ltd. v. CCE - 2001 (127) E.L.T. 789 (T) = 2000 (41) RLT 713 3. SKN Gas Appliances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lot of force in the above arguments of the ld. Advocate No doubt, no duty is proposed to be confirmed against M/s. Reliable Corpn., but it is the status of the said unit which is proposed to be disturbed by the Revenue from an independent unit to a dummy unit which, in my views, cannot be done without giving a notice to M/s. Reliable Corpn. and without including them in the proceedings. Now the question arises as to whether marking of the copy of the show cause notice to M/s. Reliable Corpn. amounts to issuance of a proper notice to them or not. The answer to the above question lies in the ratio of the various decisions relied upon by the ld. Advocate and mentioned supra. The common ratio of all these decisions is that a mere marking of the show cause notice to the proposed dummy unit without specifically calling upon the same to show cause against the proposed action cannot be held to be sufficient compliance with principles of natural justice and the proceedings arising out of the same are required to be set aside. Learned Member (Technical) has observed that M/s. RC having participated in the proceedings and having filed a reply to the show cause notice, are estopped from taking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the paragraphs 21 22 of the order and I agree with the said findings. MAJORITY ORDER In the light of the majority view, it is held that the clearance of M/s. Reliable Corporation are not to be clubbed with the clearances of M/s. Poly Resins. Longer period of limitation also cannot be invoked in this case for demand of duty. As regards question of clubbing of clearances of M/s. PR with the clearances of M/s. Abbas and Co., in the matter is remanded to the Commissioner for decision. Penalties imposed are also set aside. 7.16 The decision of Poly Resins (supra) was relied upon by Tribunal in subsequent decision in the case of CCE Vs Copier Force India Ltd. Vs CCE Chennai 2008 (231) ELT 224 (Tri.-Chennai), vide the following relevant portion : The Revenues case is that, on 29-1-2003, following simultaneous searches at the premises of M/s. Copier Force India Ltd., No. 283, Anna Salai, Chennai, (CFI), their godowns and the residential premises of the Managing Director Shri K.A. Shabu, the officers recovered several incriminating documents, three CPUs and seized 94 pieces of fully assembled photocopiers. Scrutiny of the documents revealed that CFI had impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the entire sale proceeds by issuing self cheques and all the accounts were closed by S/Shri Raghavan and Velayudam who had received authorization from the dummy account holders. The accounts were in the names of S/Shri Mujib Rahim, M.A. Nishad and P.D. Jobin. Photocopiers were despatched under dummy bills or were described as Gears. Buyers confirmed receiving photocopiers under bills showing Gears. They confirmed negotiating with Shri K.A. Sabhu and that the value declared was only one per cent of the actual value. Most buyers on seeing the printouts confirmed the transactions including the quantum and value. Shri S. Krishnakumar explained the manner of accountal of transactions though he retracted them during cross-examination conducted after a long time of recording statement. He had deposed that he used to instruct Ms. Radha and Ms. Rathi to enter data relating to transactions in the CFI computer. From the involvement of employees of CFI in the transactions recorded in the CPU of CFI and the treatment of sub-assemblies and photocopiers in the records of CFI, the Commissioner concluded that all the transactions were on behalf of CFI. CFI had manufactured a new product different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below : 6. As regards the cross objections filed by the respondents, we find that the original authority had recorded in his order that notices were issued to partners of A.G. Company only for the purpose of asking them to explain why penalties should not be imposed on them under Rule 209A. We find that in view of the ratio of various judicial authorities, for instance, Ramsay Pharma (P) Ltd. v. CCE, Allahabad [2001 (127) E.L.T. 789 (Tri-Del.)] and Poly Resins v. CCE, Chennai [2003 (161) E.L.T. 1136 (Tri.-Chen.)] non issuance of Show Cause Notice to the dummy unit vitiated the entire proceedings. The lower authorities had found A.G. Company as a dummy. A.G. Company or its partners were not issued Show Cause Notice to explain as to why clearances attributed to it should not be clubbed with those of SGRM. The original authority had categorically recorded that no such notice was issued to A.G. Company. In the circumstances, we find that the demand of ₹ 3,229/- from SGRM, imposition of penalties on SGRM and Sri N. Manikandan to be not sustainable. In the result, cross objections filed by the respondents deserve to be allowed. 7.18 In a even more recent decision, this v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and there was no notice to the two units for clubbing clearance with the clearance of the importer. In such circumstances, in our opinion, the Tribunal was quite justified in holding that demand by clubbing the clearance of other units without issuing any show cause notice was not sustainable. 7.20 With regard to the reliance of the Ld. A.R on the Hon'ble Apex Court's judgment in the case of CCE Calcutta Vs Pradyumna Steel Ltd. - 1996 (82) ELT 441 (SC), we find that issue there concerned mere mention of wrong provision of law in the SCN whereas the issue that has been agitated before us is that no SCNs at all have been issued to the appellant, but penalties imposed on them and that no SCNs have been issued also to the alleged dummy units . The Tribunal decision in Box Carton India Pvt. Ltd. Vs CCE Delhi 2008 (228) ELT 85 (Tri.-Del.) will also not help the case of the Revenue since from our reading, the only discrepancy brought up by the appellant therein was that the SCN had failed to identify as to who is the main manufacturer and who is the dummy unit. 7.21 The Ld.AR has made another forceful argument that though in the Show Cause Notice the dummy units were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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