2018 (11) TMI 491 - AT - Central Excise

Clandestine removal - penalty u/r 209A of Central Excise Rules, 1944 on Shri Ajay Shah and on M/s Royal Synthetics - unaccounted production and clandestine clearance using the cover of legitimate invoices repeatedly while recording the production of alkyd and maleic resin - Held that - The proceedings against Shri Ajay Shah is not based on a separate set of evidences relating to his particular role as distinct from M/s Royal Synthetics. Therefore, the imposition of penalty on him under rule 209A of Central Excise Rules, 1944 is not in accordance with the law. Applicability of Rule 209A on M/s Royal Synthetics - Held that - The impugned order has rendered elaborate findings on the manner in which M/s Royal Synthetics stood to gain from the handing of goods that had been clandestinely removed from the premises of M/s Universal Polymers and the active collaboration that enabled the disposal of unaccounted production of M/s Universal Polymers. The findings per se are not contributed by Learned Counsel for appellants - The unquestioned documentary evidence would suffice to establish the clandestine removal and the handling of such goods by M/s Royal Synthetics. In the circumstances, the appeal of M/s Royal Synthetics fails to find favor. The penalty imposed on Shri Ajay Shah is set aside while the penalty imposed on M/s Royal Synthetics is confirmed - appeal allowed in part.

Issues Involved:
1. Imposition of penalties on M/s Royal Synthetics and Shri Ajay Shah under Rule 209A of Central Excise Rules, 1944.
2. Alleged clandestine removal of goods by M/s Universal Polymers.
3. Relevance and admissibility of retracted statements under Section 9D of Central Excise Act, 1944.
4. Applicability of Rule 209A to individuals and partnership firms.
5. Validity of private records to establish clandestine removal.
6. Separate imposition of penalties on partners and the firm.

Detailed Analysis:

1. Imposition of Penalties on M/s Royal Synthetics and Shri Ajay Shah:
The appellants sought the setting aside of penalties of ?10,00,000 each imposed under Rule 209A of Central Excise Rules, 1944, for their alleged involvement in the clandestine removal of goods by M/s Universal Polymers. The core issue was whether the appellants were culpable under Rule 209A, which requires active participation or abetment in evasion.

2. Alleged Clandestine Removal of Goods:
M/s Universal Polymers was accused of evading central excise duties amounting to ?29,23,381 through unaccounted production and clandestine clearance. The link with M/s Royal Synthetics involved the alleged receipt of these goods despite knowing they were clandestinely removed, thus evading duties of ?5,15,600 and ?89,433 during specified periods.

3. Relevance and Admissibility of Statements:
The appellants argued that the statements relied upon were retracted and lacked relevancy as they were not scrutinized under Section 9D of Central Excise Act, 1944. They cited the case of G-Tech Industries v. Union of India, emphasizing that statements must be examined as witnesses before being admitted as evidence. The absence of this procedure renders the statements irrelevant.

4. Applicability of Rule 209A to Individuals and Partnership Firms:
The appellants contended that Rule 209A is not applicable to individuals unless there is established active participation or abetment in evasion. They drew parallels with Section 9AA of Central Excise Act, 1944, and Section 140 of Income Tax Act, 1961, which allow for parallel imposition of penalties on companies and individuals but not on partnership firms, except under special circumstances as held in Amritlakshmi Machine Works v. Commissioner of Customs (Import), Mumbai.

5. Validity of Private Records:
The Revenue argued that the impugned order relied on parallel documents unearthed during the investigation, which were not challenged and thus validated the clandestine removal. They cited Gopal Industries Ltd v. Commissioner of Central Excise, Indore, where private records were deemed sufficient to establish clandestine removal, supported by corroborative statements and documentary evidence.

6. Separate Imposition of Penalties:
The Tribunal examined whether separate penalties could be imposed on partners and the firm. The decision in Amritlakshmi Machine Works affirmed that simultaneous penalties could be imposed on both, provided there is evidence of individual abetment or mens rea. The Tribunal found that the proceedings against Shri Ajay Shah were not based on separate evidence distinct from M/s Royal Synthetics, thus the penalty on him was not justified.

Conclusion:
The Tribunal upheld the penalty on M/s Royal Synthetics, finding sufficient documentary evidence of their involvement in handling clandestinely removed goods. However, it set aside the penalty on Shri Ajay Shah, as the evidence did not establish his individual culpability under Rule 209A. The judgment underscores the necessity of adhering to statutory procedures for admitting statements as evidence and the conditions under which penalties can be imposed on individuals and firms.

← Previous Next →