2019 (1) TMI 1424 - HC - Central Excise

Imposition of penalty u/r 209A of CER on Directors - reason to believe - whether there is evidence of connivance of respondent with the nonexistence dealers as would make the Director liable for the penalty under Rule 209A of the Rules 1944 or not? - Held that - As there was contradictory statement of the authorized signatory and the scrap broker, statement of Director of respondent No.1 was recorded on 12.06.1998 under Section 14 of 1944 Act. The Director deposed that the denial of Shri Praveen Maheshwari, the scrap broker, is not correct. He deposed that he is ready to cross-examine Shri Praveen Maheshwari - However, it appears from the record that no opportunity to cross-examine Shri Praveen Maheshwari was afforded. And as evident from the order dated 16.06.1999 passed by the Adjudicatory Authority, the statement of Shri Praveen Maheshwari was relied upon to arrive at a conclusion that the Director was knowing or had reason to believe that the entire transaction was fake. In the case at hand, the penalty under Rule 209A of 1944 Rules is attracted only when it is established that it was within the knowledge and has reason to believe that the excisable goods is not confiscable - The authorized signatory and Director has stated that the material was purchased through broker was on for basis in their testimony. The Director also sought leave to confront the broker who has denied any transaction and even receiving of cheque. No cogent material is commended at, as would establish the fact that the Director was afforded effective opportunity of hearing under Section 14 of the Act of 1944 to cross-examine the broker. Thus, the conclusion arrived at by the Tribunal on the given facts of the case cannot be said to be perverse, as would give rise to a substantial question of law as proposed. Appeal dismissed.

Summary

Issues:
1. Appeal under Section 35G of the Central Excise Act 1944 without a substantial question of law framed.
2. Disallowance of MODVAT credit and penalty imposition based on fake documents.
3. Interpretation of Rule 209A of the Central Excise Rules 1944 for penalty imposition.
4. Evaluation of evidence regarding connivance with non-existent dealers for penalty imposition.
5. Analysis of the Tribunal's decision on the lack of evidence of connivance.

Issue 1:
The judgment pertains to an appeal under Section 35G of the Central Excise Act 1944 where no substantial question of law was framed at the time of admission. The absence of a substantial question of law was noted, raising concerns about the appeal's validity.

Issue 2:
Regarding the disallowance of MODVAT credit and penalty imposition based on fake documents, the case involved the manufacturing of M.S. Ingots under the Central Excise Tariff Act 1985. The respondent was granted credit but faced penalties due to discrepancies in input documents, leading to disallowance and recovery of credit along with penalty imposition.

Issue 3:
The interpretation of Rule 209A of the Central Excise Rules 1944 for penalty imposition was crucial. The rule stipulates penalties for certain offenses related to excisable goods, emphasizing the liability when a person knows or has reason to believe that goods are confiscable.

Issue 4:
The evaluation of evidence regarding connivance with non-existent dealers for penalty imposition was a key aspect. Statements from involved parties and contradictions in testimonies were analyzed to determine the Director's liability for penalties under Rule 209A based on knowledge or reason to believe in the fake transactions.

Issue 5:
The Tribunal's decision on the lack of evidence of connivance with non-existent dealers was challenged. The substantial question of law revolved around the justification of the Tribunal's ruling on the absence of evidence, questioning the liability of the Director for penalties under Rule 209A based on the available facts and testimonies.

In conclusion, the judgment extensively analyzed the issues related to the appeal, disallowance of credit, penalty imposition, interpretation of Rule 209A, evaluation of evidence, and the Tribunal's decision on connivance. The decision highlighted the legal standards for penalty imposition, the importance of evidence and testimonies, and the criteria for establishing liability under the Central Excise Rules. Ultimately, the appeal was dismissed for lack of merit, emphasizing the Tribunal's decision based on the facts presented.