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TMI Blog2012 (5) TMI 474X X X X Extracts X X X X X X X X Extracts X X X X ..... not be levied if upon the evidence on record a case is made out for levy of such penalty, petition partly succeeds and is, accordingly, allowed, penalty of Rs. 2 lakhs on the petitioner No. 2 under Rule 209A of the Rules is sustained - 16121 of 2003 - - - Dated:- 26-4-2011 - Harsha Devani and R.M. Chhaya, JJ. REPRESENTED BY : Shri Paresh M. Dave, Advocate, for the Petitioner. Shri Varun K. Patel, Standing Counsel, for the Respondent. [Judgment per : Harsha Devani, J. (Oral)]. By this petition under Article 226 of the Constitution of India, the petitioners have challenged the order No. CI/674-76/WZB/2003, dated 11-3-2003 [2003 (154) E.L.T. 461 (Tribunal)] passed by the Customs. Excise Gold Control Appellate Tribunal (the Tribunal), Regional Bench, at Mumbai, insofar as the same confirms the fine of Rs. 5 lakhs and penalties of Rs. 3 lakhs and Rs. 2 lakhs on the petitioners. 2. The petitioner No. 1, a Private Limited Company is engaged in the business of manufacture of plastic crates which are used for transportation of soft drinks and other items. It is the case of the petitioners as stated in the petition that the crates are very bulky in nature and they re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btaining permission to store the finished goods at the said premises, the officers of the Central Excise Department visited the said neighbouring premises and later on, the petitioners premises and seized the said 70,000 plastic crates shifted thereto. The officers also seized 87,500 plastic crates lying in the open factory compound on the alleged ground that since the said compound is common for two factories, both belonging to the petitioners, the goods stored in the said common compound were to be considered as stored in the premises of the petitioners other unit situated in the same factory compound. The officers also visited the petitioners factory premises on 8-12-1999 and seized one truck load with 4215 plastic crates which were leaving the factory. However, it is not necessary to refer to the said aspect in detail as the Tribunal has decided the issue with regard to the crates found in the truck in favour of the petitioners. 4. Pursuant to the aforesaid seizure, a show cause notice dated 7-6-2000 came to be issued to the petitioners for confiscation of the seized goods, for recovery of the duty and for imposition of penalty. The notice also proposed imposition of perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Rule 209A of the Rules. 6. Inviting attention to the provisions of Rule 173(Q) of the Rules, it was submitted that the said rule opens up with the words subject to the provisions contained in Section 11AC of the Act and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57-U , in the circumstances, it is only where a manufacturer, producer, registered person of a warehouse or a registered dealer commits any of the defaults specified in the said rule, and the said default is of a nature as contemplated under Section 11AC of the Act, 1944 and sub-rule (4) of Rule 57-I and sub-rule (6) of Rule 57-U, that the provisions of Rule 173Q of the Rules can be invoked. Referring to the provisions of Section 11AC of the Act, it was submitted that the said provision envisages non-levy, short levy etc. of duty by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder, with the intent to evade payment of duty. Referring to sub-rule (4) of Rule 57-I, it was submitted that the said provision also contemplates credit of duty being wrongly taken by reason of fraud, wilful mis-statement, coll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of M/s. Hindustan Steel Ltd. v. State of Orissa, AIR 1970 SC 253 = 1978 (2) E.L.T. (J159) (S.C.), for the proposition that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. The learned advocate, accordingly, submitted that in the present case, it is apparent that the petitioner had not acted deliberately or in defiance of the law and as such, penalty ought not to have been imposed on the petitioners. The decision of the Punjab Haryana High Court in the case of Commissioner of Central Excise, Chandigarh v. Sadashiv Ispat Ltd., 2010 (255) E.L.T. 349 (P H) was cited for the proposition that, where the Department had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counted for and were removed from the registered premises of manufacturer. In fact, the petitioners kept on piling up the goods in the said two premises for several days and when caught, the petitioners have come out with the plea that the petitioners have simply failed to obtain permission from the Department. It was submitted that the conduct of the petitioners of removing the finished goods without entering the same in the statutory stock register to a different premises and not seeking permission from the Department, was not a technical breach, but a serious offence under the Central Excise Act. This was not a simple case of non-obtaining of permission from the Department, but a clear case of serious breach of the provisions of the Central Excise Act which might have resulted into illicit removal of the goods. It was submitted that in the circumstances, considering the gravity of the offence committed by the petitioners, the Tribunal was justified in upholding the penalty to the extent upheld by it. 12. Next, it was submitted that the contention as regards applicability of Rule 173Q of the Rules has been raised for the first time during the course of hearing of the present pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there was no intention to evade duty on the petitioners part and failure on the part of the petitioners was of not obtaining a simple permission, none of the ingredients necessary for justifying