M/S Vip Industries Ltd vs Commissioner, Central Excise & Service ...

Appeal No.E/953/2012 [Arising out of OIO No.04-05/C.EX/COMMR/BRC-I/MP/2012, dt.12.09.2012, passed by Commissioner, Central Excise & Service Tax, Vadodara]

M/s VIP Industries Ltd. Appellant

Vs

Commissioner, Central Excise & Service Tax, Vadodara-I Respondent

Represented by: For Appellant: Shri Anand Nainawati, Advocate For Respondent: Dr. J. Nagori, Authorised Representative

For approval and signature: Honble Mr. P.K. Das, Member (Judicial)

1. Whether Press Reporters may be allowed to see the No Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether their Lordships wish to see the fair copy of Seen the order?

4. Whether order is to be circulated to the Departmental Yes authorities?

CORAM: HONBLE MR. P.K. DAS, MEMBER (JUDICIAL)

Date of Hearing/Decision:28.05.2015

Order No. A/10702 / 2015, dt.28.05.2015

Per: P.K. Das

The Appellant filed this appeal against the imposition of penalty of Rs.5 lakhs under Rule 26 of Central Excise Rules, 2002.

2. The learned Advocate on behalf of the Appellant submits that the Adjudicating authority dropped the proceedings initiated by the Show Cause Notice dt.25.01.2012 against the main noticee, the manufacturer of excisable goods by invoking Section 11A(2B) of the Central Excise Act, 1944 and therefore, the imposition of penalty against the co-noticee, Appellant, cannot be sustained. He drew the attention of the Bench to the relevant provisions of Section 11A(2B) of the said Act. In addition to that, there is no proposal for confiscation of the goods and therefore, the imposition of penalty under Rule 26 of the Central Excise Rules, 2002 is not warranted.

3. On the other hand, the learned Authorised Representative for the Revenue submits that the Tribunal in the case of CCE Raipur Vs Shri Anand Agarwal & Others  2013-TIOL-26-CESTAT-Del, held that merely because the manufacturer has discharged the duty liability alongwith interest and penalty equal to 25% duty in terms of Section 11A(1A) of the Central Excise Act, 1944 the proceedings against the co-noticee cannot be held to be conclusive in nature. He also relied upon the decision of the Tribunal in the case of Shri Ghanshyamdas C Goyal Vs CCE Aurangabad  2015-TIOL-756-CESTAT-MUM. He further submits that it is not a case of Section 11A (2B) of the Act, as the Show Cause Notice was issued for the demand of duty more than Rs.4 Crores.

4. After hearing both the sides and on perusal of the records, I find from the impugned order that the Adjudicating authority dropped the proceedings against the main noticee initiated by Show Cause Notice dt.23.01.2012 by invoking Section 11A(2B) of the said Act. The relevant portion of the impugned order is reproduced below:- 32. In view of the above, the said assessee is entitled for benefit of proviso to Section 11A(2B) according to which no notice was required to be issued to the assessee in respect of duty and interest paid by them and informed to the Department vide letter dt.08.02.2011. According to proviso to the said sub-section, no penalty under any of the provisions of the Central Excise Act or rules made thereunder can be imposed on the said assessee in respect of the said duty and interest paid thereon.

33. As regards the proposal in the show cause notice proposing penalty under Rule 26 of the Central Excise Rules, 2002 on the said principal, I find that the reasons put forth in the show cause notice explaining their role for imposition of penalty are contained in Para 14 of the show cause notice and they have failed to defend themselves properly, perhaps because the allegations made against them in Para 14 of the show cause notice are factual and by all means it was their duty and responsibility to safeguard the interest of Revenue. They were well aware of the fact that the goods being received by them without payment of duty at their Haridwar unit where they were availing exemption under Notification No.49/2003-CE, as amended by Notification No.76/2003-CE dt.05.11.2003, were liable for confiscation. They acquired possession of such goods and acted by transporting depositing, keeping and selling such goods, thereby they have rendered themselves for penalty under Rule 26 of the Central Excise Rules, 2002.

34. In view of the above discussion and findings, I pass the following order:-

ORDER

The proceedings initiated against M/s Banco Aluminum Limited, Padra, Vadodara vide Show Cause Notice F.No.76(4)I/OA/Commr-1/2012, dt.25.01.2012 are hereby dropped.

I impose penalty of Rs.5,00,000.00 (Rupees Five Lakhs only) under Rule 26 of the Central Excise Rules, 2002 on M/s VIP Industries, Haridwar, Uttaranchal  429 403.

