2018 (9) TMI 1133 - AT - Central Excise

Clandestine removal - allegation was that M/s HAL was supplying Ferro-alloys to M/s HSAL without any invoices - The appellant have not challenged the facts or evidences in this case nor have they contested their involvement in abetting evasion of duty. The main plea of the appellant is that they were supplier of the raw material and did not deal with the excisable goods, which were liable to confiscation and they had no knowledge that the goods were liable to confiscation. Held that - The appellants were supplying Ferro Alloys to M/s HSAL. Invoice book was recovered from their godown, which had parallel invoice nos. and invoices from that invoice book had been used in clearance of the Ferro Alloys. The daily report were also found, which contained each and every activity taking place in godown, which confirms that various types of Ferro Alloys were dispatched to M/s HSAL without the cover of the invoices, or the billing was done but no material was dispatched, or the goods were dispatched to M/s HSAL, but the invoices were issued to some other parties. All these facts and evidences clearly show that various employees and the Director of the appellant were clearly in the knowledge that the supplies were being made for goods, which were liable to confiscation. In fact, any excisable goods cleared by appellant without cover of invoices are also liable to confiscation - The active involvement of the appellant in the entire modus operandi is thus established in relation to fraudulent supply of raw material without payment of duty to M/s HSAL in a well organized manner thereby abetting evasion of duty by M/s.HSAL. Penalty - Held that - In the instant case, Ferro Alloys were dispatched to M/s HSAL without the cover of the invoices, or the billing was done but no material was dispatched, or the goods were dispatched to M/s HSAL, but the invoices were issued to some other parties. Clearly, the appellant were not merely sending raw material without issuing invoices but were also engaged in other modus operandi. All these were done with sole intent to enable evasion of duty - thus, penalty has rightly been imposed on the appellants for their collaborative role in the conspiracy of clandestine removal of goods by M/s HSAL and enabling evasion of duty - however, quantum of penalty reduced. Appeal allowed in part.

Summary

Issues Involved:
1. Imposition of penalty on M/s Himani Alloys Limited (HAL) under Rule 209-A of the Central Excise Rules, 1944.
2. Whether M/s HAL, as a company, can be penalized under Rule 209-A.
3. Whether the goods supplied by M/s HAL were liable to confiscation.
4. The quantum of penalty imposed on M/s HAL.

Issue-wise Detailed Analysis:

1. Imposition of penalty on M/s Himani Alloys Limited (HAL) under Rule 209-A of the Central Excise Rules, 1944:
The adjudicating authority confirmed that M/s HAL had supplied Ferro Alloys to M/s Haryana Steel & Alloys Ltd (HSAL) without proper invoices, facilitating the evasion of central excise duty. The investigation revealed that M/s HAL had manipulated records, dispatched goods without invoices, and issued invoices without dispatching goods. The penalty was imposed based on the corroborative evidence, including daily reports, invoice books, and financial transactions documented in the Panchnama.

2. Whether M/s HAL, as a company, can be penalized under Rule 209-A:
The appellant contested the imposition of penalty, arguing that Rule 209-A applies only to natural persons, not legal entities like companies. They relied on the Larger Bench judgment in the case of Steel Tubes of India Limited vs. Commissioner of Central Excise, Indore, which interpreted the expression "which he knows" to apply only to natural persons. However, the Tribunal referenced the judgment of the Hon’ble High Court of Punjab and Haryana in Vee Kay Enterprises vs. CCE, which held that penalties under Rule 26(1) (similar to Rule 209-A) could be imposed on entities involved in issuing invoices without supplying goods.

3. Whether the goods supplied by M/s HAL were liable to confiscation:
The Tribunal found that M/s HAL was actively involved in the fraudulent supply of raw material without payment of duty, aiding M/s HSAL in evading duty. The evidence included the recovery of parallel invoice books, daily reports, and statements from employees, which confirmed that goods were dispatched without invoices or billed falsely. This established that the goods were liable to confiscation, and M/s HAL's actions were in contravention of the Central Excise Rules.

4. The quantum of penalty imposed on M/s HAL:
The Tribunal acknowledged the active involvement of M/s HAL in the evasion of duty and upheld the imposition of penalty. However, considering the circumstances, the Tribunal found the penalty amount of ?10,00,000 to be excessive and reduced it to ?7,50,000 to serve the interest of justice.

Conclusion:
The appeal was partly allowed, with the penalty on M/s HAL reduced to ?7,50,000. The Tribunal affirmed that M/s HAL's actions facilitated the evasion of duty by M/s HSAL, justifying the penalty under Rule 209-A of the Central Excise Rules, 1944. The judgment emphasized the legal responsibility of entities involved in the fraudulent evasion of excise duty and upheld the principles of accountability and compliance with excise laws.