2013 (7) TMI 405 - AT - Central Excise

Section 11A(2), 11A read with Section 11A(1A) Main Respondent is manufacturer of MS Ingots - M.S. Ingots alleged to have been cleared without payment of duty and also for imposition of penalty - under Section 11AC and the imposition of penalty under Rule 26 of Central Excise Rules, 2002 on Director and also on broker and buyer in the transaction Main Respondent had paid the entire disputed amount of duty along with interest and 25% of the duty towards penalty within 30 days of the issue of the Show Cause Notice, in term of the provisions of Sub-Section (1A) of Section 11A of the Central Excise Act Held that - the words other persons used in first proviso to Sub-Section (2) would cover the co-noticees/persons who face the allegations of contravention of Central Excise Rules, which are linked with the allegation of deliberate/fraudulent short payment, non-payment or erroneous refund of duty against the person chargeable with duty facing the duty demand i.e. the person who are alleged to have knowingly dealt with the excisable goods, liable for confiscation in the manner mentioned in Rule 26 (1) of the Central Excise Rules, 2002 and for this reason have been Show Caused for imposition of penalty under this Rule, either in the notice under section 11A (1) issued to the person chargeable with duty or by separate notices issued in this regard - as when the proceedings against the manufacturer/assessee stand concluded on payment of disputed amount of duty plus interest plus 25% of the duty as penalty, there would be no sense in continuing the proceedings for imposition of penalty under Rule 26 against other persons like traders who had purchased the goods, transporters who had transported the goods cleared by manufacturer/assessee, the Directors/employees of the manufacturer/assessee company. Observation made by the Hon ble Tribunal - Under Section 32M, every order of settlement passed under section 32F(5) shall be conclusive as to the matters stated therein and no matter covered by said order shall, save as otherwise provided in this chapter, can be reopened in any proceedings under this Act or under any other law for the time being in force - Tribunal in case of Shitala Prasad Sharma Vs. Commissioner of Central Excise, Mumbai-I, reported in 2004 (12) TMI 195 - CESTAT, MUMBAI and also the Tribunal s judgment in case of D.P.Kothari reported in 2001 (3) TMI 183 - CEGAT, COURT NO. II, NEW DELHI has held that when the matter has been settled by the settlement commission against the main party and settlement commission has granted immunity to him from penalty, the co-accused can not be penalized under Rules, 209A of Central Excise Rules, 1944 as he can not face a penalty greater than the penalty on the main accused Appeal dismissed Decided against the Revenue.

Summary

Issues Involved:
1. Whether the proceedings against co-noticees can be concluded when the main noticee pays the disputed duty, interest, and 25% penalty within the prescribed period.
2. Interpretation of the terms "such person" and "other persons" in the context of Section 11A(2) of the Central Excise Act.
3. Applicability of penalties under Rule 26 of the Central Excise Rules, 2002, to co-noticees when the main noticee settles the duty and penalty.

Issue-wise Detailed Analysis:

1. Concluding Proceedings Against Co-noticees:
The primary issue addressed was whether the proceedings against co-noticees (Sh. Deepak Agrawal, Sh. Harikrishna Madanlal Agrawal, and M/s. Abir Steel Rolling Mills Pvt. Ltd.) could be considered concluded when M/s. Agrawal Sponge Ltd. paid the disputed duty, interest, and 25% penalty within 30 days of receiving the Show Cause Notice. The Tribunal noted that the main noticee, M/s. Agrawal Sponge Ltd., had complied with the provisions of Sub-Section (1A) of Section 11A by paying the required amounts within the stipulated period. The Assistant Commissioner had, therefore, dropped the penal proceedings against the co-noticees. The Department, however, argued that the payment by the main noticee should not result in the conclusion of proceedings against the co-noticees for penalties under Rule 26.

2. Interpretation of "Such Person" and "Other Persons":
The Tribunal examined the terms "such person" and "other persons" as used in the first proviso to Sub-Section (2) of Section 11A. The Tribunal disagreed with the Revenue's interpretation that "other persons" would not include those show-caused for penalties under Rule 26. The Tribunal emphasized that the words "such person" and "other persons" must be given distinct meanings. According to the Tribunal, "such person" refers to the person chargeable with duty, while "other persons" include co-noticees who are linked with the fraudulent or deliberate short payment or non-payment of duty. This interpretation ensures that the words "other persons" are not rendered redundant.

3. Applicability of Penalties Under Rule 26:
The Tribunal held that the words "other persons" in the first proviso to Sub-Section (2) of Section 11A would cover co-noticees facing allegations linked with the main noticee's duty evasion. The Tribunal reasoned that continuing proceedings against co-noticees for penalties under Rule 26, when the main noticee has settled the duty and penalty, would be illogical. The Tribunal supported its view by referencing the legislative intent to reduce litigation and expedite tax collection, as outlined in the Board's Circular No. 831/08/06-EX dated 26.07.06. The Tribunal also cited judgments, such as Shitala Prasad Sharma and S.K. Colombowala, which held that co-accused cannot be penalized when the main accused has been granted immunity or has settled the dispute.

Conclusion:
The Tribunal concluded that the proceedings against the co-noticees should be considered conclusive once the main noticee settles the duty, interest, and 25% penalty within the prescribed period. The appeals filed by the Revenue were dismissed, and the impugned order was upheld.

Order:
The Tribunal dismissed the Revenue's appeals and confirmed that the proceedings against the co-noticees were rightfully concluded by the Assistant Commissioner. The judgment was dictated in open court.