TMI Blog2020 (3) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... ier, as a main applicant or a co-applicant because he is not the main applicant. In the present case, M/s. Royal Touch Fablon Private Limited (Unit-1), the Co-applicant No. 1, has been proposed penalty in the SCN. This SCN was issued to M/s. Royal Touch Fablon Private Limited (Unit-IV). The case of M/s. Royal Touch Fablon Private Limited (Unit-IV) has already been settled by the Commission where he has applied as main applicant. Here, the co-applicant, M/s. Royal Touch Fablon Private Limited (Unit-I), has approached the Settlement Commission under Section 32E(5) to decide the issue of imposition of penalty. He has been penalised earlier in a case relating to him where he was an assessee and the main applicant. Since he is not the main applicant in the present case, he will not be debarred from approaching the Settlement Commission. Had he been the main applicant in this case to whom a duty demand has been issued in the form of a SCN, he would have been barred from approaching the Commission as he was penalised earlier in the settlement of another case relating to him where a SCN was issued to him demanding duty - the Commission is of the opinion that M/s. Royal Touch Fablon P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Central Excise Intelligence (HQ), New Delhi [(now Directorate General of GST Intelligence) (DGGI/Department in short)], New Delhi. 2. Earlier, in respect of the dispute arising out of the show cause notice issued under F. No. 574/CE/63/2015/Inv./21347, dated 22-12-2015, the main applicant M/s. Royal Touch Fablon Pvt. Ltd. (Unit-IV), filed Settlement Application No. 1135/2017, (hereinafter referred to as applicant ) under Section 32E of the Central Excise Act, 1944 (in short Act ). 3. M/s. Royal Touch Fablon Private Limited is having manufacturing unit as Unit-I i.e. Domestic Tariff Area Unit (hereinafter referred to as DTA Unit ) and Unit-IV i.e. Export Oriented Unit (hereinafter referred to as EOU ) located at Panchghara, Beghumpur, Dankuni Expressway, Distt. Hooghly, Pin-712306, and are engaged in the manufacture of HDPE/PP Woven Sacks, Jumbo Bags, Laminated Woven Fabrics, Polythene Sheets, Polythene Liners, etc. falling under Chapter 39 of First Schedule to the Central Excise Tariff Act, 1985. The Registered Office of M/s. Royal Touch Fablon is located at Room No. 202, 4 No. Synagogue Street, 2nd Floor, Kolkata-700 001. 4. On the basis of intelligence collected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DTA unit, along with interests under Section 11AA of the Central Excise Act, 1944. (v) Central Excise duty amounting to ₹ 26,60,000/- paid by the applicant during investigation should not be appropriated towards the demand of Central Excise duty. (vi) Penalty should not be imposed upon them under Section 11AC read with Rule 25 of the Central Excise Rules, 2002 and under Section 114A read with Section 112 of the Customs Act, 1962. (B) The co-applicant 1 was called upon to show cause to the Joint/Additional Commissioner of Central Excise, Kolkata-IV Commissionerate, MS Building, Custom House, 15/1, Strand Road, Kolkata-700001 as to why penalty should not be imposed upon them under Rule 26 of the Central Excise Rules, 2002 read with Section 112 of the Customs Act, 1962 for their contravention; and (C) The co-applicant 2, co-applicant 3 and co-applicant 4 were called upon to show cause to the Joint/Additional Commissioner of Central Excise, Kolkata-IV Commissionerate, MS Building, Custom House, 15/1, Strand Road, Kolkata-700001 as to why penalty should not be imposed upon them under Rule 26 of the Central Excise Rules, 2002 read with Section 112 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,000/- vide Final Order No. 180/CE/07-SC(KB), dated 25-7-2007. 9. Co-applicant 1 vide their reply dated 4-1-2019 (also reiterated in their reply on 15-5-2019) inter alia submitted that in terms of Section 32-O of the Act, where an order of Settlement provides for the imposition of penalty on the ground of concealment of particulars of duty liability, then such person shall not be entitled to apply for Settlement under Section 32E of the Act in relation to any other matter. They have stated that no penalty has been imposed upon the applicant (co-applicant No. 1 in the present case) for concealment of particulars by the Hon ble Settlement Commission in Final Order No. 180/CE/07-SC(KB), dated 25-7-2007 and therefore the present application of co-applicant 1 has been correctly filed and not hit by the bar as contained in Section 32-O of the Act. 10. Assistant Commissioner, CGST Central Excise, Dankuni Division vide letter dated 24-4-2019 has informed the cases in respect of the co-applicants has not yet been adjudicated. 