even a token penalty were satisfied. It is averred in the petition that the acts of confiscation and imposition of fine as well as penalty would be justified only when an assessee was guilty of contumacious conduct, but not when there was only a technical or venial breach on the part of the assessee. Moreover, it is an admitted position that the contention as regards the applicability of the aforesaid rules had been raised before the lower authorities. Hence, it is not as if the respondents are not aware of such a contention having been raised. Further, the contention as regards the applicability of the aforesaid rules is a pure question of law and as such, it is permissible for the petitioners to raise the said contention even at this stage, more so, when it goes to the root of the matter inasmuch as, if the petitioners succeed on the issue, the fine and penalty levied under Rule 173Q of the Rules would be without jurisdiction 15. In the light of the aforesaid facts and contentions rais ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avail himself of the exemption provided in Section 5, he had to submit an application in Form I for a licence and the Form of the licence shows that the licence was subject to the provisions of the Act and the rules made thereunder which required the licensee to submit returns as required and also to keep true accounts under Section 13. This shows that the giving of the licence was subject to certain conditions being observed by the licensee and the licence itself was issued subject to the Act and the rules. But it was contended that the words subject to do not mean conditional upon but liable to the rules and the provisions of the Act. So construed Section 5 will become not only inelegant but wholly meaningless. On a proper interpretation of the section it only means that the exemption under the licence is conditional upon the observance of the conditions prescribed and upon the restrictions which are imposed by and under the Act whether in the rules or in the licence itself; that is, a licensee is exempt from assessment as long as he conforms to the conditions of the licence and not that he is entitled to exemption whether the conditions upon which the licence is given are f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t or the Rules made thereunder, with intent to evade payment of duty. Likewise, sub-rule (4) of Rule 57-I of the Rules speaks of wrongful taking of credit of duty paid on inputs by reason of fraud, willful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty. Similarly, sub-rule (6) of Rule 57-U of the Rules speaks of wrongful taking credit of the specified duty paid on capital goods by reason of fraud, wilful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty. Thus, for the purpose of invoking either of the aforesaid three provisions, the condition precedent which is required to be fulfilled is that there should be fraud, wilful mis-statement, collusion or suppression of facts, or contravention of any of the provisions of the Act or the Rules made thereunder on the part of the petitioner, with intent to evade payment of duty. 22. Clause (a) sub-rule (1) of Rule 173Q of the Rules would be attracted only where a manufacturer, producer, registered pers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Rule 25 of the Central Excise Rules. 24. Examining the facts of the present case, in the light of the aforesaid legal position, a perusal of the impugned order indicates that the Tribunal has recorded that the proceedings do not show whether the goods so stored were accounted in RG-1 Register. The assessee put forth strongly that all the goods were accounted for. The Commissioner in para 30 of his order does not bring out the basis for his belief that the goods were not so recorded. The Tribunal noted that the lack of accounting in RG-1 Register would attract penalty proceedings under Rule 173Q(1)(b) of the Rules and that the act of removal of goods without payment of duty which attracted provisions of Rule 173Q(1)(a) is much more serious. The Tribunal, however, in paragraph 22 of the order, has observed that the action of the petitioner of removing the goods from the place of manufacture and storing the same in adjacent premises was not suggestive of intention to evade duty. Thus, the Tribunal has noted that the provisions of clause (a) of sub-rule (1) of Rule 173Q and clause (b) of sub-rule (1) of Rule 173Q are duly satisfied. However, as observed hereinabove, for the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to believe are liable to confiscation under the Act or the rules, shall be liable to a penalty not exceeding three times the value of such goods or five thousand rupees, whichever is greater. On behalf of the petitioners it has been contended that once it is held that the goods are not liable to confiscation, penalty under Section 209A of the Rules cannot be imposed for the reason that the condition precedent for invoking the said rule, viz., that the person concerned should have reason to believe that the goods are liable to confiscation would not be satisfied. According to the learned advocate if the goods are not liable to confiscation, the question of there being any reason to believe that the same are liable to confiscation would not arise, hence, penalty could not have been imposed under Rule 209A of the Rules. The submission advanced by the learned advocate for the petitioners does not merit acceptance for the reason that the requirements for confiscation and penalty under Rule 173Q of the Rules are different than the requirements for imposition of penalty under Rule 209A, inasmuch as for invoking Rule 209A of the Rules the ingredients of Section 11AC and Rules 57-I( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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