Case Law Details
Karimbhai Nanjibhai Shah Vs C.C.E. (CESTAT Ahmedabad)
Introduction: The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Ahmedabad upheld a penalty imposed on Karimbhai Nanjibhai Shah for his role in facilitating the clearance of ‘Chhakkdo Rickshaw’ without payment of excise duty. The case emerged from the evasion of Central Excise Duties by certain manufacturers engaged in suppressing production and making clandestine clearances.
Detailed Analysis: The intelligent agency of the department detected the evasion and issued show cause notices to M/s Shree Rajshakti Automobiles, Ahmedabad, and others involved. Karimbhai Nanjibhai Shah, the appellant, was made liable for a penalty under Rule 26 of the Central Excise Rules, 2002. The matter was adjudicated through an Order-In-Original dated 03.10.2012, confirming Central Excise Duty of Rs. 2,48,83,940/- against M/s Shree Rajshakti Automobiles, along with penalties. A penalty of Rs. 1,00,000/- was imposed on Karimbhai Nanjibhai Shah.
During the proceedings, the main noticee, M/s Shree Rajshakti Automobiles, settled the dispute under the Sabka Vishwas (Legacy Dispute Resolution) Scheme (SVLDRS).
Karimbhai Nanjibhai Shah challenged the penalty, arguing that Rule 26 was wrongly invoked. He contended that his role was limited to providing his Automotive Research Association of India (ARAI-Pune) registration for the registration of vehicles with the RTO, as the manufacturers lacked the required ARAI registration. He further argued that he was not engaged in activities covered by Rule 26, such as transportation, sale, or purchase of excisable goods.
The appellant cited case laws in his favor, including the rulings in APPLE SPONGE AND POWER LTD. VS. COMMISSIONER OF SERVICE TAX and HOMAG INDIA PVT. LTD. VS. COMMR, OF C. EX., S.T. & BANGALORE-II.
However, the CESTAT Ahmedabad, after hearing both sides, found that Karimbhai Nanjibhai Shah was aware of the evasion scheme and facilitated the registration of ‘Chhakkdo Rickshaw,’ which was cleared without payment of Central Excise Duty. The tribunal concluded that he had dealt with non-duty paid goods in “any other manner,” falling under the purview of Rule 26. The case laws cited by the appellant were deemed irrelevant to the present matter.
Conclusion: In light of the evidence and the provisions of Rule 26, CESTAT Ahmedabad upheld the penalty on Karimbhai Nanjibhai Shah, dismissing the appeal. The decision reinforces the accountability of individuals involved in facilitating the evasion of excise duties, even if they are not directly engaged in transportation or sale of the goods. It emphasizes the importance of preventing any form of facilitation in such cases.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
The brief facts of the matter are that the intelligent agency of the department detected that certain manufacturers of “Chhakkdo Rickshaw” were evading payment of Central Excise Duties by suppressing their production and making clandestine clearances. After detailed investigations, a show cause notices was issued to M/s Shree. Rajshakti Automobiles, Ahmedabad where under the present appellant was also made liable for penalty under Rule 26 of the Central Excise Rules, 2002 for certain omissions and commissions will laid to evasion of Central Excise duty. The matter got adjudicated by impugned Order-In-Original dated 03.10.2012 where under Central Excise Duty amounting to Rs. 2,48,83,940/- was confirmed against M/s Shree. Rajshakti Automobiles, Ahmedabad and apart from imposition of penalty and penalties to another persons, a penalty of Rs. 1,00,000/- has also been imposed on the present appellant under Rule 26 of the Central Excise Rules, 2002. The appellant is before me against the above mentioned penalty of Rs. 1,00,000/-.
2. I have heard both the sides. The Learned Advocate appearing for the appellant has stated that main noticee in the matter M/s Shree. Rajshakti Automobiles, Ahmedabad have already settled the dispute under SVLDRS Scheme. It has also been mentioned that Rule 26 of the Central Excise Rules, 2002 has wrongly been invoked by the adjudicating authority for imposition of penalty against the appellant. It has been contended that only role of the appellant was to provide his registration of ARAI-Pune for getting the vehicle registered with RTO, as the manufacture of the vehicles were not having the required registration under Automotive Research Association of India (ARAI-Pune) (which is mandatory as per Rule 126 of Central Motor Vehicles Rules (CMVR), 1989). It has further been contended that for imposition of penalty under Rule, 26 of the Central Excise Rules, 2002, the person need to be engaged in a acquiring possession non-duty paid goods or he should be concerned with transportation, removing, depositing, keeping, concealing, selling or purchasing of any excisable goods which he knows or have reason to believe that same are liable for confiscation under Central Excise act. It has been the contention that since the appellant has not engaged in any of these activities and therefore the learned adjudicating authority should not have imposed penalty upon him under Rule 26 of the Central Excise Rules, 2002. The learned Advocate has also submitted that following case law in his favour as follows:-
- APPLE SPONGE AND POWER LTD. VS.COMMISSIONER OF SERVICE TAX, AUDIT-I-2018 (362) E.L.T 894 (Tri.- Mumbai)
- HOMAG INDIA PVT. LTD. VS. COMMR, OF C. EX., S.T. & BANGALORE-II-2017 (357) E.L.T 1194 (Tri.-Bang.)