11. The cases were heard on 9-5-2019. 12. 1st Personal Hearing : 12.1 Shri Niraj Baheti, Senior Associate, C/o, Khaitan Co., Solicitors Advocates, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted (Unit-I) Shri Vikas Kandoi, Director, Shri Raj Kr. Jaisansaria, in-charge of Accounts and Shri Pawan Sharma, Manager, of M/s. Royal Touch Fablon Private Limited. Shri Arvind Baheti submitted that no statements have been taken from Shri Vikas Kandoi, Director, or any other responsible persons from M/s. Royal Touch Fablon Private Limited (Unit-I), which is also evident from the relied upon documents at Annexure-A to the SCN. In a mechanical manner, the SCN has proposed imposition of penalty against all the 4 co-applicants without establishing their involvement in abetment of the offence as alleged. The case against the main noticee has already been settled by the Hon ble Commission and a penalty had also been imposed upon the main noticee. Since no separate offence is involved, Shri Baheti prayed that Hon ble Commission may grant complete immunity from imposition of penalty against the 4 co-applicants. 13.3 The Department was represented by Shri Suhrid R. Sinhababu, Assistant Commissioner and Shri Mihir Kr. Mukhopadhyay, Supdt. of CGST Central Excise, Range-1, Dankuni Division, Howrah Commissionerate. Shri Mukhopadhyay, Supdt., submitted that the Directorate General of GST I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eciding their case. 16. The Commission has observed that co-applicant No. 1, M/s. Royal Touch Fablon Pvt. Ltd. (Unit-1) earlier had applied for settlement of a case of evasion of Central Excise duty arising out of SCN No. DGCEI F. No. 350/KZU/Kol/ Gr. F/05/2674-76, dated 16-4-2007 which was issued to him. His application was settled by the Hon ble Commission, Kolkata Bench, in Final Order No. 180/Central Excise/07-SC(KB), dated 25-7-2007. In the said order, apart from settlement of Central Excise Duty, the Commission had imposed a penalty of ₹ 50,000/- and granted immunity beyond the above-said amount. In response to a query whether such an imposition of penalty to the co-applicant No. 1 would not make them debarred from applying for settlement of a case under Section 32-O of the Central Excise Act, 1944, they have submitted the following in their letter dated 15-5-2019. With respect to Final Order No. F-180/CE/07-SC(KB), dated 25-7-2007, it is most humbly submitted that in terms of Section 32-O of the Central Excise Act, where an order of settlement provides for the imposition of penalty on the ground of concealment of particulars of duty liability, then such person s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt under the said sub- section (7) in relation to a case, such person is convicted of any offence under this Act in relation to that case; or (iii) the case of such person is sent back to the Central Excise Officer having jurisdiction by the Settlement Commission under Section 32L, then, he shall not be entitled to apply for settlement under Section 32E in relation to any other matter. Section 32-O (After 6-8-2014) (Explanation was inserted) ECTION 32-O. Bar on subsequent application for settlement in certain cases. - (1) Where, - (i) an order of settlement provides for the imposition of a penalty on the person who made the application under Section 32E for settlement, on the ground of concealment of particulars of his duty liability; or Explanation. - In this clause, the concealment of particulars of duty liability relates to any such concealment made from the Central Excise Officer. (ii) After the passing of an order of settlement in relation to a case, such person is convicted of any offence under this Act in relation to that case; or (iii) the case of such person is sent back to the Central Excise O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue is concerned, it is to be noted that Mr. Mehta Learned Advocate for the respondents in this appeal had submitted that as the earlier show cause notice was issued prior to the introduction of the Explanation by Finance (No. 2) Act, 2014, the bar under Section 32-O(1)(i) is not applicable. The argument made on behalf of the respondent that Section 32-O(1)(i) cannot be accepted, if one looks at the plain language of Section 32E(1) of the Act. The Explanation in Section 32-O(1)(i) stating that the concealment of particulars of duty liability relates to any such concealment made from the Central Excise Officer is in aid to and evidently in consonance