2015 (10) TMI 1265 - AT - Central Excise

Clandestine manufacture and removal of goods - Imposition of penalty - Section 35F - Held that - Appellant had purchased the Dyed Fabrics from the said Company on the basis of challans and bills. It is also seen from the records that the statements of the traders were recorded. In this context, we refer the statement dt.12.03.2003 of Shri Ajay H. Shah, Authorised Signatory of M/s Hemen Textile, where he stated that they were engaged in the manufacturing of Grey Fabrics and they purchased Polyester Died Yarn/Textured Yarn/Twisted Yarn for manufacture of Grey Fabrics from the said Company. He confirmed that they have received the goods only under the cover of delivery challans and Bills. He produced the Xerox copies of delivery challans and bills to the investigating officer. It is noted that all statements are mostly similar in nature. - there is no material available on record that the Appellants had knowledge of the non-duty paid character of the goods. It is seen from the records that the Appellant as per the normal trade practice, purchased the goods with bills and challans from the said company. In view of that, we find that the imposition of penalty under Rule 209A of Central Excise Rules, 1944 on the Appellants/Traders cannot be sustained. It is seen that the Appellant in his statements dt.08.06.2001 and 29.03.2003 had categorically admitted that they were preparing parallel invoices on computer and quantity of goods mentioned therein were sold without payment of duty, without accounting of the same in their Central Excise statutory records. He also admitted that he had knowingly indulged himself in illicit clearance and removal of Dyed Polyester Yarn without payment of duty, without issuing Central Excise invoice and without accounting for in statutory records. We find that the Appellant was directly involved in the clandestine removal of the goods. It is also noted that that the Appellant Company had not complied with the stay order passed by this Tribunal. Hence, the imposition of penalty on Shri Ketan M. Shah is justified. - Decided partly in favour of assessee.

Summary

Issues:
- Central Excise duty evasion by a textile company
- Imposition of penalties on the company and its director
- Appeal against penalties and duty demand

Central Excise Duty Evasion:
The case involved M/s Navpad Textile Industries Ltd (Dyeing Division) allegedly clearing Dyed Polyester Filament Yarn to traders without paying Central Excise duty. The Commissioner confirmed a duty demand of Rs. 91,99,802.00 along with penalties on the company and various traders. The Tribunal directed the company to pre-deposit a sum for appeal hearing, but later dismissed the appeal for non-compliance with the stay order under Section 35F of the Central Excise Act, 1944.

Penalties Imposed:
The appellants, traders who purchased goods from the company, argued that they bought goods based on legitimate challans and bills. The Adjudicating authority claimed the goods were received without Central Excise invoices and with forged invoices. However, the Tribunal found no evidence that the appellants knowingly received goods on forged invoices. Citing a precedent, the Tribunal emphasized that penalties require evidence of knowledge about non-duty paid goods, which was lacking in this case. Thus, penalties under Rule 209A of Central Excise Rules, 1944 on the appellants/traders were deemed unsustainable.

Penalty on Director Upheld:
Regarding the penalty of Rs. 23 lakhs on Shri Ketan M. Shah, Director of the company, his involvement in preparing parallel invoices for illicit clearance of goods without duty payment was established. His admission of involvement in clandestine activities and non-compliance with the Tribunal's stay order justified upholding the penalty on him.

Judgment:
The Tribunal set aside penalties on all appellants except Shri Ketan M. Shah, upholding the penalty on him. Consequently, all appeals filed by the appellants were allowed, except for the appeal filed by Shri Ketan M. Shah, which was rejected. The decision was pronounced in court after thorough consideration of the evidence and legal arguments presented.