2022 (6) TMI 427 - AT - Central Excise

Imposition of penalty under Rule 26 of the Central Excise Rules 2002 - Advance Authorization scheme - diversion of imported goods procured duty free to the Appellant firm - HELD THAT - The goods were diverted from AOPL to the appellant- M/s. Allure International on the basis of email received from Allure International by AOPL. Thereafter the Director Shri Narinder Manghani of AOPL used to send confirmation through return mail and on receipt of instruction he himself as an employee used to take delivery of the goods from M/s. AOPL. The appellant - Shri Pankaj Khubani used to go to AOPL to take delivery on behalf of the Allure International as per directions of the other partners and as he was the junior most in the firm. It is further observed in the impugned order that AOPL Bhiwadi and their manufacturer suppliers took recourse to issue of fictitious documents to cover up the operations of the firm for diversion of duty free goods with intent to evade payment of duty on the said goods. It is further evident that in the course of investigation Shri Pankaj Khubani inter alia stated that he was more or less a dummy partner in Allure International Ltd. and the actual persons controlling over the firm are Manghani Brothers. Further he was working on the directions of the Manghani Brothers. Although AOPL procured duty free materials etc. for manufacture of goods for export but most of the time such duty free inputs were transferred to DTA without any accounting. It seems that the Adjudicating Authority has taken adverse view against the appellant Shri Pankaj Khubani based on the notings in the raw materials of register of AOPL wherein it is mentioned that on certain dates certain inputs were issued to Pankaj Khubani or Shri Pankajji. Manghani Brothers are the actual master mind and this is also supported by fact that Manghani Brothers were the directors in AOPL and were also the partners in Allure International. Thus there appears to be no role in decision making in diverting the duty free goods from AOPL by Pankaj Khubani. However in the facts and circumstances it is found that other appellant M/s. Allure International a partnership firm has committed the act of omission and commission by receiving the duty free goods without proper documents as required under law from AOPL. It is further evident that Manghani Brothers have taken advantage of its position for the purpose of diversification of the goods to DTA. Penalty on Shri Pankaj Khubani is set aside - appeal allowed in part.

Summary

Issues:
Imposition of penalty under Rule 26 of the Central Excise Rules, 2002 on a partnership firm and one of its partners for alleged diversion of duty free imported raw materials in connivance with another entity.

Analysis:
1. Alleged Diversion of Duty-Free Imported Goods:
The case involved M/s. Alcome Overseas Pvt. Ltd. (AOPL) allegedly diverting duty-free imported raw materials to the appellant firm, M/s. Allure International, without proper documentation. The Department claimed that the goods were clandestinely removed without cover of invoices, leading to the imposition of penalties under Rule 26 of the Central Excise Rules, 2002.

2. Penalty Imposition and Previous Litigation:
The Tribunal noted that this was the second round of litigation, with the earlier order being set aside due to procedural lapses. The impugned order imposed penalties of Rs. 20 lakhs on the appellant firm and Rs. 3 lakhs on the partner, Shri Pankaj Khubani, under Rule 26 of the Central Excise Rules.

3. Contentions and Legal Arguments:
The appellant argued that penalties should not be imposed on the partnership firm, citing precedents like Woodman Industries and Aditya Steel Industries. It was contended that Shri Pankaj Khubani was a nominal partner under the control of the Manghani Brothers, who were the actual decision-makers involved in the diversion of goods.

4. Findings and Decision:
The Tribunal analyzed the evidence and observed that the diversion of duty-free goods was orchestrated by the Manghani Brothers, who were directors in both AOPL and partners in Allure International. It was concluded that Shri Pankaj Khubani had a nominal role and was following directions from the actual masterminds. Consequently, the penalty on Shri Pankaj Khubani was set aside, while the penalty on M/s. Allure International, the partnership firm, was upheld due to its involvement in receiving duty-free goods without proper documentation.

5. Final Verdict:
The Tribunal dismissed the appeal of M/s. Allure International but allowed the appeal of Shri Pankaj Khubani, absolving him of the penalty. The decision highlighted the distinction in roles between nominal partners and actual decision-makers in cases of alleged violations of excise rules and duty evasion.

This detailed analysis of the judgment highlights the key issues, legal arguments, findings, and the final decision reached by the Tribunal in the case involving the imposition of penalties under the Central Excise Rules.