2015 (11) TMI 1341 - AT - Central Excise

Evasion of duty - unaccounted manufacture - clandestine clearances of Gutka - Confiscation of goods - Held that - Appellant has not dealt with any excisable goods inasmuch as he has neither acquired possession of any excisable goods nor he is in any way concerned in transporting, removing, keeping, depositing, concealing, selling, or in any other manner dealing with excisable goods which he knew or had reason to believe are liable for confiscation. The Appellant s alleged activity would at the most amount to abetment of duty evasion which as discussed above is not covered by Rule 26. Therefore, the penal provisions of Rule 26 are not attracted in the case of the appellant for his alleged act of fabrication of documents to give legal cover to illicit income of M/s. Shyam Traders. Rule 27 provides for penalty up to the maximum limit of ₹ 5000/- for breach of the Central excisable goods where no other penalty is prescribed. For invoking Rule 27 there must be a breach of Central Excise Rules and in the present case, the department has not spelled out as to which the provision of Central Excise Rules has been contravened by the appellant. There was allegation of clearance of finished goods without payment of duty as well as availing CENVAT Credit fraudulently on the basis of bogus invoices procured from Registered Central Excise without physically receiving any raw material against these company and in this case, Shri Sanjay Vimal Bhai Deora was sought to be penalized under Rule 26 for being concerned in clearance of the goods without payment of duty. But in the present case, the appellant Shri V.K. Tulsian, Chartered Accountant had absolutely no role in illicit clearance of the gutka without payment of duty by M/s. Shyam Traders. - Imposing penalty of ₹ 50 lakh on the appellant is not sustainable. The same is set aside - Decided in favour of assessee.

Summary

Issues:
1. Duty evasion and clandestine clearances of Gutka
2. Seizure of cash and claim of share application money
3. Imposition of penalty under Rule 26 of the Central Excise Rules, 2002

Issue 1: Duty evasion and clandestine clearances of Gutka

The case involves M/s. Shyam Traders being suspected of large-scale duty evasion through unaccounted manufacture and clandestine clearances of Gutka. Following a search operation, a substantial amount of cash was seized from the residential premises of the proprietor, leading to suspicions of unaccounted sales. The investigation revealed discrepancies in the claim that the seized cash was share application money received from investors for a different venture, casting doubt on the legitimacy of the funds.

Issue 2: Seizure of cash and claim of share application money

The seized cash from the residential premises was claimed to be share application money for a separate company, supported by a certificate from a Chartered Accountant. However, statements from individuals associated with the investing companies indicated that the entries were fictitious, raising concerns about the authenticity of the claimed source of the cash. This discrepancy formed the basis for initiating a show cause notice against M/s. Shyam Traders and individuals involved.

Issue 3: Imposition of penalty under Rule 26 of the Central Excise Rules, 2002

The Commissioner's adjudication order imposed penalties under Rule 26 of the Central Excise Rule, 2002 on various parties, including the Chartered Accountant who issued the certificate regarding the seized cash. The appeal contested the applicability of Rule 26 to the Chartered Accountant, arguing that the alleged activities did not align with the provisions of the rule. The defense highlighted that the Chartered Accountant had no direct involvement in handling excisable goods or activities specified under Rule 26, emphasizing the lack of grounds for imposing the penalty.

In the final judgment, the Appellate Tribunal examined the allegations against the Chartered Accountant and concluded that the penal provisions of Rule 26 were not applicable in this case. The Tribunal emphasized that the Chartered Accountant's actions, even if considered in favor of the department's allegations, did not align with the scope of Rule 26, which pertains to dealing with excisable goods in specific manners. The Tribunal also clarified that the cited precedent from the High Court regarding penalty imposition was not directly relevant to the Chartered Accountant's situation. Consequently, the Tribunal set aside the penalty imposed on the Chartered Accountant, ruling in favor of the appeal.