with the opening part of the provisions contained in Section 32E(1) which provides An assessee may, in respect of a case relating to him, make an application, before adjudication, to the Settlement Commission to have the case settled, in such form and in such manner as may be prescribed and containing a full and true disclosure of his duty liability which has not been disclosed before Central Excise Officer having jurisdiction,.... (Emphasis supplied). Therefore, under Section 32E(1) an application for settlement can be filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 32M, is conclusive. That apart, as evident from the records, the respondents had accepted the earlier order passed by the Settlement Commission. It is clear from the order dated 28th March, 2014, particularly paragraphs 8, 24 and 28 thereof, that on the earlier occasion the respondent herein was found guilty for concealment of duty particulars and penalty was imposed which the Learned Judge had overlooked and thus erred in passing the judgment under challenge. 12. So far as the decisions relied on behalf of the respondents are concerned, the judgment in Sedco Forex International Dril. Inc. (supra) has no application as the Explanation in Section 32-O(1)(i) is in consonance with Section 32E(1) as even with its introduction there is no change of the existing law. Since it is an admitted fact that on earlier occasion the respondents were found by the Commission to have concealed particulars of duty liability and orders were passed imposing penalty which the respondents had accepted, the principles of law in Commissioner of Income-Tax, Jalpaiguri v. Om Prakesh Mittal (supra), in Union of India v. Dharamendra Textile Processors (supra), in Light Engineering Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Settlement Commission. In this regard the decision of the Hon ble High Court of Calcutta in case of C.P. Re-Rollers Ltd. Reported in 2015 (322) E.L.T. 824 (Cal.) is relevant. 9. Section 32-O of the said Act permits subsequent applications for settlement being made, provided the assessee has not been penalized previously on the ground of concealment of particulars of his duty liability.... . It is necessary to see the relevant provision without its explanation, which is not necessary for the present purpose : Section 32-O. Bar on subsequent application for settlement in certain cases. - Where (i) An order of settlement passed under sub-section (7) of Section 32F, as it stood immediately before the commencement of Section 122 of the Finance Act, 2007 (22 of 2007) or sub-section (5) of Section 32F, provides for the imposition of a penalty on the person who made the application under Section 32E for settlement, on the ground of concealment of particulars of his duty liability;.... 10. It is absurd to suggest that the expression, concealment of particulars of his duty liability , pertains to the application made before the Settlement Commission. If that we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Excise Officer, after making a true disclosure of his duty liability. 22.1 The case was admitted and settled vide Order No. 180/Central Excise/07-SC(KB), dated 25-7-2007, (2007 order) settling certain amount of duty with imposition of ₹ 50,000/- penalty. Therefore, the penalty imposed has been due to the concealment of duty liability of the co-applicant. The Settlement Order has been accepted by the co-applicant. There is strictly no requirement of writing specifically that the penalty imposed is for concealment of duty particulars as it is always implied. Therefore, even if the 2007 Order of the Commission has not specifically written that it was imposed due to concealment of duty liability, it has been indeed for that purpose only as the co-applicant has approached the Commission admitting concealment of duty liability. In view of the above, the contention advanced by the co-applicant in his Settlement Application and in his letter dated 15-5-2019 is not correct. 