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TMI Blog2024 (9) TMI 1301X X X X Extracts X X X X X X X X Extracts X X X X ..... 1652 of 2010 and 1654 of 2010. 3. The appellants have proposed the following common substantial questions of law arising from the impugned order of the CESTAT : "(A) Whether penalty can be imposed upon the Appellant under Rule 26 of the Central Excise Rules, 2002 only because the Appellant was the in-charge Managing Director? (B) Whether the Appellate Tribunal erred in law in upholding the Order in Original and confirming the penalty under Rule 26 of the Central Excise Rules, 2002, without specifying which particular clause of Rule 26 had been allegedly contravened by the Appellant? (C) Whether the penalty under Rule 26 can be imposed without there being any proposal and order for the confiscation of the goods in question? (D) Whether the Appellate Tribunal is justified in relying upon the statement partly, which suits the version of the adjudicating authority and brushes aside the part which is in favour of the Appellant? (E) Whether the Appellate Tribunal justified in upholding the penalty under Rule 26 of the Cenvat Credit Rules, though no mens rea was established?" 4. The brief facts of the case are as under : 4.1. M/s. Shree Sardar Co-operative Sugar Industries L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f of. Shri Parantap Joshi - Managing Director, it has been contended that he was only implementing the decisions of the entire governing committee, and not gaining anything individually out of the procedural regularities as alleged. It has been submitted that, in absence of any allegation much less on account of actual confiscation of goods, no personal penalty under Rule 26 can be imposed. 26.3. I have gone through the evidences available on records all of which clearly shows that the practice of illicit clearances of sugar, viz., claimed as "over-selling" has been going on in the factory premises of the assessee over very long period and that too, with active knowledge and connivance of all the Noticees, whether it is Managing Director, other Directors, President, Vice-President, and other employees working under their instructions and guidance. The total quantity of such illicitly cleared Sugar is to the tune of 215845 quintals, the value of which is to the tune in excess of Rs. 25 Crores and the Central Excise duty that has been evaded is to the tune of Rs. 1.98 Crores, and hence this is not a meager quantity or amount to escape the attention and knowledge of any senior funct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of fund, and to survive in the cooperative society: that whatever the information submitted / declared to the Central Excise department was wrong and misleading information as the sugar sold beyond released quota was not mentioned in the ER-1 returns and that he had also signed some of such ER-1 returns for which he is responsible. 26.5. The above statements have not been retracted till date and on the contrary remain admitted even during adjudication proceedings. These facts also find corroboration from other available documentary evidences which have been relied upon for the purpose of this show cause notice. 26.6. I also find that in so far as Shri Jayant Patel - President, Shri Devendra Thakar - Vice President and Shri Kanubhai Patel - Managing Director, in spite of efforts made by the investigating officers, they could not be interrogated due to their non-appearance before the officers. Hence efforts were made to ascertain from the records of The District Registrar of Co-operative Society, Vadodara who were also simultaneously carrying on certain investigation on their account, to identify their roles in commission or offence, the details of which have been discussed in Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the charge of abatement in evasion of excise duty by the company. The judgements relied upon by the appellant are on different facts. Penalty under Rule 26 is decided on the basis of the fact of each case depending on the role of the person which varies from case to case. Therefore, considering the fact of the present case, the judgments are not applicable. Accordingly, do not find any infirmity in the impugned order imposing penalty on the present appellants. Hence, tie penalties are sustained. Appeals are dismissed." 5.1. Learned advocate Mr. Dhaval Shah for the appellants submitted that the respondents have failed to consider the applicability of the Rule 26 of the Rules, as under breach of Sub-rule (1) or (2), the penalty is levied as stated in the Order-in-Original. 5.2. In support of his submission, reliance was placed on the decision of the Hon'ble Supreme Court in case of Amrit Foods Versus Commissioner of Central Excise, U.P. wherein, the Hon'ble Apex Court has held that it was necessary for the respondent to put the assessee on notice as to the exact nature of the penalty to be levied. It was therefore submitted that the respondent-adjudicating authority has neither ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n his statement that on coming to know about such illegal clandestine removal of the Company, he had opposed the same and had given instruction to dis-continue such "overselling" of the Sugar by the Company as the same was over and above the quota fixed by the Government. It was therefore submitted that no penalty could have been levied upon the appellants by the adjudicating authority and the Tribunal has committed an error in confirming the same contrary to Rule 26 of the Rules. 6. Considering the submissions made by the learned advocate for the appellants, it is not in dispute that the appellants were in knowledge of the clandestine removal of the goods by the Company. 7. Rule 26 of the Rules prevailing at the relevant time reads as under : "RULE 26. Penalty for certain offences- [1] Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or 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, shall be liable to a penalty not exceeding the duty on such goods or [rupees two thousand,] whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r receipt of demand draft by the sales department, they issued two memos, one memo for Godown keeper and second for Chief Accountant along with the demand draft for posting in the books of accounts; that the Memo issued to the godown keeper indicated the information viz. name of the customer, quantity of sugar to be sold, truck number and other relevant information: that on arrival of memo, Godown keeper used to load the sugar in the specified truck and prepared the Central Excise Invoice and handed over the same to the customers. He admitted that they sold the sugar according to the quota allotted by Central Government and also sold sugar beyond the quota so released / allotted by the Central Government; that the Sugar sold beyond the quota is known as "overselling" in sugar Industry; that he admitted that during his tenure as In charge Managing Director of the assessee, the practice of overselling of sugar was taking place: that while they recorded the quantity of released quota of sugar in the Central Excise records, they did not record the quantity of overselling sugar in the Central Excise records viz. Daily stock register/ returns etc; that the quantity of released quota, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consisting of Chairman, Vice Chairman and members of Executive Committee and as per such decision, overselling had been carried on by the assessee. On being shown the statements of (i) Shri Pranay Amin recorded on 13.01.2009 and (ii) Shri Kamlesh Bhatt recorded on 16.01.2009, after carefully going through the contents of both the above statements, he agreed with the contents and in token of having seen and agreed, placed his dated signature thereon." 9. From the above statement given by Mr. Narendrabhai Solanki, it cannot be said that the Adjudicating Authority or Tribunal has committed any error in invoking Rule 26 of the Rules for levy of the penalty. The contention raised on behalf of the appellants that the adjudicating authority has failed to point out which of the Sub-rule is applicable in the facts of the case is without any basis inasmuch as on perusal of Rule 26 of the Rules, it is clear that the Sub-rule (2) would never be applicable to the facts of the case as it pertains to the person who issues invoices or any other documents. The appellants being Managing Director, President or Vice-President are not required to issue any invoice or any other document and therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f overselling of sugar was taking place; that they were not mentioning the quantity of overselling sugar in the Central Excise records Viz. Daily Stock Registers, ER-1 Returns etc. He further admitted that though the Central Excise duty was collected from the customers on overselling of sugar, it was not deposited with the Department; ii. Shri. Parantap Joshi, in his statement recorded on 16.2.09, inter-alia, admitted that he was functioning as Managing Director of assessee during the period: October 2007 to June 2008; that it was the decision of Management Committee, i.e., the Boards of Director (including himself) to sell sugar beyond release quota. and accordingly he executed the decision and sold sugar beyond release quota. He further categorically admitted that two sets of invoices were being maintained by the assessee, one for regular quota and other for beyond sanctioned quota and the clearances of sugar beyond sanctioned quota was not being reported to Central Excise as he knew it was illegal. iii. Shri. Jayand Joshi in his statement recorded on 27.1.2009, inter-alia, admitted that he was a Chief Chemist and in charge of the Godown; that he had signed the that as per th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the provision of Rule 26 of the Central Excise Rules, 2002 and thereby rendering themselves liable for appropriate penalty thereunder. 9. S/Shri. Jaykant Patel - President, Devendra Thakkar - Vice- President, Parantap Joshi - then Managing Director, N.C. Solanki - In-charge Managing Director, Kanubhai Patel - Managing Director, Jayanand Joshi - Chief Chemist, Pranay K. Amin - Office Superintendent, and Atul G. Patel - Godown Keeper, all of whom were working with M/s. Shree Sardar Coop. Sugar Industries Ltd, are hereby, severally, called upon to show cause to the Commissioner of Central Excise & Customs, Vadodara - II having office at 1st floor, Central Excise Building, Arkee Garba Ground, Near Telephone Exchange, Subhanpura, Vadodara-390 023, as to why appropriate penalty should not be imposed on them for their acts of contraventions as discussed above, under Rule 26 of the Central Excise Rules, 2002." 10. In view of the above, the reliance placed on the decision of the Hon'ble Apex Court in case of the Amrit Foods (Supra) would not be applicable in the facts of the case as the appellants were put to notice as to the exact nature of contravention for which the appellants were ..... X X X X Extracts X X X X X X X X Extracts X X X X
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