2013 (2) TMI 569 - AT - Central Excise

Benefit of 1st proviso to section 11A(2) - the respondents are employees, authorised signatories/directors etc. of the main manufacturing units who have discharged duty liability along with interest and penalty equal to 25% of the duty in terms of provisions of section 11A(1A) - whether the respondents would get the benefit of provisions of section 11A(2) when the main manufacturer discharges his duty liability along with interest and 25% of penalty - Commissioner(Appeals) set aside penalties imposed as per Rule 26 of Central Excise Rules, 2002 relying upon Board s Circular No.831/08/2006-CX, dtd. 26.07.06 - Held that - Proviso to sub-section 2 of section 11A refers to conclusion of proceedings in respect of such person. Such person refer to the persons to whom notice has been served under sub-section 1 of section 11 and who have paid the duty along with interest and 25% of penalty within a period of 30 days of receipt of the notice. Thus the proceedings do not come to an end in respect of all the persons in as much as the expression used in the said proviso is only in respect of such persons and not all the notices. Notices under sub-section 1 of section 11A are served only to those persons who are required to pay duty and have either not paid duty or short paid. The invocation of penal provision of Rule 26 is dependent upon so many factors which are unconnected with the provisions of section 11A. Rule 26 which provides for imposition of penalty in certain circumstances cannot be said to be a part of the proviso to sub-section 2 of section 11A so as to conclude the proceedings in respect of all notice on payment of duty, interest and part penalty by main manufacturer.The said proviso in my views, only concludes the proceedings in respect of the persons against whom notice under section 11A is issued and who have deposited the duty in terms of provisions of sub-section 1A of section 11A. - payment of short paid and non-paid duty by the main manufacturer would not result in conclusion of proceedings against all other persons on whom penalty stands proposed to be imposed in terms of Rule 26. If the legislative intent was extending immunity to all connected persons, the language used would have been simpliciter in respect of all persons. A reading of Circular No.831/08/2006-CX, dtd. 26.07.06 as relied upon by Commissioner(Appeals) nowhere clarifies the issue as to whether payment by the main manufacturer would result in stopping of proceedings in respect of all the persons or the same would amount to settle the dispute viz-a-viz the main manufacturer only. As such nothing turns on the said Circular, thus Commissioner(Appeals) s orders allowing the appeals of respondents by extending the benefit of proviso to sub-section 2 of section 11A are not in accordance with law - as the appellate authority has not discussed the merits of the case the impugned orders are set aside and matter remanded for fresh decision after independently examining the role of each and every respondents and the applicability of Rule 26. Revenue s appeals allowed in above terms..

Issues Involved:
- Interpretation of provisions of Rule 26 of Central Excise Rules, 2002 in conjunction with Section 11A of the Central Excise Act, 1944.
- Whether payment of duty by the main manufacturer concludes proceedings against all connected persons.
- Applicability of the proviso to sub-section 2 of Section 11A in relation to persons served with notices under sub-section 1.

Analysis:

Issue 1: Interpretation of Rule 26 of Central Excise Rules, 2002 in conjunction with Section 11A

The appellate tribunal considered the relationship between Rule 26, which deals with penalties for certain offenses related to excisable goods, and Section 11A of the Central Excise Act, which pertains to recovery of duties not levied or paid. The tribunal emphasized that the two provisions are independent and mutually exclusive. It was clarified that the imposition of penalties under Rule 26 is not part of the proviso to sub-section 2 of Section 11A, which concludes proceedings against persons issued notices under Section 11A upon payment of duty, interest, and part penalty by the main manufacturer.

Issue 2: Conclusion of proceedings against connected persons upon payment by the main manufacturer

The tribunal analyzed the language of the proviso to sub-section 2 of Section 11A, which states that proceedings shall be conclusive as to the matter stated in the notice upon payment by the person served with the notice. It was held that this conclusion is limited to the persons to whom notices are issued under sub-section 1 of Section 11A, which are individuals required to pay duty but have not done so. Therefore, the proceedings do not automatically conclude against all connected persons upon payment by the main manufacturer.

Issue 3: Applicability of the proviso to sub-section 2 of Section 11A to connected persons

The tribunal clarified that the proviso to sub-section 2 of Section 11A only applies to persons served with notices under sub-section 1 of Section 11A. It emphasized that the language used in the proviso refers to "such person" and "other persons," indicating that the conclusion of proceedings is specific to those individuals who have discharged their duty liability under sub-section 1A or have been served notices under sub-section 1.

Conclusion:

The tribunal held that the Commissioner(Appeals) erred in extending the benefit of the proviso to sub-section 2 of Section 11A to all connected persons. The orders allowing the appeals of respondents were set aside, and the matters were remanded for fresh consideration to independently assess the role of each respondent and the applicability of Rule 26. The Revenue's appeals were allowed on the grounds that the legislative intent did not intend to grant immunity to all connected persons upon payment by the main manufacturer.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the tribunal's interpretation of the relevant legal provisions.

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