2015 (1) TMI 888 - AT - Central Excise

Penalty under Rule 209A - whether penalty could be levied on the person who did not actually deliver the goods and merely issued a fake invoice which enabled wrong availing of Cenvat credit and the extent of penalty which could be levied. - Held that - Firstly penalty under Rule 209A cannot be invoked to the Company. Secondly penalty under Rule 209A cannot be imposed on a person who has not dealt with goods liable for confiscation. As regards applicability of provisions introduced on 1-3-2007 to alleged acts committed prior to the said date the matter is covered by orders of this Court referred to above which are not shown to be distinguishable. Accordingly we hold that the amended provisions will not apply to the acts committed prior thereto. In spite of non-applicability of Rule 26(2) penalty could be levied as the appellant was concerned in selling or dealing with the goods which were liable to confiscation inasmuch as the appellant claimed to have sold the goods in respect of which the Cenvat credit was taken. In such a case Rules 25(1)(d) and 26(1) are also applicable. The person who purports to sell goods cannot say that he was not a person concerned with the selling of goods and merely issued invoice or that he did not contravene a provision relating to evasion of duty. The appellant issued invoices without delivery of goods with intent to enable evasion of duty to which effect a finding has been recorded and which finding has not been challenged. We are thus unable to hold that appellant was not liable to pay any penalty. Appellant diverted the imported scrap without any documents for manufacturing of excisable goods by M/s. Chamak who clandestinely removed without payment of duty. So the appellant company by supplying the goods without documents made easier to M/s. Chamak in manufacturing and clearing the goods clandestinely which are liable to confiscation under the Act or Rules. Hence imposition of penalty under Rule 209A is warranted. Thus both the issues raised by the learned Counsel are not sustainable. The learned Counsel had not contested the imposition of penalty on merit. - Decided against assessee.

Summary

Issues Involved:
1. Imposition of penalty under Rule 209A of the erstwhile Central Excise Rules, 1944.
2. Alleged violation of principles of natural justice.
3. Applicability of Rule 209A to a Public Limited Company.
4. Involvement of the appellant in dealing with goods liable for confiscation.

Detailed Analysis:

1. Imposition of Penalty under Rule 209A:
The appellant contested the imposition of a Rs. 10 lakh penalty under Rule 209A of the erstwhile Central Excise Rules, 1944. The adjudicating authority found that the appellant diverted substantial quantities of shredded scrap without proper documentation to M/s. Chamak Holding Ltd., facilitating the clandestine manufacture and clearance of re-rolled products. The Commissioner (Appeals) upheld this penalty, leading to the appellant's appeal.

2. Alleged Violation of Principles of Natural Justice:
The appellant argued that they were not given a proper opportunity for a hearing and that the documents relied upon by the adjudicating authority were not provided. These issues were raised before the Commissioner (Appeals) but were allegedly not considered. The appellant claimed that both orders were passed in gross violation of the principles of natural justice. However, the Revenue representative countered that sufficient opportunities were provided, and the appellant refused to collect the documents, negating any violation of natural justice.

3. Applicability of Rule 209A to a Public Limited Company:
The appellant argued that Rule 209A, which prescribes penalties for dealing with excisable goods liable to confiscation, does not apply to a Public Limited Company. They cited the Larger Bench decision in Steel Tubes of India Ltd. v. Commissioner of Central Excise, Indore, which held that Rule 209A pre-supposes knowledge of the liability for confiscation and that a corporation, being an artificial person, cannot have such knowledge. However, the court referred to the Supreme Court's decision in Madhumilan Syntex Ltd. v. Union of India, which upheld that a company, though not a natural person, is subject to criminal liability and can be penalized under Rule 209A.

4. Involvement of the Appellant in Dealing with Goods Liable for Confiscation:
The appellant contended that they did not acquire possession or deal with the goods manufactured and clandestinely removed by M/s. Chamak. They argued that Rule 209A should not apply as they were not involved in the direct handling of the goods. However, the court noted that the expression "in any other manner deals with" in Rule 209A has a broad scope, indicating that indirect involvement, such as supplying goods without documentation to facilitate clandestine manufacture and removal, falls within its ambit. The court cited the Punjab and Haryana High Court's decision in Vee Kay Enterprises, which held that issuing fake invoices to enable wrong availing of Cenvat credit constitutes dealing with goods liable for confiscation, thus justifying penalty under Rule 209A.

Conclusion:
The court rejected the appellant's arguments, affirming that Rule 209A applies to companies and that the appellant's actions facilitated the clandestine manufacture and clearance of goods, warranting the penalty. The appeal was dismissed, and the penalty upheld. The miscellaneous application for additional grounds was disposed of.