5. For the purpose of the proper appreciation of the case, the relevant portion of the Section 11A are reproduced below:-

Section 11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded  (1) When any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, whether or not such non-levy or non-payment, short levy or short payment or erroneous refund, as the case may be, was on the basis of any approval, acceptance or assessment relating to the rate of duty or on valuation of excisable goods under any other provisions of this Act or the rules made thereunder, a Central Excise Officer may, within one year from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short levied or short paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice.

... ... ...

(1A) When any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of duty, by such person or his agent, to whom a notice is served under the proviso to sub-section (1) by the Central Excise Officer, may pay duty in full or in part as may be accepted by him, and the interest payable thereon under Section 11AB and penalty equal to 25% of the duty specified in the notice or the duty so accepted by such person within 30 days of the receipt of notice.

(2) The Central Excise Officer shall, after considering the representation, if any, made by the person or whom notice is served under sub-section (1), determine the amount of duty or excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.

... ... ...

(2A) Where any notice has been served on a person under sub-section (1), the Central Excise Officer, -

(a) in case any duty of excise has not been levied or paid or has been shot levied or short paid or erroneously refunded, by reason of fraud, collusion or any willful mis-statement 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, where it is possible to do so, shall determine the amount of such duty, within a period of one year, and

(b) in any other case, where it is possible to do so, shall determine the amount of duty of excise which has not been levied or paid or has been short levied or short paid or erroneously refunded, within a period of 6 months,

from the date of service of the notice on the person under sub-section (1).

(2B) Where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer before service of notice on him under sub-section (1) in respect of the duty, and inform the Central Excise Officer of such payment in writing, who, on receipt of such information shall not serve any notice under sub-section (1) in respect of the duty so paid.

6. On plain reading of the Section 11A(1) of the said Act, it is clear that the Central Excise Officer is empowered to serve a notice on the person chargeable with the duty, which has not been levied or paid or which has been short levied or short paid etc. Sub-section (1A) of Section 11A provides where a person has not paid the duty by the reason of fraud, collusion or any wilful mis-statement or suppression of facts etc to whom the notice is served under sub-section (1) of the said Section, the person may pay duty in full or in part as may be accepted by him along with interest under Section 11AB and penalty equal to 25% of the duty of the notice to be accepted by the Department. Sub-section (2A) of the Section 11A of the said Act provides that the Central Excise Officers shall determine the amount of duty. Sub-section (2B) of the Section 11A of the Act which is the subject matter of the present appeal, provides a different situation. In terms of Section 11A(2B) of the Act, if the person on his own ascertainment or on the basis of duty ascertained by the Central Excise officers, paid the amount of duty before service of the notice under sub-section (1) of the said Section and informed the Central Excise officers after payment, in writing, no notice under sub-section (1) of Section 11A shall be served in respect of the duty so paid.

7. In the present case, I find from the impugned order that the person (main noticee) had paid the duty and interest and informed the Department by letter dt.08.02.2011. Thereafter, the impugned Show Cause Notice dt.25.01.2012 was issued to the main noticee and the Appellants herein. The Adjudicating authority had dropped the proceedings initiated in the Show Cause Notice, extending the benefit under Section 11A (2B) of the said Act.

8. In my considered view, the proceedings initiated under the Show Cause Notice dt.25.01.2012, has been dropped by the Adjudicating authority by invoking Section 11A(2B) of the Act, the imposition of penalty against the Appellant herein cannot be sustained. Section 11A(2B) categorically provides that no notice under sub-section (1) of Section 11A shall be served where the duty and interest paid by the person. Hence, imposition of penalty on the co-noticee cannot be sustained for the reason that the notice issued under Section 11A(1) cannot be served.

9. The learned Authorised Representative relied upon the decisions of the Tribunal. On perusal of the said decisions, it is seen that in both the cases, the Show Cause Notices were issued under Section 11A(1) of the said Act. The main noticee paid the duty along with interest and penalty 25% of the duty. In this context, the Tribunal observed that the imposition of penalty against the co-noticee would be survived.

10. Another aspect of this matter, the penalty on the Appellant was imposed under Rule 26 of Central Excise Rules, 2002. Rule 26 of the said Rules provides any person who acquires possession of, or is in any concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any manner deals with any excisable goods which he knows are liable to confiscation under the Act or Rules, shall be liable to penalty. In the present case, there is no demand of duty and confiscation of goods and therefore, the imposition of penalty on the Appellant is not warranted.

11. In view of the above discussion, the imposition of penalty on the Appellant is liable to be set aside. Accordingly, the penalty imposed on the Appellant is set aside. The appeal filed by the Appellant is allowed.

(Dictated & Pronounced in Court)

(P.K. Das) Member (Judicial)

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