2017 (4) TMI 690 - AT - Central Excise

Clandestine removal - consignments of grey fabrics - demand - seizure 9933.75 mtrs. of processed fabrics valued at ₹ 5,96,025/- under the reasonable belief that the same were offending in nature and liable for confiscation, since the same were manufactured out of the unaccounted grey fabrics and kept unaccounted in RG-1 register in the factory with an intention to remove the same without the cover of Central Excise invoice(s) and without payment of Central Excise duty. Held that - there are sufficient incriminating evidences available on the record to sustain the demand of duty of Central Excise of ₹ 1,54,87,744/- against the appellant assessee M/s RKSM. The argument of the assessee-appellant that they have inflated their production figures of receipt of grey fabric to avail bank loan facility for replacing old machinery of the factory does not carry sufficient force as there is no evidence to corroborate the same. On the other hand, there are enough corroborative evidences to prove that the appellant-assessee namely M/s RKSM procured extra grey fabrics and clandestinely manufactured and removed the processed fabrics from their factory - demand upheld. Extended period of limitation - Held that - considering the suppression of facts with intention to evade payment of duty it cannot be said that show cause notice was to be issued within one year from the relevant date. The period involved is from April, 2002 onwards and demand has been issued within the five year period from the relevant date as per the provisions of Section 11A of the Central Excise Act, 1944. Therefore, it cannot be said that on this count that the demand is not recoverable from the assessee-appellant. Penalty on 4 companies - Held that - Rule 26 of Central Excise Rules, 2002 (Rule 209A of erstwhile Central Excise Rules, 1944) is not imposed on a company but only on a person - penalty imposed on these four companies is hereby dropped. Penalty on proprietorship concerns being on higher side, were reduced. Appeal dismissed - decided partly in favor of appellant, as regards penalty.

Issues Involved:
1. Demand of Central Excise Duty and Penalty on M/s RKSM.
2. Penalty on Shri R. K. Goel, Director of M/s RKSM.
3. Penalty on Shri R. K. Gupta, Authorised Signatory of M/s RKSM.
4. Penalty on other appellants under Rule 26 of Central Excise Rules, 2002.
5. Time-barred contention for the issuance of the show cause notice.

Issue-wise Detailed Analysis:

1. Demand of Central Excise Duty and Penalty on M/s RKSM:
M/s RKSM was found to be involved in the clandestine removal of processed fabrics, evading Central Excise duty by not accounting for the grey fabrics received and processed. The DGCEI conducted a search and discovered incriminating documents and unaccounted processed fabrics. The Commissioner confirmed the demand of ?1,54,87,744/- along with interest and an equivalent penalty. The Tribunal upheld this decision, citing sufficient evidence, including admissions by the company's authorized signatory and director.

2. Penalty on Shri R. K. Goel, Director of M/s RKSM:
Shri R. K. Goel was penalized ?25 lakhs under Rule 26 of Central Excise Rules, 2002. The Tribunal noted his involvement in the clandestine activities and upheld the penalty. However, considering the equivalent penalty imposed on the company, the Tribunal reduced his penalty to ?5,00,000/-.

3. Penalty on Shri R. K. Gupta, Authorised Signatory of M/s RKSM:
Shri R. K. Gupta was penalized ?2,50,000/- under Rule 26. The Tribunal acknowledged his role in the evasion but reduced the penalty to ?50,000/-, considering the totality of the circumstances and his status as an employee.

4. Penalty on Other Appellants under Rule 26 of Central Excise Rules, 2002:
- M/s Palson Fabrics Pvt. Ltd., M/s Orion Fabrics Pvt. Ltd., M/s Ankur Sulz Pvt. Ltd., and M/s Pioneer Suitings Pvt. Ltd.: Penalties were dropped as Rule 26 does not apply to companies, only to individuals.
- M/s Hari Om Textiles, M/s Sri Sai Shanti Textiles, M/s Berry Brothers, M/s Anand Parkash & Sons (HUF), and M/s Nishu Fabrics: Penalties were reduced to ?50,000/- each, considering their involvement and the overall circumstances.
- M/s Shavellon Fabrics and Shri Dev Raj Sindhal: Penalties were dropped due to lack of evidence of their involvement.
- Shri Mahender Kumar Miglani: Penalty was dropped as there was insufficient evidence to prove his involvement.

5. Time-barred Contention for the Issuance of the Show Cause Notice:
The appellant argued that the show cause notice was time-barred as it was issued more than one year after the search. However, the Tribunal noted that due to the suppression of facts with the intent to evade duty, the extended period of five years under Section 11A of the Central Excise Act, 1944, was applicable. Thus, the demand was not time-barred.

Conclusion:
The Tribunal upheld the demand of ?1,54,87,744/- along with interest and an equivalent penalty on M/s RKSM. Penalties on Shri R. K. Goel and Shri R. K. Gupta were reduced. Penalties on certain appellants were dropped, while others were reduced. The show cause notice was deemed not time-barred. The appeals were disposed of accordingly.

← Previous Next →