2015 (1) TMI 624 - HC - Central Excise

Clandestine clearance of goods - Imposition of penalty - Invocation of Rule 173Q and 209 of the Central Excise Rules, 1944 so as to impose penalty on the appellants - Held that - The reliance on the final order of the Commissioner and the directions in that behalf of imposition of penalty cannot be faulted. Rules 173Q and 209 on which reliance is placed permits imposition of penalty on any manufacturer, purchaser, registered person of a warehouse or registered dealer responsible for removal of excisable goods in contravention of provisions of the rules and also without payment of duty, if any, leviable on the same. Once we find that there is no specific case as of the Central Excise Rules, then prevailing have not been contravened, and there is no intention to evade payment of duty, then, the argument of Shri Shah raised for the first time before us cannot be accepted. The findings are not based only on the admitted contravention of the rules with intention to evade payment of duty but also removal of excisable goods in contravention of the provisions of the rules themselves and not accounting the same. There is a clear case where both rules have been invoked and applied and merely because the duty liability is determined that is of M/s. S.R. Industries Ltd. and not of appellant No. 1, does not mean that in the facts and circumstances the imposition of penalty was not called for. The imposition of penalty was the cumulative effect of all the events and totality of the circumstances which enable the Commissioner to record the findings that fictitious entity was floated. It was shown to be export-oriented unit and though in its activity it did not require PTY/PFY, these goods were ordered for the alleged requirement of such unit. They were diverted firstly through the six units from Gujarat/Silvassa and by producing the documents and certifying and evidencing their supply for export-oriented unit and secondly in connivance with all concerned, such goods were diverted to Bhiwandi local market. In addition to their role in facilitating the other parties in diversion of such goods which were admittedly excisable that the penalty has been imposed, merely because the appellant No. 1 has not been held guilty of any evasion or non-payment of duty, does not mean that the penalty imposed was illegal and unjustified. - In the given facts and circumstances it could be for the positive act and it would also be for a collective failure of the obligations or rather active participation in bringing about this situation. Therefore the intention was to evade payment of duties. - no substantial question of law arises - Decided against assessee.

Summary

Issues Involved:
1. Legality of invoking and applying Rule 173Q and 209 of the Central Excise Rules, 1944.
2. Validity of penalties imposed on the appellants.
3. Alleged evasion of duty by the appellants.
4. Procedural compliance and notice adequacy concerning the allegations.

Detailed Analysis:

1. Legality of invoking and applying Rule 173Q and 209 of the Central Excise Rules, 1944:
The appellants contended that Rule 173Q and 209 could not have been invoked to impose penalties as they were not guilty of evasion of duty. They argued that the show cause notice did not propose the imposition of penalty under Rule 209, and thus, findings based on this rule in the final order were unjustified. However, the court found that the appellants were aware of the allegations in the show cause notice and did not dispute the evasion of duty. The court noted that Rule 173Q and 209 allow for penalties not only for evasion of duty but also for contravention of any provisions of the rules, including removal of excisable goods without payment of duty. The court concluded that the rules were correctly invoked and applied.

2. Validity of penalties imposed on the appellants:
The appellants argued that the penalties were unjustified as they had followed the correct procedures, including the use of CT-3 certificates and Re-warehousing certificates. The court, however, found that the goods were diverted to the local Bhiwandi market with the appellants' connivance, and they received extra money over the normal price. The court upheld the penalties, noting that the appellants were actively involved in the transaction and that the penalties were justified based on the totality of the circumstances, including the creation of a fictitious entity and the diversion of goods.

3. Alleged evasion of duty by the appellants:
The court found that the appellants did not dispute the fact that goods were cleared without payment of duty and diverted to the local market. The findings of the Commissioner and the Tribunal were concurrent and based on undisputed evidence and admissions. The court noted that the appellants were involved in the evasion of duty and that the penalties were imposed not only for the admitted contravention of rules but also for the removal of excisable goods in contravention of the provisions of the rules.

4. Procedural compliance and notice adequacy concerning the allegations:
The appellants argued that they were not put to notice regarding the allegations of violation of Rules 173Q and 209. However, the court found that the appellants were aware of the allegations and that the arguments before the Tribunal were restricted to the imposition of penalties. The court noted that the Tribunal dealt with the arguments based on the documents and uncontroverted events, and the findings were not perverse. The court rejected the appellants' contention that the penalties were illegal and unjustified, noting that the penalties were imposed for both the positive act of evasion and the collective failure of obligations.

Separate Judgments:
There were no separate judgments delivered by the judges in this case.

Conclusion:
The court dismissed the appeals, finding no merit in the appellants' contentions and concluding that the penalties imposed were justified. The appeals did not raise any substantial question of law.