2016 (5) TMI 608 - AT - Central Excise

Demand of duty and imposition of penalties - Appellant contended that once the case against main noticees is settled in Settlement Commission, he argued that, a case against all other noticees stands settled and since there is no confiscation of goods, no penalty under Rule 26 of the Central Excise Rules can be imposed - Held that - by applying the decision of Hon ble Supreme Court in the case of Yogesh Korani Vs Union of India 2003 (7) TMI 703 - SUPREME COURT , if the liability of the co-noticees arise from different act they will not get immunity from further proceeding. Also there was a proposal for confiscation of goods and the matter was settled by the settlement Commission. Thus it is recognized that an offence was committed which required invocation of provisions for confiscation of goods. In the instant case the provisions of law for confiscation were invoked, the offence has been admitted before the Settlement Commission by the main party and settled. Thus it cannot be said that no offence meriting confiscation of goods was committed. Therefore, the penalty is imposable. - Decided against the appellant

Summary

Issues Involved:
1. Whether the case against all other noticees stands settled once the main noticee's case is settled by the Settlement Commission.
2. Whether penalties can be imposed under Rule 26 of the Central Excise Rules in the absence of confiscation of goods.

Issue-wise Detailed Analysis:

1. Settlement of Case for All Noticees:
The appellants argued that once the main noticee's case is settled by the Settlement Commission, the case against all other noticees stands settled. They relied on the Tribunal's decision in S.K. Colombowala Vs. Commissioner of Customs (Import), Mumbai, which held that "the case against all co-noticees comes to an end once the order of settlement is passed in respect of the person entitled to file an application before the Settlement Commission and therefore, penalty imposed upon the appellants cannot be sustained and is set aside." This decision was also followed in other cases like Virender Bansal Vs. Commissioner of Customs (ICD), New Delhi, and Radiant Silk Mills (P) Ltd. Vs. Commissioner of Customs & Central Excise, Jaipur.

The Revenue countered this argument by relying on the decision in K I International, which was stayed by the Hon'ble Bombay High Court. They also pointed out that the provisions of the KVS scheme are similar to those of the Settlement Commission, citing Section 90(3) of the Finance Act, 1998, and Section 32M of the Central Excise Act, which state that the order of settlement shall be conclusive and no matter covered by such order shall be reopened in any other proceedings.

The Tribunal noted that the decision in S.K. Colombowala did not consider the decision of the Hon'ble High Court in Yogesh Korani Vs. Union of India, which was upheld by the Hon'ble Supreme Court. The High Court in Yogesh Korani held that when the liability of the main noticee and the co-noticees arise under separate, distinct, and independent causes of action, the co-noticee cannot claim immunity based on the main noticee's settlement. This principle was further supported by the decision in Modest Shipping (Agency) Pvt. Ltd., where the High Court distinguished between cases where the co-noticee's liability arises from the same act as the main noticee and cases where it arises from different acts.

In the present case, the Tribunal found that the appellants were personal beneficiaries and were not merely assisting the main noticee. Therefore, the principle in Yogesh Korani applied, and the case against the appellants did not stand settled by the main noticee's settlement.

2. Imposition of Penalty under Rule 26:
The appellants argued that no penalty under Rule 26 of the Central Excise Rules can be imposed in the absence of confiscation of goods. They relied on the decision in Sharda Synthetics Ltd. Vs. Commissioner of Central Excise, Raigad, where it was held that penalty under Rule 26 is not imposable when the goods are not held liable for confiscation.

The Tribunal noted that in the present case, there was a proposal for confiscation of goods, and the matter was settled by the Settlement Commission, indicating that an offence meriting confiscation was committed. The decision in Sharda Synthetics was distinguishable as it involved a case where no offence was found to confiscate goods. Therefore, the Tribunal held that the absence of actual confiscation due to settlement does not preclude the imposition of penalties under Rule 26.

Conclusion:
The Tribunal dismissed the appeals, holding that the settlement of the main noticee's case does not settle the case against other noticees when their liabilities arise from distinct and independent causes of action. Furthermore, penalties under Rule 26 can be imposed even in the absence of actual confiscation if an offence meriting confiscation was committed.