Case Law Details
Monohar Lal Agarwala Vs Commissioner of CE & ST (CESTAT Kolkata)
Introduction: The Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Kolkata recently dealt with an appeal filed by a Chartered Accountant (CA), Shri Manohar Lal Agarwal. The appeal challenged the penalty of Rs. 50,000 imposed on the CA under Rule 26 of the Central Excise Rules, 2002, by the Commissioner of Central Excise & Service Tax, Dibrugarh. The penalty was imposed based on allegations related to the issuance of a certificate and its subsequent use by another party. In this article, we will explore the details of the case and the CESTAT’s decision.
Detailed Analysis:
1. Background: Shri Manohar Lal Agarwal, a registered Chartered Accountant, had issued a certificate related to the value of plant and machinery for M/s. Kitply Industries. The certificate was issued after examining the relevant records and was dated March 31, 2005.
2. Show Cause Notice: A show cause notice was issued on July 4, 2011, to M/s. Kitply Industries Ltd, Assam. In this notice, Shri Manohar Lal Agarwal was also included as Noticee No.5. The notice alleged that the CA had issued a certificate without examining the books of accounts of M/s. Kitply Industries, and this certificate was used by the company to claim an ineligible exemption under Notification 20/2007-CE dated April 20, 2007. Consequently, a penalty under Rule 26 was proposed for Shri Manohar Lal Agarwal.
3. Adjudication and Penalty: The notice led to an adjudication, resulting in the imposition of a penalty of Rs. 50,000 on Shri Manohar Lal Agarwal. However, the appellant challenged this penalty before CESTAT Kolkata.
4. Appellant’s Defense: During the hearing, Shri Mayur Agarwal, the son of the appellant, pointed out that the show cause notice had been issued to M/s. Kitply Industries based on the allegation that the company had incorrectly claimed an increase in the value of plant and machinery and used the certificate issued by Shri Manohar Lal Agarwal. However, he argued that the certificate issued by the CA had not been relied upon in the impugned order. Additionally, the notice and the impugned order referred to a Chartered Accountant Certificate dated June 30, 2007, which detailed the addition in the value of plant and machinery, but this certificate was not issued by Shri Manohar Lal Agarwal.
5. CESTAT’s Decision: After considering the arguments presented, CESTAT Kolkata observed that Shri Manohar Lal Agarwal had not specified the purpose for which the certificate was issued. The certificate, dated March 31, 2005, was not relied upon in the impugned order. Furthermore, the certificate mentioned in the notice and impugned order was a different one, dated June 30, 2007, and had not been issued by the appellant. CESTAT concluded that Shri Manohar Lal Agarwal had not abetted any offense committed by the company in claiming the benefit of exemption under Notification 20/2007-CE. Therefore, the penalty imposed on the appellant was not justified, and CESTAT set it aside.
Conclusion: The case of Shri Manohar Lal Agarwal vs. Commissioner of Central Excise & Service Tax is a clear example of the importance of proper documentation and defense. In this case, the penalty imposed under Rule 26 of the Central Excise Rules was quashed by CESTAT Kolkata due to the lack of evidence linking the appellant’s certificate to the company’s actions. This ruling highlights the significance of accurate record-keeping and the need for stringent evidence to support allegations of wrongdoing.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The present appeal has been filed by the Appellant, Shri. Manohar Lal Agarwal, Chartered Accountant, against the impugned order dated 24.02.2012 passed by Commissioner of Central Excise & Service Tax, Dibrugarh, wherein a penalty of Rs.50,000/- was imposed on him under Rule 26 of the Central Excise Rules, 2002. Aggrieved against the penalty imposed on him, the Appellant filed this appeal.
2. The Appellant is a registered Chartered accountant having its Firm under the name of M/s. M. L. Agarwala & CO, Tinsukia, Assam. The Appellant was asked by M/s. Kitply Industries to verify their books of Accounts and value the plant and machinery of the company as on 3 1.03.2005. After examining the relevant records, the Appellant issued a certificate dated 31.03.2005, certifying the value as on 31.03.2005 as Rs.2,89,68,573.34, as per their Balance Sheet.
3. On the basis of investigation done by the department, a Show Cause notice dated 04.07.2011 was issued to M/s.Kitply Industries Ltd, Assam, wherein the Appellant was also included as Noticee No.5. It was alleged in the Notice that the Appellant has issued Certificate relating to the value of plant and machinery of M/s. Kitply Industries without examining their books of accounts, on the basis of which the said assessee has taken ineligible exemption under Notification 20/2007-CE dated 20.04,2007. Accordingly, penalty under Rule 26 was proposed on the Appellant in the Notice. The Notice was adjudicated vided impugned order dated 24.02.2012, wherein the adjudicating authority imposed penalty of Rs.50,000/- on the
4. Shri. Mayur Agarwal, son of the Appellant appeared for the hearing and stated that the notice was issued to M/s. Kitply Industries on the basis of the allegation that the company have wrongly claimed the increase in value of plant and machinery and claimed the exemption provided under Notification No. 20/2007-CE dated 20.04.2007, on the basis of the certificate issued by the Appellant. He stated that the certificate issued by the Appellant has not been relied upon in the impugned order. The Notice as well as the impugned order refers only the Chartered Accountant Certificate dated 30.06.2007, giving the details of addition in value of plant and machinery. That certificate was not issued by the Appellant. Further, when they issued the certificate dated 31.03.2005, they have not mentioned the purpose for which it was issued. They have not given the certificate to M/s. Kitply Industries for the purpose of claiming the benefit of exemption Notification No. 20/2007-CE dated 20.04.2007. There no evidence on record to substantiate the allegation that the company has claimed the benefit of exemption notification on the basis of the certificate issued by them. Hence, the penalty imposed on the Appellant under Rule 26 of the Central Excise Rules is not justified and prayed for setting aside the same.
5. The Ld. A.R. reiterated the findings in the impugned order.
6. Heard both sides and perused the appeal records.
7. We observe that the present appeal has been filed by the Appellant against imposition of penalty of Rs.50,000/-on him under Rule 26 of the Central Excise Rules, 2002, in the impugned order. The allegation of the Revenue in the impugned order is that M/s. Kitply Industries have wrongly claimed the exemption provided under Notification No. 20/2007-CE dated 20.04.2007, on the basis of the certificate issued by the Appellant.
8. We observe that the Appellant has not specified the purpose for which the certificate was issued by him. He stated that the M/s. Kitply Industries have asked them to verify their books of Accounts and value the plant and machinery of the company as on 31.03.2005. After examining the relevant records, the Appellant issued a certificate dated 31.03.2005. We find that this certificate was not relied upon in the impugned order. Para 14 of the impugned order refers a Chartered Accountant Certificate dated 30.06.2007 certifying the additions in plant and machinery, which was not issued by the Appellant. Thus, we find that the Appellant has not abetted the offence, if any, committed by the company in claiming the benefit of exemption provided under Notification 20/2007-CE dated 20.04.2007.Accordingly, we hold that the penalty imposed on the Appellant is not sustainable and hence set aside the same.
9. In view of the above discussions, we set aside the penalty imposed on the Appellant under Rule 26 of the Central Excise Rules, 2002 and allow the appeal filed by the Appellant.
(Operative part of the order was pronounced in the open Court.)
