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2013 (10) TMI 406 - HC - Central ExciseClandestine Production and Removal of Cigarettes selling the goods without issue of invoices. - Omission and Commission under Rule 26 of CE Rules - Held that - Capt.Raj Kumar Gupta and Shri Vidyut Raj were actively involved in the functioning of M/s Musk Tobacco - They indulged in clandestine production and clearance and abetted M/s Musk Tobacco in evasion of the Central Excise duty on the cigarettes - Capt. Raj Kumar Gupta and Shri Vidyut Raj were in full knowledge of the fact that the Cigarettes removed by Musk Tobacco clandestinely were liable to confiscation under Central Excise Law - Capt. Raj Kumar Gupta and Shri Vidyut Raj are liable to penal action, for their acts of omission and commission under Rule 26 of the Central Excise Rules, 2002. The role of Shri Raghu / Shri Raghuvar Dayal, who never appeared to explain the contents of the documents recovered from his residence inspite of repeated summons - He deliberately avoided his presence from the officers as several important documents relating to Capt. R.K.Gupta and M/s Musk Tobacco were found in his residence - they had full knowledge that the Cigarettes removed by Must Tobacco clandestinely were non-duty paid which were liable to confiscation under Central Excise law - Shri Shankar Pal Pradhan and Shri Raghu Raghuvar Dayal are liable to penal action for their acts of omission and commission under Rule 26 of the Central Excise, 2002. Waiver of Pre-deposit Relying upon Benara Valves Ltd. & Or. v. Commissioner of Central Excise & Anr. 2006 (11) TMI 6 - SUPREME COURT OF INDIA - Tribunal has not committed any error of law in directing the appellants to deposit ₹ 1 crore for stay of remaining amount of excise duty and penalties - The Tribunal has directed the appellants to deposit a lumpsum amount of ₹ 1 crore giving benefit for excise duty and penalty as also various amounts of penalties imposed on the appellants - it was found that all the appellants had acted with common design and purpose to evade excise duty by clandestinely removing excisable goods, the demand on lumpsum basis does not suffer from any arbitrariness - The Tribunal has given substantial relief based on the financial position of the appellants - there was not any ground to interfere with the common order passed by the Tribunal - Decided partly in favour of Assessee.
Issues Involved:
1. Evasion of central excise duty. 2. Invocation of extended period of limitation. 3. Imposition of penalties under Central Excise Rules. 4. Validity of show cause notice. 5. Requirement of pre-deposit for stay of recovery. Issue-wise Detailed Analysis: 1. Evasion of Central Excise Duty: The Directorate of Central Excise Intelligence received information about M/s Musk Tobacco (India) Ltd. evading central excise duty by not accounting for their products and selling goods without issuing invoices. Searches at various company locations revealed unaccounted cigarettes of various brands, including '777', 'Commander', 'Captain', and 'Perfect'. Additionally, large quantities of shells, sliders, and wrappers were found, indicating the company was manufacturing goods for other brands. The investigation led to the seizure of goods and documents revealing unaccounted raw materials and involvement of common directors between M/s R.K. Cigarettes and M/s Musk Tobacco. 2. Invocation of Extended Period of Limitation: The Commissioner of Central Excise and Service Tax, Lucknow, confirmed the invocation of the extended period of limitation in the show cause notice. The basis for this was the clandestine manufacture and clearance of cigarettes by M/s Musk Tobacco using unaccounted raw materials. The investigation revealed the involvement of various directors and employees in evading payment of duty. The extended period was justified due to the deliberate actions to mislead officers and conceal the true nature of operations. 3. Imposition of Penalties Under Central Excise Rules: The Commissioner imposed penalties on M/s Musk Tobacco and several individuals under Rule 25 and Rule 26 of the Central Excise Rules, 2002. The penalties included: - Rs. 7,74,09,518/- on M/s Musk Tobacco under Section 11AC. - Rs. 10,00,000/- each on two directors and several other individuals. - Rs. 1,00,00,000/- each on Smt. Bushra Gupta, Shri Raj Kumar Gupta, Shri Vidyut Gupta, and Smt. Megha Gupta. The penalties were based on findings that these individuals were actively involved in the clandestine operations and evasion of central excise duty. 4. Validity of Show Cause Notice: The appellants objected to the show cause notice, arguing that it was issued erroneously and lacked specific details. However, the court found no error in the issuance of the notice or the findings of the Commissioner. The notice and subsequent investigation revealed a premeditated exercise to remove excisable goods without payment of duty. The appellants' replies to the show cause notice were considered, and the extended period of limitation was invoked appropriately. 5. Requirement of Pre-deposit for Stay of Recovery: The CESTAT directed the appellants to deposit Rs. 1 crore as a pre-deposit for staying the recovery of the balance amount of duty and penalties. The Tribunal considered the financial position of the applicants and provided substantial relief by reducing the pre-deposit amount. The court upheld this decision, stating that the Tribunal did not commit any error of law. The requirement of pre-deposit was deemed necessary to safeguard the interests of revenue while considering the undue hardship to the appellants. Conclusion: The High Court dismissed all the central excise appeals, finding no good ground to interfere with the Tribunal's order. The appellants were given an additional four weeks to deposit the amount if not already done, to avoid dismissal of their appeals for non-compliance. The judgment emphasized the importance of compliance with central excise regulations and the necessity of pre-deposit to ensure revenue protection.
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