Ultramix Computer Support System Pvt. Ltd. Vs Commissioner of CGST & CE (CESTAT Mumbai)
CESTAT Mumbai held that penalty under rule 209A of the Central Excise Rules, 1944 can be levied only if it is found that the concerned person have dealt with the goods in any manner which they knew are liable to confiscation. Role of co-noticee proved and hence penalty justifiable.
Facts-
Show cause notice was issued alleging that assessee failed to pay appropriate excise duty on full air conditioner in split form and also alleging clearance against two dummy units along with interest and various penalty.
Conclusion-
Appellant 2 and Appellant 3 admitted to their role in the alleged activities for evading the central excise duty they also admitted the fact that they were collecting the duty @ 30 % on the value of goods supplied to their Customers as Central Excise Duty as per the contract, but were not paying the same to government account. Hence we do not have any hesitation in holding that the both Shri Shrikant Shiwadkar and Shri Jayant Shiwadkar were in complete knowledge of the things in relation to clearance of these goods without payment of duty. These goods which have been cleared without payment of duty are liable for confiscation and hence penalties under Rule 2009A is justifiable and cannot be faulted with.
FULL TEXT OF THE CESTAT MUMBAI ORDER
These appeals are directed Order in Original No 10/CEX/2012 dated 30.03.2012 of Commissioner of Central Excise, Pune. By the impugned order Commissioner has held as follows:
“ORDER
i. I confirm and demand Central Excise Duty amount of Rs. 18,00,000/- (Rs. eighteen lakh only) on clearances made by Ms Shrikant Refrigeration Company & M/s Excel Technology and order recovery of the same from M/s Ultramatix Computer Support Systems Pvt. Ltd. under the provisions of Sec.11A of Central Excise Act, 1944 as proposed vide SCN F.No. V(8415)15-204/Adj/99 dtd. 22.09.1999.
ii. I order that the duty demanded to the tune of Rs.18,44,400/- in Annexure B to the SCN F. No. V (8415)15-204/Adj/99 dtd. 22.09.1999 does not survive for confirmation.
iii. I impose penalty of Rs.2,00,000/-(Rs. Two lakh only) under Rule 173Q of the Rules on M/s Ultramatix Computer Support System Pvt. Ltd.
iv. I impose personal penalty of
a. Rs. 1,00,000/-(Rs. One lakh only) under Rule 209A of the Rules on Shri. Shirwadkar, Director of M/s Ultramatix Computer Support System.
b. Rs. 50,000/-(Rs. Fifty thousand only) under Rule 209A on Shri. Jayant Shirwadkar, partner of M/s Ultramatix Computer Support System Pvt. Ltd.
v. I order confiscation of land, building plant and machinery, material belonging to M/s Ultramatix Computer Support System Pvt. Ltd. under Rule 173Q(1) of the Rules. However I give option of payment of redemption fine of Rs. 10.00.000 only) in lieu of the said confiscation to M/s Utramatix Computer Support Systems Pvt. Ltd.
This order is issued without prejudice to any other action that may be taken under this Act or any other Act for the time being in force within India.”
1.2 For ease of reference we refer the appellant in Appeal No E/995/2012 as Appellant 1, in Appeal No E/996/2012 as Appellant 2 and in Appeal No E/997/2012 as Appellant 3.
2.1 Appellant 1 is engaged in the manufacture of Split Air conditioners falling, under Ch. Heading 8512 of Central Excise Tariff Act, 1985.The goods manufactured by the assessee are supplied mainly to DOT, MTNL & AIR.
2.2 On the basis of intelligence gathered by the departmental officers, that the Appellant had floated two dummy units viz. M/s Shrikant Refrigeration Co. (in short SRC) and M/s Excel Technology (in short ET) at the same premises, the factory premises of the assessee was visited and statements of certain persons were recorded as part of investigations. It appeared that the assessee had floated the dummy units with intent to avail inadmissible exemption and benefit of Notifn.75/87 dtd. 1.3.1987. It further appeared that
a. All the three units had common machinery and labour force
b. Common muster roll to all the three units
c. Use of label of M/s Ultramatix on the goods manufactured by other two units and
d. All the three units had common manufacturing premises.