2.1. I have also heard the learned departmental representative. Having heard both the sides, I find that appellant was having a registration with Automotive Research Association of India (ARAI-Pune) for production of vehicles in name of his firm namely Hakikat Auto Industries, Rajkot- Bhavnagar Highway Road, Chanvand, Amreli. He was also aware that manufacturer of the “Chhakkdo Rickshaw” cannot get their product registered with the RTO without ARAI certificate/registration. The appellant have facilitated registration of the “Chhakkdo Rickshaw” manufactured by M/s Shree Rajshakti Automobiles, Ahmedabad by providing his ARAI registration and thus facilitating sale and sale of “Chhakkdo Rickshaw” which was cleared without payment of Central Excise Duty. I reproduce role the appellant which has been elicitation by adjudicating authority with regard to the appellant.
“43. 5 Shri Karim Nanjibhai Shah, proprietor of M / s Hakikat Auto Inds, Amreli, had received 54 vehicles illicitly manufactured and cleared by the main noticee. It was clarified by him that he had received these vehicles from the main noticee and delivered the same to Shri Prakash Somaiya for the purpose of financing and onward delivery to ultimate customers. He has confessed that the said vehicles were received from the manufacturer without the cover of any Central Excise invoice evidencing payment of duties and delivered to Shri Prakash Somaiya for the purpose of financing and delivery to the ultimate customers. Moreover, 03 fake Central Excise invoices were recovered from the premises of M / s Esspee Finance, Rajkot, during the course of panchnama on 06.10.09. Both, Shri Karim Nanjibhai Shah, proprietor of M / s Hakikat Auto Inds, and Shri Prakash Somaiya, proprietor of M/s Esspee Finance, Rajkot, were very much aware about the procedure to be followed, however, they knowingly connived with the main noticee to receive the goods [54 vehicles] illicitly without the cover of Cenvat Invoice evidencing payment of duties. Moreover, recovery of 03 fake Central Excise invoices from the premises of M/s Esspee Finance clearly indicates that they every reason to believe that the goods cleared without payment of duties and on fake invoices, were liable for confiscation. They acquired possession of, or were concerned in transporting, removing, depositing, keeping, concealing seling or purchasing and dealt with the excisable goods, which were liable to confiscation. The ratio of the cases cited are not applicable inasmuch as in the case of Associated Plastics & Rayond [2007 (215) ELT 309] and M / s Carpenter Classic Exim (2006 (200) ELT 593] relates to imposition of personal penalty on emplyees under the Customs Act and in the case of Vinod Kumar (2006 (199) ELT 705, penalty was held to be not sustainable in view of the fact that intention to evade payment of Central Excise duty was not mentioned in the order. In the present case, the role played by Shri Karim N.Shah in evasion of the excisable goods has been clearly brought out. Therefore, I hold that both, Shri Karim Nanjibhai Shah, proprietor of M/s Hakikat Auto Inds, Amreli, and Shri Prakash Somaiya, proprietor of M / s Esspee Finance, Rajkot, are liable for personal penalty under Rule 26 of the said Rules.”
3. Before proceeding further, it will be proper to have a look of the provision of Rule 26 of the Central Excise Rules, 2002 which is reproduced here below:-
Penalty for certain “Rule 26 Offences – “[(1)Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or rupees 1[two thousand rupees,] whichever is greater.]
3[Provided that where any proceeding for the person liable to pay duty have been concluded under clause (a) or clause (d) of sub-section (1) of section 1 1AC of the Act in respect of duty, interest and penalty, all proceedings in respect of penalty against other persons, if any, in the said proceedings shall also be deemed to be concluded.]
[(2) Any person, who issues-
(i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or
(ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made there under like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.]”
3.1 From the facts of the matter and as per the provision of the Rule 26 of the Central Excise Rules, 2002, it can easily be inferred that the appellant though may not have physically handle the transportation, sale, purchase of “Chhakkdo Rickshaw” which was cleared without payment of the duty. However, he was fully aware that same are getting cleared without proper invoices and the manufactures of the “Chhakkdo Rickshaw” were not having required ARAI registration. The appellant has conscientious by provider his ARAI registration to the manufacturer/ buyers of non-duty paid Rickshaw for getting the same registered with RTO. Thus he has dealt with non-duty offending good in “any other manner”. Thus, I am of the view that he has facilitated the clearance of excisable goods without the payment of duty which ultimately resulted into evasion of the Central Excise Duty by manufacturer of “Chhakkdo Rickshaw”. The case laws which have been relied upon by the learned advocate are based on different facts altogether and therefore I consider that the same are not relevant in the present matter.
4. Accordingly, I hold that appeal is without any merit and I set aside the
5. Appeal is accordingly dismissed.
(Pronounced in the open court on 27.10.2023)
