TMI Blog2019 (7) TMI 904X X X X Extracts X X X X X X X X Extracts X X X X ..... r declaration, therefore as per the provisions of Rule 9 of the PMPM Rules, 2008 the rate of duty applicable to goods of Highest RSP, ₹ 3 in this case will be applicable in respect of all packing machines operated by the Appellant and they are liable to pay duty as per said RSP on all machines. Personal penalty imposed upon the Appellant Shri Dilipkumar Amrutlal Jani, director of the Appellant Unit and Shri Jagdishprasad Mohanlal Joshi and Shri Sachin Joshi - HELD THAT:- The impugned goods were manufactured in violation of Rule 6 of PMPM Rules, 2008 and since Shri Dilipkumar Amrutlal Jani being involved in violation of subject rules being director of the unit is liable for penalty. However considering the amount of duty and imposition of penalty on the company, we are of the view that personal penalty imposed upon Shri Jani is on higher side, which requires reduction - penalty imposed upon Shri Dilipkumar Amritlal Jani is reduced from ₹ 5,00,00,000/- to ₹ 4,00,00,000/-. Penalty on Shri Jagdish M Joshi and Shri Sachin Joshi - Applicability of section 270 - HELD THAT:- No involvement of above persons is on record. We do not find any act committed by both Appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 1.5/-. 2 First Floor 3 PMPM manufacturing Gutkha pouches having MRP of ₹ 1/- each. 3 Second Floor 5 PMPM manufacturing Gutkha pouches having MRP of ₹ 2.5/-. 19 PMPM manufacturing Gutkha pouches having MRP of ₹ 1/-. TOTAL MACHINES OF VARIOUS MRPs 37 Pan Masala Packing Machines of MRP of Re. 1/- 17 Pan Masala Packing Machines of MRP of Re. 1.5/- 5 Pan Masala Packing Machines of MRP of Re. 2.5/- 3 Pan Masala Packing Machines of MRP of Re. 3/- TOTAL MACHINES IN THE FACTORY 62 Pan Masala Packing Machines However during surprise check it was found that in case of machines installed on ground floor the machines were manufacturing pouches as under: TABLE- B Machine Sr.No. As per declaration filed under Rule-6 of PMPM Rules, 2008, declared MRP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Re. 1/ ₹ 1.5/- (Brand GOA 1000) - 9 Re. 1/ Re. 1/- Gutkha Pouches having MRP of ₹ 1.5/- lying in front of the machine 10 Re. 1/ Re. 1/- of sealed pack roll Gutkha Pouches having MRP of ₹ 1.5/- lying in front of the machine 11 Re. 1/ Re. 1/- Gutkha Pouches having MRP of ₹ 1.5/- lying in front of the machine 12 Re. 1/ ₹ 1.5/- (Brand GOA 1000) - 13 Re. 1/ Re. 1.5/- of sealed pack roll (Brand GOA 1000) - 14 Re. 1/ Re. 1/- of sealed pack roll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - 27 Re.1/- Re.1/- - 28 Re.1/- Re.1/- - 29 Re.1/- Re.1/- - 30 Re.1/- Re.1/- - 31 Re.1/- Re.1/-(Branch GOA 1000) - 32 Re.1/- Re.1/-(Branch GOA 1000) - 33 Re.1/- Re.1/- - 34 Re.1/- Re.1/-(Branch GOA 1000) - 35 Re.1/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ogo of the JMJ Group till August/ September‟2011 and website of JMJ Group was showing unit as part of group. They even had registered office at Mumbai which is corporate office of JMJ Group. The shareholding of M/s SMFPPL was in hands of Shri J.M. Joshi. The directors of the company on record are only for namesake and did not hold any shares and did not have any control on company. The shares were held by Shri J.M. Joshi, his wife and his HUF and entire shares were sold by them on 19.04.2011 to nine different persons. This act of selling shares was necessitated by the DGCEI booking offence case against M/s SMFPPL and the same appears to be keep away himself completely from activities of Appellant Unit and thereby to conceal his actual involvement in the clandestine activities of Appellant unit and to escape the penal actions that may be initiated against him by the department. That in term of section 277 and 270 of the Companies Act, the existing directors are not qualified to be director as they do not hold any shares. That the Appellant unit with malafide intention knowingly mis declared the fact of manufacturing of Gutkha of different MRP using various Pan Masala Machines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attracted on higher MRP only when goods of higher MRP are manufactured in the factory. In the present case the highest MRP Goods i.e. ₹ 3 MRP were not manufactured for whole month but only for a day. The Higher MRP goods of ₹ 1.5/- value were being manufactured and that too due to mistake on the part of the labour that they loaded roll of ₹ 1.5/- pouch. He submits that the duty can be demanded only of ₹ 1.5/- MRP. He also