23. However, the discussion above does not throw any light on the position of a co-applicant who has been proposed for a penalty in a SCN and sought settlement but was earlier penalised by the Commissi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and includes any producer or manufacturer of excisable goods or a registered person under the rules made under this Act, of a private warehouse in which excisable goods are stored; (b) Bench means a Bench of the Settlement Commission; (c) case means any proceeding 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 an application under sub-section (1) of Section 32E is made : SECTION 32E. Application for settlement of cases . - (1) An assessee may, in respect of a case relating to him, make an application, before adjudication, to the Settlement Commission to have the case settled, in such form and in such manner as may be prescribed and containing a full and true disclosure of his duty liability which has not been disclosed before the Central Excise Officer having jurisdiction, the manner in which such liability has been derived, the additional amount of excise duty accepted to be payable by him and such other particulars as may be prescribed including the particulars of such excisable goods in respect of which he admits short levy on account of misclassif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... follows :- The co-applicant is a person who is other than an assessee. An assessee is a person who is liable to pay duty (Section 31(a) of the [Central] Excise Act, [1944]). An assessee has been issued a SCN demanding certain amount of duty which is pending before the Adjudicating Authority and the assessee can approach the Settlement Commission for the Settlement of the demand in the SCN under Section 32E. In that case, such a proceeding means a case under Section 31(c). In the SCN issued to an assessee, several other persons may be proposed for penalty and such persons can apply to the Settlement Commission as co-applicants in the case since the assessee to whom the SCN is issued is treated as the main applicant. These co-applicants can apply for settlement of their issues mentioned in the SCN issued to the assessee i.e. the main applicant, when the case relating to the assessee has been settled or pending for settlement i.e. along with the main applicant or separately if the case of the main applicant is settled. The co-applicants cannot apply to the Settlement Commission if the case of the main applicant is settled and the issue relating to them in the SCN to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5/Inv./21347, dated 22-12-2015) explains the charges framed against the co-applicants and Paras 12 and 13 of the SCN propose imposition of penalty on the co-applicants. Para 10 of the SCN is reproduced as under : 10. The imported raw material (Polypropylene) and finished excisable goods i.e. PP fabrics and PP woven sacks diverted from EOU into DTA were kept unaccounted in the DTA unit with an intent to evade applicable duties in contravention of provisions of Customs Act, 1962, Central Excise Act, 1944, and Central Excise Rules, 2002, and as such M/s. Royal Touch Fablon Pvt. Ltd., Unit-I (DTA Unit), Panchghara, Beghumpur, Dankuni Expressway, Distt. Hooghly, Pin 712306 appears to have rendered themselves liable for penal action under Rule 26 of the Central Excise Rules, 2002 read with Section 112 of the Customs Act, 1962. 10(1) Shri Vikas Kandoi, Director, M/s. RTFPL appears to be involved in entire modus operandi of shifting the imported raw materials, capital goods and finished goods from the EOU Unit to the DTA Unit of M/s. RTFPL without obtaining permission from the department of Central Excise to de-bond these goods and without payment of applicable duties thereon. Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs against them proposed in the SCN as the SCN demanding duty against the main applicant has been settled with a grant of partial immunity to penalty. The co-applicants have stated that the order of Settlement Commission has been duly complied with by the main applicant and all the payments including the penalty as contained in the Settlement Commission s Order have been paid. 29.1 They have further submitted that penalty proceedings have been proposed under Rule 26 of the Central Excise Rules, 2002, and that the Hon ble Tribunal in a series of decisions has opined that mens rea is an essential ingredient for imposition of penalty under Rule 26 of the Central Excise Rules. Further, the person concerned should have reasons to believe that the goods are liable to confiscation while dealing with such goods and there has been no positive corroborative evidence on record to suggest that the co-applicants have conspired or colluded in any manner so as to warrant imposition of penalty under the said Rule. Further, they have contended that penalty under Rule 26 of the Central Excise Rules, 2002, can be sustained only when there is sufficient evidence as regards the direct or indirect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olvement of the co-applicants in the alleged charges, they are not liable for imposition of penalty under Rule 26 of the Central Excise Rules, 2002, are not correct. 