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TMI Blog2014 (2) TMI 1290X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account with intent to evade payment of duty of excise leviable thereon. The Charge against the co-applicant - At para 10.2 of the show cause notice is that he “definitely’ had prior knowledge relating to such evasion of Central Excise duty by way of clandestine removals, etc., by ‘notice No. 1‘ and that such unlawful act would have never taken place without his consent. .. therefore, appears to have had knowledge or reason to believe that the goods thus removed in contravention of the provisions of law were liable for confiscation…. therefore, appears to have rendered himself liable for penalty in terms of Rule 26 of the said Central Excise Rules, 2002.” The DGCEI submissions on the co-applicant’s application for settlement confirm this allegation. We agree with the finding that there was clandestine evasion of excise duty and that, therefore, full immunity from penalty cannot be granted to the applicant (Nos. 1 and 2) and also that immunity from prosecution granted to them should be subject to terms and conditions imposed regarding payment of duty, penalty and interest. The rest of the findings of the learned Member are in consonance with our view that there was c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service Tax, Ranchi Commissionerate Central Revenue Building, 5, Main Road, Ranchi-834001. 2. Briefly, the facts of the case are that the applicant-company is the manufacturer of M.S. Ingot falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985 and holds Central Excise registration. On 7-11-2012, the officers of DGCEI searched the aforesaid factory-cum-office premises of the applicant and other related premises. They seized some records, documents and obtained statements from concerned persons. Examination of the seized records and perusal of statements revealed that the documents in seized File No. 03/JPISPL/FAC/12 were actually Gate Passes / Weight Slips , used for clandestine removal of 765.37 M.T . of M.S. Ingots without payment of C.E. duty. The officers also recovered and seized ledger account vide seized File No. 01/JPISPL/FAC/12, which contained details of transactions during the period from September 12 to November 12 including those relating to the clandestine removal of the aforesaid clandestinely removed goods involving C.E. duty amounting to ₹ 30,01,065. The co-applicant, in his statement dated 16-11-2012 submitted, inter al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .E. duty ₹ 30,01,065 and also admitted additional liability of ₹ 1,15,522 towards interest, totalling ₹ 31,16,587. They deposited the said amount of ₹ 31,16,587 by e-payments @ ₹ 5 lakh each on 15-11-2012, 15-12-2012 and @ ₹ 10 lacs on 16-1-2013, 7-2-2013 and balance ₹ 1,16,587 on 8-6-2013 (Rs. 1,065) and 16-6-2013 (Rs. 1,15,522) before approaching the Commission. 4.2 The co-applicant, in his application dated 24-6-2013 referred to the acceptance of the liability towards C. Excise duty as demanded in the SCN along with interest payable thereon by the applicant. He requested for waiver of penalty on himself. He initially did not submit the particulars of other settlement application(s) made by him, but in reply to the statutory notice informed that he submitted another application for settlement as co-applicant in the matter of M/s. Renuka Ispat Pvt. Ltd. involving C.E. duty ₹ 15,09,675 on clandestine removal of excisable goods, which is pending before this Bench. 4.3 Having admitted duty liability of more than ₹ 3 lac, and claiming to have made full disclosure while approaching for settlement, the applicants prayed for all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estine .dearances of finished goods viz. MS ingots by the applicant-company and the activities leading to clandestine sale of their finished goods were very much within the knowledge of the co-applicant, who, in his confessional statement, admitted the above facts and made the said advance payment towards the outstanding duty liabilities; that thus apparently he was involved in the activity of clandestine manufacture and clearance of finished excisable goods without the cover of Central Excise invoices and without payment of applicable Central Excise duty. Citing precedence of the decisions of this Bench in Final Order Nos. F-245/CE/10-SC(KB), dated 12-10-2010, F-246/CE/10-SC(KB), dated 12-10-2010 and F-244/CE/I0-SC(KB), dated 12-10-2010 where penalty was imposed both on the applicants and the co-applicants therein, it was prayed that in view of their wilful act or omission with the mala fide intent to evade payment of Central Excise duty, their prayer for immunity from penalty and prosecution may not be granted by the Hon ble Commission. Enclosing the work sheet for calculating interest liability, it was stated that the said amount was found to be ₹ 97,504, instead of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd well-planned evasion of duty in a systematic manner. Goods admitted to have been cleared clandestinely without payment of duties were not entered in the official records prescribed under the Central Excise Act and Rules. Accordingly, these transactions and the profits generated from the same cannot be recorded or utilised by Applicant No. 1. These profits have to be diverted and utilised somewhere else. Applicant No. 2 has played a key role in this entire exercise of duty evasion and utilisation of illegally generated profits as he has in his statement dated 16-11-2012 admitted that he looks after every aspect of the business of Applicant No. 1 including purchase of raw material and sale of finished goods. 