2016 (8) TMI 577 - AT - Central Excise

Imposition of penalties - Rule 209A of Central Excise Rules, 1944 - clandestie removal of goods - various dummy/benami firms created - obtained hire purchase finance from various finance companies fraudulently - huge quantity of machinery, structurals etc. were shown accounted for in the books which were not available with M/s.Kedia Distilleries - Held that - Appellant (Shri S.K.Batra) is one of the person alleged to be involved in scheming the financial fraud by acting as a proprietor of one of the dummy units which purported to have supplied machinery to the main party. Since, the financial fraud is admitted fact, other than this, the role of appellant in excise duty evasion is not explained in the impugned order. When companies are dummy and transactions are only book entries the penalty under excise rules cannot be justified. any. Similarly for second appellant (Kedia Castle Dellon Industries) also , the allegation of their involvement in any excise duty evasion has not been explained with evidence in the impugned order. As discussed earlier, we are dealing with mainly non-exiting machinery, created by book entries as part of financial fraud and some manufacture done by contractors. The role of appellant in the excise duty evasion has to be indicated and evidenced independently. Therefore, in the absence of coherent evidence to this effect the penalties imposed on appellants are not sustainable. - Decided in favour of appellant

Summary

Issues:
Appeals against penalties imposed under Rule 209A of Central Excise Rules, 1944.

Analysis:
1. Background of the Case: The appeals were filed against penalties imposed on the appellants under Rule 209A of Central Excise Rules, 1944, by the Commissioner (Adj.) Raiipur, based on investigations conducted against M/s. Kedia Distilleries for duty demand and penalties related to clandestine clearances and captive use of machinery.

2. Penalty Imposition Dispute: The main issue in the appeals was the contestation of the penalties imposed on the appellants. The Tribunal noted that there was no appeal on record regarding the main demand, focusing solely on the penalty's validity for the co-noticees. The sustainability of the main demand would impact the penalty proceedings against the appellants.

3. Legal Arguments: The appellants argued that the proceedings leading to the impugned order were not legally sustainable. They contended that the transactions were merely book entries to obtain finance, with no actual movement of goods. Reference was made to a previous Tribunal order that favored one of the appellants, highlighting the absence of duty evasion or penal liability.

4. Allegations of Financial Fraud: The Tribunal acknowledged the financial fraud scheme orchestrated by the main party, involving the creation of dummy firms to secure finance through fabricated book entries. The machinery manufacturing was outsourced to job workers, potentially incurring central excise duty liability on the contractors.

5. Penalty Assessment: In assessing the liability of the appellants for penalties under Rule 209A, it was observed that the involvement of the appellants in excise duty evasion was not adequately explained in the impugned order. The penalties were deemed unsustainable due to the lack of evidence linking the appellants to the financial fraud or duty evasion activities.

6. Judgment: The Tribunal allowed the appeals, emphasizing that the penalties imposed on the appellants were not justified as there was insufficient evidence to prove their direct involvement in the excise duty evasion scheme. The decision was pronounced in open court on 23.11.2015, overturning the penalties imposed on the appellants under Rule 209A of the Central Excise Rules, 1944.

This detailed analysis encapsulates the key legal aspects and findings of the judgment, focusing on the penalty dispute and the lack of evidence linking the appellants to the alleged financial fraud and duty evasion activities.