Demand of excise duty is valid if Assessee was aware that transaction was done without payment of duty

Rajesh Mangal Vs C.C.E. & S.T. (CESTAT Ahmedabad)

The CESTAT, Ahmedabad in Rajesh Mangal v. C.C.E. & S.T.-Ahmedabad-III [Excise Appeal No. 11712 of 2013-DB dated June 15, 2023] held that the demand for Excise Duty would be valid if the Assessee was aware that the transaction was done without the payment of duty and subsequently reduced the penalty imposed under Rule 26 of the Central Excise Rules, 2002 (“the CE Rules”).

Facts:

Rajesh Mangal (“the Appellant”) was working as DGM finance with M/s Electrotherm (India) Ltd (“the Company”).

A Show Cause Notice dated May 31, 2010 (“the SCN”) was issued by the Revenue Department demanding excise duty of INR 1,30,14,009/- from the Company and a penalty of INR 10 lacs was demanded from the Appellant under Rule 26 of the CE Rules, which was adjudicated by the Commissioner of Central Excise who vide Order-In-Original confirmed the penalty however, the demand of excise duty was settled under SVLDRS-2019.

Aggrieved by the order the Appellant filed an appeal before the CESTAT.

The Appellant reiterated the case that the demand before the Company had been settled under SVLDRS-2019 and the Company had paid the duties as required under the scheme and the Appellant had no role in alleged non-payment of duty since, the work related to the removal of goods was handled by another person and as the Appellant was not involved in the case of evasion of duty so penalty cannot be imposed on the Appellant.

Issue:

Whether the Appellant is liable to penalty under Rule 26 of the CE Rules if the transaction of removal of goods was done without payment of duty?

Held:

The CESTAT, Ahmedabad in Excise Appeal No. 11712 of 2013-B held as under:

• Observed that, the demand for excise duty was valid as the transaction of movement of goods was undertaken, knowingly without the payment of excise duty.
• Observed that the Appellant had the ultimate responsibility of booking all the transactions and was aware that the transaction was made without the payment of duty.
• Noted that, the Appellant has placed reliance on multiple case, however, the court was of the view that the penalty under Rule 26 of the CE Rules is to be dealt with respective facts.
• Reduced, the penalty from INR 10 lacs to 1 Lacs.

FULL TEXT OF THE CESTAT AHMEDABAD ORDER

The brief facts of the case are that the appellant is working as DGM Finance with M/s. Electrotherm (India) Ltd. A case was made out under a common show cause notice dated 31.05.2010 against M/s. Electrotherm (India) Ltd wherein, Shri Rajesh Mangal, the present appellant was also made a party. There was an excise duty demand proposed against the company M/s. Electrotherm (India) Ltd for an amount of Rs. 1,30,14,009/-and a penalty under Rule 26 was proposed on the present appellant. A show cause notice was adjudicated by Commissioner of Central Excise, Ahmedabad-I vide Order-In-Original against the said order, the present appellant was imposed with a penalty of Rs. 10 lacs in terms of Rule 26 of Central Excise Rules, 2002 therefore, the present appeal filed by the appellant.

02. Shri M.G. Yajnik, learned counsel appearing on behalf of the appellant submits that as regard the main case of M/s. Electrotherm (India) Ltd the same has been settled under SVLDRS-2019 and the company has paid the duties as required under the scheme. He submits that as regard the present appellant, he has no role in the non-payment of duty by the company as the work related to removal of goods was being handled by one Shri S.G. Pathak. Even, the present appellant has not given any statement in his personal capacity. He has given a statement only for and on behalf of the Director of the company. In this fact, the appellant being not involved in case of evasion of duty, cannot be imposed penalty under Rule 26. He also submits that no specific sub-rule or clause of Rule 26 was invoked for imposing penalty. For this reason also the penalty under Rule 26 was wrongly imposed. In support of his submission, he placed reliance on the following judgments:-

• Commissioner of C. EX. Chandigadh Vs. Pepsi Food Ltd. – 2010 (260) ELT 481(S.C)
• Manohar Singh Rana Vs. Commissioner of Central Excise, Indore – 2017 (357) ELT 1163 (Tri. – Del.)
• Raymond Apparels Ltd. Vs. Commissioner of Central Excise, Thane-I 2013 (294) ELT 151 (Tri.- Mumbai)
• of C.Ex. Pune-III Vs. Jamshri Ranjitsinghji SPG. & Weaving Mills Co. Ltd. – 2014 (302) ELT 574 (Tri. Mumbai)
• Metro Enterprise Vs. Commissioner of Central Excise, Thane-II 2014 (311) ELT 785 (Tri. Mumbai)
• Amrit Foods Vs. Commissioner of Central Excise, U.P. 2005 (190) ELT 433 (S.C)
• Oswal Knit India Ltd. Vs. Commissioner of C.Ex. Ludhiana – 2006 (204) ELT 510 (Tri. – Del.)

03. Shri G. Kirupanandan, learned Assistant Commissioner (AR) appearing on behalf of the revenue reiterates the finding of the impugned order. He further submits that the appellant being DGM-Finance of the company is responsible for all the transactions, be it clandestine removal or otherwise. Accordingly, he is recording sales of the goods in the books of accounts therefore, he is very well aware of the overall affairs of the company hence, rightly imposed penalty under Rule 26. He placed reliance on the following judgments:-

• Indo Farm Tractors & Motors Ltd. Vs. Union Of India – 2008(222) ELT 184(H.P)
• Case New Holland Construction Vs. Commiseioner of C.Ex. Indore – 2013 (287) ELT 447 (Tri.-Del.)
• Ronak Chaudhari Vs. CCE, Surat-I, Final Order No. A/12576/2021-dtd.02.12.2021
• Naresh Agarwal Vs. CCE Vadodra –II – A/1056/2020 dtd. 27.02.2020
• Mangalam Druga & Organics Ltd Vs. CCE, Surat-I – A/12582-12584/18 dtd14.11.2018
• Rajeev Reniwal Vs. CCE, Ahmedabad –III A/10972/2018 dtd 15.03.2018
• Paragon Steel Ltd Vs. CCE, Calicut 2018 (15) GSTL 298 (Tri-Bang)
• Goyal Ispat Ltd Vs. CCE, Puducherry ,2017 (6) GSTL 210 (Tri-Chennai)
• Sanjay Vimalbhai Deora Vs. CESTAT 2014 (306) ELT 533 (Guj.)
• Sanjay Vimalbhai Deora Vs. CESTAT 2014 (309) ELT A131 (Guj.)

04. I have carefully considered the submissions made by both the sides and perused the record. I find that there is a force in the counsel’s submission that from the record it appears that the major work related to removal of goods is looked after by one Shri S.G. Pathak and the appellant’s personal statement was not recorded. The statements which he has given to the investigating officer is on behalf of the Director accordingly, such statement can be used against the Director only and not anyone else. However, the appellant being worked as DGM Finance ultimately all the transactions are finally booked in the books of accounts and for which the appellant is responsible as he was aware with the transaction made without payment of duty.

4.1 As regard the duty, the same has been admitted by the company therefore the evasion of duty is not under dispute. As regard the judgment cited by both the sides, I am of the view that as regard the penalty under Rule 26 each case has to be dealt with in its fact therefore, without relying to any judgment considering the involvement of the appellant, I am of the view that the appellant deserves for leniency therefore, I reduce the penalty from Rs. 10 lacs to Rs. 1 lac.

05. Therefore, the impugned order in respect of the present appellant is modified to the above extent. The appeal is partly allowed in the above terms.

(Pronounced in the open court on 15.06.2023)

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