2009 (7) TMI 341 - AT - Central Excise

Export goods procured duty free and diverting the same in the local market and submitting false proof of export Appeellant having declared themselves as merchant-manufacturer and having enjoyed benefit of receiving the goods for export without payment of duty, if they are allowed to claim that they are not liable to pay duty on the ground that they had not executed bond, it would mean allowing them to enjoy the benefit of fraud and profit from fraud. This is totally against law and public policy and no individual can be allowed to benefit from fraud Held that if penalty imposed on firm, separate penalty cannot be imposed on proprietor - in the case of proprietary firm, it becomes necessary for the Commissioner to identify the person chargeable with duty and he should not and cannot merely confirm duty against the name of the firm, especially when it happens to be a case where person is only a dummy owner and the real owner is behind the scene. Therefore, we have to hold that Commissioner had not acted beyond the scope in identifying the person chargeable with duty - The next point is whether duty can be demanded under Section 11A Held that Section 11A covers any type of short levy or non-levy for the purpose of recovery, we hold that Section 11A has been correctly applied. Once recovery is upheld under Section 11A, interest shall also be payable as per the provisions of Section 11AB - Held that penalty cannot be imposed on deceased person and if imposed cannot be recovered from legal heirs no penalty imposable on legal heirs - suppression cannot be alleged, so demand not sustainable on limitation Regarding personal penalty, no case that V.L. Chalke not aware that goods liable to confiscation, so penalty is imposable penalty also imposable u/r 14A for diversion of goods

Summary

Issues Involved:

1. Whether Shri K.K. Agarwal is the real proprietor of GCI and GI and liable for duty and penalty.
2. Whether Central Excise duty amounting to Rs. 4,08,04,652/- is chargeable from GCI, GI, and NRL.
3. Whether GCI, GI, and NRL are liable for penalty under Section 11AC of the Central Excise Act, 1944.
4. Whether the sixteen supplier manufacturers are liable for penalty under Section 11AC of the Central Excise Rules, 1944, and whether their assets are liable for confiscation.
5. Whether Shri K.K. Agarwal and Shri V.L. Chalke are liable for penalty under Rule 209A of the Rules.

Detailed Analysis:

1. Real Proprietorship and Liability of Shri K.K. Agarwal:
The Tribunal held that Shri K.K. Agarwal (KKA) is indeed the real proprietor and person controlling GCI and GI. This conclusion was based on multiple statements by KKA himself, corroborated by evidence such as bank transactions and statements from suppliers and employees. The Tribunal emphasized that in cases involving proprietary firms, the proprietor and the firm are inseparable, thus confirming that KKA is liable for any duty and penalty imposed on GCI and GI.

2. Chargeability of Central Excise Duty:
The Tribunal upheld the demand for duties of Rs. 1,87,41,038/- from GCI and Rs. 2,11,19,435/- from GI. The argument that no bond was executed before the Maritime Commissioner, and hence no duty could be demanded, was rejected. The Tribunal stated that having declared themselves as merchant-exporters and having obtained goods duty-free through fraudulent means, the appellants cannot escape liability. The Tribunal also held that Section 11A of the Central Excise Act is applicable for recovery of duty, as Rule 14A is not self-contained.

3. Penalty under Section 11AC:
The Tribunal found that GCI, GI, and NRL are liable for penalties under Section 11AC of the Central Excise Act, 1944. However, it was noted that penalties cannot be imposed on deceased persons and recovered from their legal heirs. Thus, while the duty liability on KKA was upheld, no penalty was imposed on him posthumously, and his wife, Mrs. Meena K. Agarwal, was held liable to pay the duty confirmed against KKA.

4. Liability of Supplier Manufacturers:
The Commissioner had already exonerated the sixteen supplier manufacturers from penalties and confiscation of their assets. The Tribunal did not find it necessary to address this issue further, as it was not contested.

5. Penalty on Shri K.K. Agarwal and Shri V.L. Chalke:
The Tribunal confirmed the penalty on Shri V.L. Chalke, reducing it from Rs. 50 Lakhs to Rs. 1 Lakh, considering his role as an employee and the lack of evidence showing significant monetary benefit from the fraudulent activities. The penalty was imposed under Rule 14A, although the Tribunal clarified that Rule 209A is also applicable.

Conclusion:
The Tribunal upheld the duty demands on GCI and GI, to be paid by Mrs. Meena K. Agarwal. The matter was remanded to the Commissioner to identify and quantify the duty demands on which interest under Section 11AB is applicable. The penalty on Shri V.L. Chalke was reduced to Rs. 1 Lakh, and the appeals were decided accordingly.