11. Taking the above into account and in the facts and circumstances of the case, the Bench settles the case under Section 32F of the Act on the following terms and conditions :- ORDER Central Excise Duty : The Central Excise Duty in this case is settled at ₹ 30,01,065. Interest : The amount of interest is settled at ₹ 97,504. The abovementioned settled amounts should be appropriated by the jurisdictional Commissioner from the deposit made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tral Excise duty evasion by wilful suppression of material facts pertaining to production and removal of finished excisable goods, that is, MS Ingots without proper accountal which are mainly, against applicant noticee number 1, as under - (a) Para 6.0 of the show cause notice - alleges that noticee number 1 indulged in unaccounted dispatch/removal of finished excisable goods in their factory premises without discharging duty and have not followed any of the required statutory provisions, like, recording production and removals of finished goods in their Daily Stock Account and issuance of invoices and in order to hoodwink the Authority used weighment slips as dispatch documents. (b) Para 10.1 spells out the contraventions by noticee number 1 (applicant) of various provisions - Rules 4, 6, 10, 11 and 12 of the Central Excise Rules, 1944, Sections 91 and 93 of the Finance Act, 2004 and Sections 136 and 138 of the Finance Act, 2007. That by their deliberate acts of omission and commission, noticee number 1 has rendered themselves liable for penalty in terms of Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, etc., by noticee No. 1 , which is the applicant-company and further that such unlawful act would have never taken place without his (co-applicant s) consent and thus he appears to have had knowledge or reason to believe that the goods thus removed were liable for confiscation. On the other hand all the specific charges of violation of Rules by removal of goods without proper assessment, non-payment of duty, non-maintenance of records, non-issue of invoices, non-submission of returns have been made in respect of the applicant-company and not against the Director even considering that he had stated that he looked after all aspects of the business. Thus the aspect of the amount of penalty on the Director needs closer examination. 19. We agree with the finding that there was clandestine evasion of excise duty and that, therefore, full immunity from penalty cannot be granted to the applicant (Nos. 1 and 2) and also that immunity from prosecution granted to them should be subject to terms and conditions imposed regarding payment of duty, penalty and interest. The duty liability, interest and penalty of ₹ 6,00,000/- imposed on the applicant No. 1, the company (noticee number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ove, it appears to have been assumed that it is the Director (and not the company) on whom the liability arises or shifts for the transactions and profits that have not come on record of the manufacturing company. The above inference does not appear to be sustainable in law, particularly, in view of the fundamental difference between Section 11AC of the Central Excise Act, 1944 and Rule 26 of the Central Excise Rules, 1944 regarding statutory mandatory and non-mandatory character of the two penalties. (v) The inference in the context of profits arising (and being diverted) through evasion of excise duty in respect of the co-applicant but not the company, is thus only on assumption basis. The company cannot be disassociated from the Director merely on the ground that the transactions were not on record. In fact the company has appointed the same Director as their Principal Officer to represent it for their Case of Settlement. (vi) Under law, the manufacturing entity is the company and under law itself, the manufacturing company is liable for the acts of its agents, servants, etc. Thus, the company s responsibility remains even though acts of omission or commission were c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r short-payment or erroneous shall be as follows : (a) Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded for any reason, other than the reason of fraud or collusion or any wilful misstatement or suppression of facts or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade, payment of duty, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to the duty so determined; However, Rule 25 of the Central Excise Rules, 2002 reads as Subject to the provisions of Section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer, - (a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or (b) does not account for any excisable goods produced or manufactured or stored by him; or (c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] it was held that It is an undisputed position that in this case that the dues/arrears of excise duty and penalty are that of the company. Therefore, the recovery proceedings under the Recovery Rules, 1995, can be taken only against the company, as it alone is the defaulter. There is no provision to recover the arrears of the company from its Directors and/or shareholders under the said Act. The arrears of dues belonging to a limited company are recoverable only from the limited company concerned which is an independent entity in law, particularly so, as it obtains a separate registration under the Act . Consequently, the dues of the company cannot be recovered from the directors and/or individual shareholder of the company . Further, it is pertinent to note that it is not the case of the respondents that they are seeking to lift the corporate veil of the said company to establish that the said company was a mere shell and being utilised to defraud the Revenue of its legitimate dues. Further the case of lifting the corporate veil, if any, was to be made out at the time notices of demand were issued to the said company by making the Directors/shareholders liable to pay the dues ..... X X X X Extracts X X X X X X X X Extracts X X X X
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