2022 (7) TMI 820 - AT - Central Excise

Benefit of conclusion of proceedings to co-noticees in the common SCN - Whether the appellants who are the co-noticees in the common show cause notice, whether they are entitled to benefit of conclusion of proceedings under Section 11A (1A) r/w proviso to sub Section 2 of Section 11A? - HELD THAT - There is no ambiguity in the provisions as contained in Section 11A (1A) r/w proviso to sub-Section (2). Admittedly, in the facts of the present case, the manufacturer Shree Raj Pan Masala Pvt Ltd have deposited the duty alongwith interest and penalty (as stipulated), during investigation before issue of the show cause notice. Further, the benefit of conclusion has been granted by the learned Commissioner to the manufacturer-Shree Raj Pan Masala Pvt. Ltd. It is further that the learned Commissioner have failed to consider the scope and purport of the words used in the statute other person . The statute clearly provides that the benefit of conclusion shall be applicable in respect of such person , that is the manufacturer or the person of whom duty is demanded and other persons which refers to co-noticees like directors, transporters, godown keepers, employees etc. Thus, these appellants are also entitled to the benefit of conclusion in terms of the proviso to sub-Section 2 r/w sub-Section (1A) of Section 11A of the Central Excise Act. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Entitlement to the benefit of conclusion of proceedings under Section 11A(1A) read with the proviso to sub-Section 2 of Section 11A for co-noticees.
2. Applicability of Section 11A to co-noticees in the context of penalties imposed under Rule 26 of Central Excise Rules, 2002.

Issue-wise Detailed Analysis:

1. Entitlement to the Benefit of Conclusion of Proceedings under Section 11A(1A) Read with Proviso to Sub-Section 2 of Section 11A for Co-noticees:

The core issue in these appeals is whether the appellants, who are co-noticees in a common show cause notice, are entitled to the benefit of conclusion of proceedings under Section 11A(1A) read with the proviso to sub-Section 2 of Section 11A. The brief facts reveal that the revenue investigated duty evasion by two manufacturers and issued a show cause notice demanding duty from Shree Raj Pan Masala Pvt Ltd. The SCN also included other co-noticees, including the directors and transporters. The duty liability was confirmed, and penalties were imposed on both the manufacturer and co-noticees.

Upon appeal, the Tribunal remanded the matter to the original authority to examine the applicability of the newly inserted provisions of Section 11A(1A) and their applicability to both the main appellant and other noticees. The original authority was directed to verify the facts of payments and the applicability of the benefit of deemed closure of proceedings to all noticees.

Upon remand, the Commissioner concluded the proceedings for the main party, Shree Raj Pan Masala Pvt Ltd, but denied the same benefit to the co-noticees, including the present appellants. The Commissioner observed that the SCN was issued to co-noticees for penalties under Rule 26 of the Central Excise Rules, 2002, and not under Section 11A of the Central Excise Act. Therefore, the benefit of conclusion of proceedings under Section 11A(1A) was not extended to them.

2. Applicability of Section 11A to Co-noticees in the Context of Penalties Imposed under Rule 26 of Central Excise Rules, 2002:

The appellants argued that the Commissioner erred in not extending the benefit of conclusion of proceedings to them. They contended that the provisions of Section 11A, particularly the proviso to sub-Section 2, clearly state that if the person from whom the duty is demanded has paid the duty in full along with interest and penalty, the proceedings in respect of such person and other persons to whom notices were served shall be deemed conclusive. They cited the Division Bench ruling in Orbit Jewellers vs. Commissioner of Customs, which held that the benefit of conclusion of proceedings should extend to co-noticees as well.

The Tribunal, considering the rival contentions, found no ambiguity in the provisions of Section 11A(1A) read with the proviso to sub-Section 2. It was noted that Shree Raj Pan Masala Pvt Ltd had deposited the duty along with interest and penalty before the issuance of the show cause notice, and the benefit of conclusion was granted to the manufacturer. The Tribunal observed that the Commissioner failed to consider the scope and purport of the term "other persons" in the statute, which refers to co-noticees like directors, transporters, etc.

Following the interpretation given by the Division Bench in Orbit Jewellers, the Tribunal held that the appellants, as co-noticees, are also entitled to the benefit of conclusion of proceedings under Section 11A(1A) read with the proviso to sub-Section 2 of Section 11A. Consequently, the appeals were allowed, and the impugned order was set aside concerning the appellants, granting them consequential benefits as per law.

In conclusion, the Tribunal clarified that the legislative intent behind Section 11A(1A) and its proviso is to extend the benefit of conclusion of proceedings not only to the main person liable for duty but also to other co-noticees involved, thereby reducing litigation and aiding in the expeditious collection of dues.

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