2.3 Hence, a Show Cause Notice dated 22.09.1999 was issued to the Appellants alleging therein the contraventions of following Rules of erstwhile Central Excise Rules, 1944 (in short the Rules):
a. Rule 9(1) of the C. Excise Rules in as much as they failed to pay appropriate Central Excise Duty on full air conditioners in split form for the period from Sept.1994 to March 1995.
b. Rule 173(C) read with Rule 173F of the Rules in as much as they failed to determine the correct duty liability on the goods i.e. air conditioner in split/package form cleared by them.
c. Rule 173B of the Rules in as much as aforesaid two companies floated by the assessee as dummy units, availed SSI exemption under Notification No. 75/87 dtd.01.03.1987.
2.4 The show cause notice ask the appellants to show cause as to why:
a. Central Excise duty amounting to Rs. 18,44,400/- at full rate of 60% should not be recovered from the assessee in respect of split air conditioners cleared under the guise of parts and accessories @30%
b. The clearance of M/s Ultramatix and clearances shown against the two dummy units viz. M/s Shrikant Refrigeration Co and M/s Excel Technologies should not be clubbed together on the basis of invoices issued by the said two dummy units and recover Central Excise duty of Rs. 19,35,000/-
c. Total duty amounting to Rs 37,79,400/- (Rs 18,44,400 + Rs 19,35,000) should not be demanded and recovered from them by invoking Proviso to section 11 A (1) of Central Excise Act, 1944 read with rule 9 (2) of the Central excise Rules, 1944.
d. Interest @20% should not be recovered from them under Sec.11AB of the Act
e. Penalty should not be imposed on Appellant 1 under Sec. 11AC of the Act
f. Penalty should not be imposed on Appellant 1 under 173Q of the Rules.
g. Penalty should not be imposed on Shri. Shrikant Shirwadkar and Smt. H.S.Shirwadkar, Directors of UCSSPL; Smt. H.S.Shirwadkar Partner of the dummy unit viz. M/s Shrikant Refrigeration Co. and Shri. Jayant Shirwadkar, Partner in the other dummy company viz. M/s Excel Technologies (in short ET), under Rule 209A of the Rules.
h. Land, building, plant, machinery, material etc. should not be confiscated under Rule 173Q(2) of the Rules.
2.5 Further para 5 of the show Cause Notice stated as follows:
“5. And Shri Shrikant Shirwadkar, Director of M/s UCSSPL., Shri Jayant Shirwadkar, Partner of the said dummy unit i.e. M/s Excel Technology and Mrs H S Shirwadkar, Director of M/s UCSSPL & Partner of the said floated unit i.e. M/s Shrikant Refrigeration Co are hereby called upon to show cause to the same authority within thirty days of the receipt of this notice as to why personal penalty should not be imposed on them under the provision of Rule 209A of the Rules.
2.6 The SCN was adjudicated vide Order in Original NO. 42/CEX/2001 dtd. 09.01.2002. recording findings as follows:
i) The extended period was not invokable so far as the clearances of M/s Ultramatix Computer Support System were considered, since the classification list w.e.f 1994 was finally approved by the jurisdictional Asstt. Commissioner, holding therein that the goods manufactured by M/s Ultramatix were classifiable under Chapters sub heading 8415.00 as parts attracting duty @30%.
ii) From the admittance by various partners/ employees of the companies, it was concluded that both M/s SRC and M/s EL were the units floated by the assessee as a temporary measure for catering to their requirements of execution of the pending orders and accordingly the clearances made by these three units were to be clubbed.
iii) From the evidence on record it was concluded that all the three units viz. M/s UCSSL, M/s SRC and M/s ET, cleared 14 number of complete AC system during the period under consideration and not parts of AC as claimed by the assessee. This fact was admitted by the Partners/ Directors in the statements recorded by the officers of the department. As such, the demand to the extent of clearances of AC units was sustainable for the extended period.
