2017 (3) TMI 1212 - AT - Central Excise

Imposition of penalties - Rule 26 - penalties on company, M/s Man Industries Ltd. (MIL) as well as various commercial persons - Held that - the respondents namely, Shri J C Mansukhani, MD and Shri K G Mantri, Vice President (Commercial) were in the knowledge of the facts as well as they were the party to the facts leading to evasion of duty of Central Excise to the tune of ₹ 1,28,56,776/- - penalty upheld. M/s. MIL has intentionally split the tender in two parts one for bare pipes and the other for PE/CTE coating job. And both the respondents were having the knowledge and were party to this modus operandi of evasion of huge Central Excise duty amounting to ₹ 1,28,56,776/- . Both the respondents deserve to be imposed penalties in terms of Rule 26 of the CER, 2002, even when the main noticee M/s. MIL has been imposed the penalty equivalent to the duty evaded. It is also made clear that imposition of penalty is necessary in terms of Rule 26, with a further view that the said imposition of penalty will deter the respondents in future from playing such a role which led to evasion of payment of taxes/ dues due to the Exchequer. Penalty upheld - appeal allowed - decided in favor of Revenue.

Summary

Issues:
Imposition of penalty under Rule 26 of Central Excise Rules on MD and VP (Commercial) of the assessee-company.

Analysis:

1. The main issue in the appeal was the imposition of penalties under Rule 26 of the Central Excise Rules on the Managing Director (MD) and Vice President (Commercial) of the assessee-company. The demand of duty under section 11A(1) was confirmed by the Adjudicating authority, which was not the subject of the appeal. The Commissioner confirmed the demand and imposed penalties under Section 11A of the Central Excise Act, 1994, but did not impose penalties under Rule 26 on the MD and VP (Commercial).

2. The Revenue appealed against the Commissioner's order confirming Central Excise duty against the company and imposing penalties. The Revenue argued that the MD deliberately misled the department by falsely claiming that bare pipes were cleared outside the factory premises and brought back for coating to avoid duty payment. The VP (Commercial) admitted that the pipes were never physically removed from the factory premises.

3. The respondents contended that the MD and VP (Commercial) were not involved in the alleged non-payment of duty and, therefore, should not be penalized. After considering the facts and submissions, it was found that both respondents were aware of and party to the evasion of Central Excise duty amounting to a significant sum.

4. The Tribunal noted that the company had intentionally split the tender into two parts to evade duty, and both the MD and VP (Commercial) were aware of this scheme. Despite the company being penalized, it was deemed necessary to impose penalties on the individual respondents to deter future tax evasion activities. Consequently, token penalties of &8377; 80,000 and &8377; 20,000 were imposed on the MD and VP (Commercial) respectively under Rule 26 of the Central Excise Rules, 2002.

5. The Tribunal's decision to impose penalties on the individual respondents was based on their involvement in the evasion scheme, despite the company being penalized separately. The penalties were seen as necessary to prevent future tax evasion practices and uphold the integrity of the tax system. The appeals filed by the Revenue were allowed, and the penalties on the individual respondents were upheld.

This detailed analysis covers the issues involved in the legal judgment comprehensively, outlining the arguments presented by both parties and the Tribunal's reasoning for its decision.