2017 (12) TMI 951 - AT - Central Excise

Clandestine removal - Imposition of penalties and personal penalties u/s 209A - first contention of the appellants is that the impugned order was passed ex-parte - case of appellants are also that the employees are not distinguishable from the company and hence could not be penalized when the company had been subjected to penalty - principles of natural justice - Held that - In the remand proceedings, the appellants did not submit any reply despite repeated reminders and did not attend personal hearing despite being given a number of opportunities - no reply was filed by the appellants either within the stipulated period or even till the date of adjudication - sufficient chances were given to the appellants to present their case but the appellants did not avail those opportunities and hence there is no violation of natural justice by the adjudicating authority. The Department has been able to successfully prove the allegations of clandestine removal and evasion of duty done in various ways by the appellants as also the taking of illegal credit and illegal utilization of such credit by the appellants. It is also clear that the appellants were resorting to such fraudulent clearances repeatedly and systematically over a long period of time in complete disregard of the provisions Central Excise Act and the Rules thereunder - In view of the foregoing, the order of the Ld. Commissioner confirming the demand of ₹ 1,10,41,745/- for the extended period alongwith interest and imposing penalties on the appellant M/s ATPL is upheld - The denial of Cenvat Credit of ₹ 63,839/- as well as interest and penalty of the same amount are upheld - Considering the systematic and planned suppression of production, clandestine removal of goods and clearance of the goods without payment of duty, penalties under Section 11AC of the Act and Rule 9(2) and Rule 173Q are correctly imposed. Penalty on Sh. Deepak Singh, M.D - Held that - the Managing Director was fully responsible for the fraud, which was played on the Revenue in various ways. Hence, separate penalty on Managing Director is fully justified. The penalty on Sh. Deepak Singh, M.D. is therefore upheld. Penalty on Sh. VK Sachdeva, General Manager (Finance) - Held that - overall superintendence of excise matters rested with him and he was the fully aware of the law and implications of its violation. He has willfully connived with the management. His role in the fraud has been proven and hence the penalty on Sh. V.K. Sachdeva has been correctly imposed. Penalty on Sh. N.M. Gupta, AGM (cost and accounts) - Held that - Sh. N.M. Gupta, AGM has fully abetted in all the activities leading to clandestine removal of goods and clearance of goods without payment of duty and fraudulent evasion of central excise duty. Hence, the penalty imposed on him is fully justified. Personal penalties on the Managing Director, Sh. Deepak Singh, Sh. V.K. Sachdeva and Sh. N.M. Gupta u/s 209A of CER - Held that - the appellant employees were very much aware that the goods were liable to confiscation and what they were doing had implications of contravention of the laws; still, they willfully and systematically connived with the management in clandestine removal of goods through different modus operandi - penalties upheld. The penalty in the case of Sh. N.M. Gupta, has indeed been enhanced was 50,000/- to ₹ 2,00,000/- and in the case of Sh. V.K. Sachdeva penalty has been enhanced from ₹ 1,00,000/- to ₹ 2,00,000/-. It is settled position of law that in the remand proceedings the amount of penalty cannot be enhanced especially when there are no new facts or evidence to justify that - the penalty imposed on Sh. N.M. Gupta is reduced to ₹ 50,000/- and penalty imposed on Sh. V.K. Sachdeva is reduced to ₹ 1,00,000/-. Appeal allowed in part.

Issues Involved:
1. Allegations of clandestine removal of goods.
2. Fraudulent credit entries in PLA.
3. Violation of natural justice.
4. Imposition of personal penalties on individuals.
5. Enhancement of penalties in remand proceedings.

Detailed Analysis:

1. Allegations of Clandestine Removal of Goods:
The appellants were accused of clandestine removal of finished goods and raw materials, supported by evidence such as parallel invoices, private records, weighment slips, and truck registers. The Central Excise Authority conducted a search on 21.04.1999, recovering incriminating documents. The show cause notice dated 04.04.2000 listed various offences, including parallel invoices (?3,95,930), credit entries without deposits (?18,50,000), and unaccounted weighment slips (?5,27,495). The adjudicating authority confirmed these demands, finding sufficient corroborative evidence from recovered documents, statements from employees, and external records like octroi slips and truck union records.

2. Fraudulent Credit Entries in PLA:
The appellants took credit of ?18.5 lakhs in their PLA without making deposits in the bank, using this illegal credit for clearance of excisable goods. This fraudulent activity was confirmed through statements and documents, showing deliberate violation of the law over a period of time.

3. Violation of Natural Justice:
The appellants claimed the impugned order was passed ex-parte, violating natural justice principles as they were approaching the Settlement Commission and did not file a reply to the show cause notice. However, it was found that ample opportunities were given to file a reply and attend hearings, which the appellants did not utilize. The Tribunal held that natural justice was not violated, referencing cases like Patel Widecom India Ltd. and Rathi Udyog Ltd., where failure to file a reply despite opportunities did not constitute a violation of natural justice.

4. Imposition of Personal Penalties on Individuals:
Penalties were imposed on various individuals under Rule 209A of the Central Excise Rules. The appellants argued that employees could not be penalized separately from the company, and the penalties were based on assumptions without corroborative evidence. However, the Tribunal upheld the penalties, finding that individuals like Sh. Deepak Singh (Managing Director) and Sh. V.K. Sachdeva (General Manager, Finance) were fully aware and involved in the fraudulent activities. Statements from employees and corroborative evidence confirmed their roles in clandestine removals and fraudulent credit entries.

5. Enhancement of Penalties in Remand Proceedings:
The appellants argued that penalties were unjustifiably enhanced in the remand proceedings without any change in circumstances or new evidence. The Tribunal agreed, stating that in remand proceedings, penalties should not be increased without justification. The penalties for Sh. N.M. Gupta and Sh. V.K. Sachdeva were reduced to their original amounts from the earlier adjudication order.

Conclusion:
The Tribunal upheld the demand of ?1,10,41,745/- along with interest and penalties on M/s ATPL, confirming the systematic and planned evasion of duty. Personal penalties on Sh. Deepak Singh, Sh. V.K. Sachdeva, and Sh. N.M. Gupta were also upheld, though the enhanced penalties in remand proceedings were reduced. The appeals of M/s ATPL and Sh. Deepak Singh were dismissed, while the appeals of Sh. N.M. Gupta and Sh. V.K. Sachdeva were partly allowed to the extent of penalty reduction.

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