submits that for the above reason no penalty can be imposed upon Shri Dilipkumar Amrutlal Jani. 4. Shri Makrand Joshi, ld. Counsel appearing for Shri Jagdishprasad Mohanlal Joshi and Shri Sachin Joshi submits that the duty demand under rule 9 of PMPM Rules is on presumptive basis . The duty has been demanded without any investigation or allegation of or finding of actual manufacture and removal of goods. Penalty under Rule 26 is not sustainable in absence of any investigation or transaction and involvement of the Appellant in any such clandestine manufacture and removal of goods. The adjudicating authority has held that in terms of section 266 and 270 all the directors existing during April‟2011 are not qualified to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in Andaman Timber Industries Vs CCE, Kolkata ( 2015 (324) ELT 641 (SC). Shri J.M. Joshi was not a director of SMFPPL since year 2000 and that he had sold all his shares even before the investigation in the instant case had begun. None of the witnesses has made any statement to the effect that the Appellants were aware of or involved in the alleged clandestine removal by SMFPPL. Therefore, penalty under Rule 26 cannot be imposed on the Appellants. The statements of witnesses cannot be relied upon unless they are corroborated with cogent evidence whereas there is no iota of corroborative evidence to support statements of witnesses and hence statements cannot be relied upon. Mere observation that Appellants had overall control or played a role in clandestine removal would not support imposition of penalty under Rule 26. The Order must disclose connection between the transactions and directors / appellants so as to impose penalty under Rule 26. In absence of any finding or evidence showing connection between the transaction and the directors/ appellants, penalty under Rule 26 cannot be imposed. Unless there is a finding that role was played by the Appellants in acquiring p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the time of the visit of the officers, the affairs of the unit was being found to be managed by Shri Dilipkumar Amrutlal Jani as stated by Production Supervisor Shri Pradeep G Sharma, Labour Supervisor, Shri Narpatsingh Kishorsingh Khichi and Shri Pappuram Mangaram and Authorised signatory Shri Balraj Chamansingh Maurya. Shri Dilipkumar Amrutlal Jani in his statement dt. 25.04.2011 also agreed with the facts of panchnama dated 21/22.04.2011 and also agreed with the verification of machines. He also accepted filing declaration and was aware of the law that the Guthka‟ is notified goods and manufactured in Appellant‟s Unit. In such case we find that the director Shri Dilipkumar Amrutlal Jani being managing the affairs of the unit was responsible for violation of Rule 6 of PMPM Rules, 2008. The impugned goods were manufactured in violation of Rule 6 of PMPM Rules, 2008 and since Shri Dilipkumar Amrutlal Jani being involved in violation of subject rules being director of the unit is liable for penalty. However considering the amount of duty and imposition of penalty on the company, we are of the view that personal penalty imposed upon Shri Jani is on higher side, which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant and he was not even shareholder. Even if assumed to be that he was holding shares, then too without any evidence it cannot be said that any of the Appellant was involved in violation of any law. The adjudicating authority has relied upon section 266 of the Companies Act, to hold that a person cannot become director if he does not hold any shares. However we find that the Sub - Section (1) is applicable only where the company is filing a prospectus of an intending company. It is not applicable in case of an existing company. Further sub section 5 of section 266 clearly states that the section shall not apply to a private company. In the present case the Appellant unit is a private ltd company and hence section 266 is not applicable to the present case. Therefore the contention of adjudicating authority is incorrect. 10. As regard applicability of section 270, it is submitted that said section is applicable to the person named in Articles of Association as director. It is not applicable to appointment of subsequent directors or nominated directors. Pertinently the Articles of Association of the appellant company permits a person to be director even if he is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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