2019 (7) TMI 1171 - AT - Central Excise

Clandestine removal - appellant had manufactured and cleared the impugned goods in the name of M/s. Nikita Plast, Daman without depositing the duty amount to the Government but instead deposited to the bank account of M/s. Nikita Plast - Freezing of accounts - HELD THAT - As far as the submission of the learned counsel appearing for the Fancy Bag Industries and Manoj Mehta, the only defense of Manoj Mehta is that he was the Manager of Fancy Bag Industries which is a proprietary concern and in the show-cause notice proposal is made to recover the duty from him whereas the demand has been confirmed against the proprietorship concern which is not tenable in law. This argument of the learned counsel is not tenable in view of reply of Manoj Mehta to the show-cause notice wherein he has admitted that he is in-charge of Fancy Bag Industries which is a proprietorship concern and is also looking after the day-to-day affairs. The entire illegal activity has been done by Manoj Mehta without the knowledge of Nikita Plast. In the absence of any evidence to prove the role of the appellant, Nikita Plast, freezing of the account and adjusting the amount therein towards the duty liability is wholly unjust, illegal and improper and therefore I order for defreezing of the account of the Nikita Plast and also hold that the appropriation from the said account is without any authority of law - the order of demand against the Fancy Bag Industries and also the imposition of penalty on Manoj Mehta is upheld - the penalty imposed on Nikita Plast under Rule 26 of Central Excise Rules, 2002 and also order for defreezing of the account of Nikita Plast with immediate effect is dropped. Appeal allowed in part.

Issues Involved:
1. Confirmation of central excise duty demand against Fancy Bag Industries.
2. Imposition of penalties on Fancy Bag Industries and Manoj Mehta.
3. Imposition of penalty on Nikita Plast.
4. Freezing of Nikita Plast's bank account.

Detailed Analysis:

1. Confirmation of Central Excise Duty Demand Against Fancy Bag Industries:
The adjudicating authority confirmed a demand of ?12,17,620 towards excise duty on poly bags for the period from 2000-01 to 2005-06, stating that Fancy Bag Industries had manufactured and cleared goods in the name of M/s. Nikita Plast without depositing the duty to the Government. The appellants argued that their turnover did not exceed the exemption limit and that the goods were cleared under the name of M/s. Nikita Plast to cater to urgent needs. The tribunal found that Manoj Mehta, in charge of Fancy Bag Industries, admitted to the clandestine clearance of goods and the collection of duty, which was deposited into Nikita Plast's account. The tribunal upheld the demand against Fancy Bag Industries, noting that the entire illegal activity was conducted by Manoj Mehta without the knowledge of Nikita Plast.

2. Imposition of Penalties on Fancy Bag Industries and Manoj Mehta:
The adjudicating authority imposed equivalent penalties under Section 11AC of the Central Excise Act, 1944, read with Rule 25 of the Central Excise Rules, 2002, and additional penalties under Rule 26 on Manoj Mehta and M/s. Nikita Plast. The tribunal upheld the penalties on Fancy Bag Industries and Manoj Mehta, emphasizing that Manoj Mehta was the mastermind behind the illegal activities and that the goods were cleared using forged invoices of Nikita Plast.

3. Imposition of Penalty on Nikita Plast:
The tribunal found that the imposition of a ?10,000 penalty on Nikita Plast under Rule 26 of the Central Excise Rules, 2002, was not sustainable. The tribunal noted that Nikita Plast had no knowledge of the activities of Fancy Bag Industries and did not authorize the use of their name for clearance of goods. The tribunal referenced the decision in Homag India Pvt. Ltd. to support the view that penalties under Rule 26 require the person to have knowingly and personally involved in violating the Central Excise provisions, which was not the case for Nikita Plast.

4. Freezing of Nikita Plast's Bank Account:
The tribunal found that the freezing of Nikita Plast's bank account was not legally tenable. The Department failed to verify or investigate the transactions in the frozen account and did not provide tangible evidence linking the account to the sale proceeds of clandestinely removed goods. The tribunal ordered the defreezing of Nikita Plast's account, stating that the seizure was based on mere presumptions and lacked corroborative evidence.

Conclusion:
The tribunal upheld the demand and penalties against Fancy Bag Industries and Manoj Mehta but dropped the penalty against Nikita Plast and ordered the defreezing of Nikita Plast's bank account. The appeals by Fancy Bag Industries and Manoj Mehta were dismissed, while the appeal by Nikita Plast was allowed with consequential relief.

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