2.7 On the basis of above findings order in original –
> dropped the proposed duty demand of Rs. 18,44,400/-demanded on clearances effected by M/s UCSSPL during the period covered in the classification list finally approved by the jurisdictional Asstt. Commissioner.
> confirmed the demand of Rs. 18,00,000 being duty on the combined clearances of 14 AC systems, manufactured and cleared in tandem by the three units under Sec.11A of the Act read with Rule 9(2) of the Rules.
> imposed penalty of Rs. 1,80,000/- under Rule 1730 of the Rules on M/s UCSSPL;
> Personal Penalty of Rs.50,000/- on the Shri. Shrikant Shirwadkar, Director of M/s UCSSPL under Rule 209A of the Rules
> ordered for the confiscation of plant, machinery, material etc. of M/s UCSSPL under Rule 173Q(1) of the Rules, which was ordered to be released on RF of Rs. 50,000/- in lieu of confiscation.
2.8 Aggrieved by the aforesaid Order in Original, M/s UCSSPL filed an appeal with the Hon’ble CESTAT which was decided vide order No. A/387-388/WZB/2006/C-IV/EB dtd.20.02.2006, remanding the matter for de-novo adjudication with the following observations:
“2. The impugned order passed by Adjudicating Commissioner has confirmed part of the duty demand of Rs 18.00 Lakhs (Rupees Eighteen Lakhs only) by holding that even though all the three units are registered for the same premises, the clearances are required to be clubbed for determining the exemption limit and duty liability. We find that the Adjudicating Authority has wrongly referred to Notification No.1/93-CE dated 28.02.2003 which is not applicable to the impugned goods) instead of considering exemption Notification No.75/87-CE dated 01.03.1997. The Adjudicating Commissioner has also dropped part of the demand relating to the allegation of clearance of Air conditioners as parts as time barred.
3. We find inconsistency in the impugned order as he has held one part of the demand as time barred whereas he has confirmed duty demand for the other part. We also find that the Show-Cause-Notice was issued under provisions of Section 11A of the Act read with erstwhile Rule 9 (2) of the Central Excise Rules, 1944 while assessments over provisional and we do not find any reference to the final assessment in the order. It is surprising that while deciding whether the demand is time barred or not, the Adjudicating Commissioner has not checked the fact whether the assessments were provisional.
4. We also find that the Excise Authorities have issued 3 Registrations for 3 different applicants in respect of the same premises. No action appears to have been taken against such irregularity. In view of the inconsistencies and lacunae in the impugned order, we set aside the same and remand the matter for fresh adjudication to the lower authority who shall re-decide the matter after taking into account the correct notification and also facts regarding provisional assessment and pass’, fresh orders after giving an adequate opportunity of hearing to the appellants.
5. The appeals are allowed by remand.”
2.8 The show cause notice in remand proceeding was adjudicated as per the impugned order referred in para 1 above. Aggrieved appellants have filed these appeals.
3.1 We have heard Shri Rajesh Ostwal, Advocate for the Appellant and Shri N.N. Prabhudesai, Superintendent, Authorized Representative for the revenue. Both the sides have also filed written submissions.
3.2 Arguing for the appellants learned counsel submit as follows:
> The impugned Order-in-Original dated 30.3.2012 places reliance on the Order-in-Original dated 8.1.2002. In fact, the impugned Order affirms the finding of the Order dated 8.1.2002. It is not possible to segregate as to how much portion of the impugned Order is influenced by the Order dated 8.1.2002. The impugned Order placed reliance on the Order dated 8.1.2022 at para 6.9 which is not in existence & is therefore liable to be set aside in its entirety.
> The Show Cause Notice in the present case has been issued to UCSSPL proposing to club clearance of SRC and ET in UCSSPL. The notice has also been issued to one partner of SRC and one partner of ET. However, there is no Show Cause Notice issued to SRC and ET asking them as to why they are not dummy and why their turnover should not be clubbed in the turnover of UCSSPL. Non-issuance of Notice to SRC and ET vitiate the entire proceeding initiated in the present case. Kindly refer:
