2013 (9) TMI 719 - AT - Central Excise

Clandestine removal - Issue of more than one show cause notice - Invocation of Extended Period of Limitation - manufacturing of off-set printing machines A case of fraud with willful intention to evade duty - Held that - there is no provision under the Central Excise Act, which prohibits issuing more than one show cause notice to an appellant. Section 11A also does not stipulate any such things. In our view any number of show cause notice can be issued under the said Section to an assessee. There is no doubt or it is not even disputed that the appellants were maintaining parallel set of invoices and undervaluing the goods. These acts are undoubtedly fraudulent act with intent to evade payment of duty. Thus the condition of proviso to Section 11A are undoubtedly satisfied. - The facts and circumstances of the present case cannot be compared with the facts of the cases quoted by the appellants - Under the circumstances we reject the contention of the appellant and held that both the show cause notice have been correctly issued and the invocation of extended period was correct in the second show cause notice. Having come to this conclusion the second contention was automatically dismissed - There was no dispute that the appellants were maintaining parallel set of invoices and also misdeclaring value of the goods involved - It was only based upon the intelligence and subsequent investigation extending over a period of three years covering more than 60-70 customers and analysis of various incriminating records seized during the search operation that the show cause could be issued. Duty, Penalty and Interest on first appellant was correctly imposed - As far as penalty on the second appellant was concerned, we find that all the evasion was being done under his active directions and was therefore liable to penalty Decided against Assessees.

Issues Involved:
1. Legality of issuing a second show cause notice invoking the extended period under Section 11A of the Central Excise Act.
2. Validity of the penalties imposed on the appellants.

Issue-wise Detailed Analysis:

1. Legality of Issuing a Second Show Cause Notice Invoking the Extended Period:

The appellants argued that the department is prohibited from issuing a second show cause notice invoking the extended period as per Section 11A of the Central Excise Act, 1944. They contended that when the first show cause notice was issued on 14.1.2003, the department had all the information and the investigations were over. Therefore, the department cannot invoke the extended period in the second show cause notice issued on 4.1.2005.

The Tribunal noted that the first show cause notice was for the confiscation of three machines seized on 15.10.2002 from three customers in Kolhapur and did not demand duty but stated that a separate show cause notice for duty evasion would be issued after investigations. The second show cause notice demanded duty from the appellant for clearances made during 1999-2000, 2000-01, and 2001-02, invoking the extended period due to fraud with willful intention to evade payment of duty by maintaining parallel sets of invoices and mis-declaration of value.

The Tribunal held that there is no provision under the Central Excise Act that prohibits issuing more than one show cause notice to an appellant. The extended time limit can be invoked in situations where the short-levy or erroneous refund is due to fraud, collusion, or willful misstatement or suppression of facts. The facts of the present case showed fraudulent acts with intent to evade payment of duty, thus satisfying the conditions of the proviso to Section 11A. The first show cause notice did not demand any duty and was limited to the confiscation of three machines, while the second show cause notice demanded duty for a three-year period and involved a large number of purchasers. Therefore, the two show cause notices were independent, and the invocation of the extended period in the second show cause notice was correct.

2. Validity of the Penalties Imposed on the Appellants:

The Tribunal noted that the appellants were not disputing the impugned order on merits. The order was based on investigations that led to the recovery of parallel sets of invoices and undervaluation. The Commissioner had found that two other units using the "S.O.G." brand name were not dummy units and did not demand duty from them. However, the issue before the Tribunal was the liabilities of the first and second appellants, as adjudicated by the Commissioner.

The Tribunal upheld the penalties imposed on the appellants. The first appellant was found liable for duty amounting to Rs. 50,01,900/- and an equal amount of penalty besides interest under Section 11AB. Additionally, a penalty of Rupees Two lakhs was imposed on the second appellant. The Tribunal found that the evasion was being done under the active directions of the second appellant, making him liable for the penalty.

Conclusion:

The Tribunal dismissed both appeals, holding that the second show cause notice invoking the extended period was correctly issued and the penalties imposed on the appellants were valid. The decision emphasized the fraudulent nature of the appellants' actions and the correctness of the extended period invocation under Section 11A of the Central Excise Act.

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