31. M/s. Royal Touch Fablon Pvt. Ltd. (Unit-I) the co-applicant No. 1 has submitted that being a company, they are not natural person and penalty under Rule 26 of the Central Excise Rules, 2002, should not be imposed upon them. While deciding with the contention of the Co-applicant No. 1, the Bench is of the opinion that penalty under Rule 26 can be imposed upon a company being a legal or juristic person . The Bench draws support from the judgment of the Hon ble Supreme Court in the case of Madhumilan Syntex reported in 2007 (210) E.L.T. 484 (S.C.), wherein the Hon ble Supreme Court has held that though company is not natural person and it cannot be ordered to suffer imprisonment, it is legal or juristic person and it can suffer payment of fine etc. This has also been relied upon by the Hon ble CESTAT in Twenty First Century Wire Rods Ltd. case 2010 (250) E.L.T. 94 (Tribunal) who held that penalty under Rule 26 can be imposed on companies . 32. Rule 26 of the Central Excise Rules, 2002, and Section 112 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent. However, the respondent is required to pay duty involved on such shortages which could not be explained and the respondent are liable for general penalty for the said discrepancy. Since no penal provision is invoked in the Show Cause Notice other than Section 11AC, no penalty could be imposed on that count. We agree with the finding of the Ld. Commissioner (Appeals) that in absence of direct or indirect involvement of the Managing Director Shri A.K. Agarwal in the clandestine removal of the goods no personal penalty under Rule 26 of the Central Excise Rules, 2002 is imposable on him. As per the above said decision and going by the contents of Rule 26 of the Central Excise Rules, 2002, and Section 112 of the Customs Act, 1962, it is abundantly clear that a person is liable to penalty under the said rule/section who is in possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or in 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. Thus, the person should have the reason to believe that such goods are liable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such an irregularity and thus had reason to believe that the goods are liable to confiscation. Further, the Co-applicant No. 1 and the main applicant (Unit-IV) are a same group of company and managed by same set of persons, like Shri Vikas Kandoi (Co-applicant No. 2) and others. Therefore, the Co-applicant No. 1 is liable to penalty. However, keeping in view of the fact that they have co-operated with the Commission during the proceeding of their case and keeping in view of grant of partial immunity from penalty to the main applicant, M/s. Royal Touch Fablon Pvt. Ltd. (Unit-IV), the Bench is inclined to take a lenient view while deciding penalty on the Co-applicant No. 1. 35. Similarly, the charges framed against Shri Vikas Kandoi, Director of M/s. Royal Touch Fablon Pvt. Ltd. (Unit-IV), the main applicant (Co-applicant No. 2), charges against Shri Rajkumar Jaisansaria, (Co-applicant No. 3) Accounts in-charge of the main applicant and charges against Shri Pawan Sharma (Co-applicant No. 4), Manager of the main applicant, have been given in Para-10(1), Para-10(2) and Para-10(3) of the SCN respectively. On going through the Paras, it has been observed that it has been drafted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), charges of removal of looms, removal of raw materials and finished goods without payment of duty and without permission from the competent authorities have been framed and M/s. Royal Touch Fablon Pvt. Ltd. (Unit-IV) has applied for settlement of his case as the main applicant and duty liability has been admitted. The case has been settled and since the main applicant has made a true and full disclosure of his duty liability and has co-operated during the proceeding before the Settlement Commission, the Bench has imposed penalty of ₹ 50,000/- and granted immunity in excess of the penalty imposed to the main applicant. 37.2 Keeping in view of the true and full disclosure of duty liability of the main applicant and co-operation of the co-applicants during the proceeding before the Settlement Commission, the Bench is inclined to take a lenient view and grant full immunity from penalty to the Co-applicant No. 2 and No. 3. 38. Prosecution : In the facts and circumstances of the case, the Bench considers it a fit case for grant of immunity from prosecution to the co-applicants. 39. ORDER 39.1 In the light of the above, the Bench settles the case on the following te ..... X X X X Extracts X X X X X X X X Extracts X X X X
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