Commissioner of C. Ex. vs Seven Seas Corporation

R.M. Savant, J.

1.The above Appeal is directed against the order dated 8-7-2005 passed by the Customs, Excise and Service Tax Appellate Tribunal West Zonal Bench, Mumbai in Appeal Nos. E/479/04 and E/481/04 by which order the Appeals filed by the Respondents came to be allowed and the penalty imposed against the Respondents came to be set aside.

The present Appeal raises following substantial question of law which can be gainfully reproduced as under:

Whether the order of the CESTAT meets the statutory requirement of Section 14 of the Central Excise Act, 1944, which is deemed to be "Judicial Proceedings" under Sub-Section 3 of Section 14 ibid, within the meaning of Section 193 and Section 128 of the Indian Penal Code, 1860?

The facts giving rise to filing of the above Appeal can be stated thus:

A show cause notice came to be issued to the Respondents, who are engaged in manufacturing of excisable goods viz. M S Wool falling under Chapter Heading 7323.00 of the First Schedule to the Central Excise Tariff Act, 1985. The said show cause notice alleged that the Respondents have contravened the provisions of Section 6 of Central Excise Act, 1944 (hereinafter referred to as "the said Act") read with Rule 174 of the Central Excise Rules, 1944 (hereinafter referred to as "the said Rules) as also Rule 173B; 173C; 173F; 173G(1) read with Rule 9(1). The said allegation was on the basis that the Respondents under-declared the said goods with an intention to evade the excise duty by suppressing production and clearance.

It was inter alia alleged that the clearances have been made by the Respondents without obtaining Central Excise Registration for the manufacture of excisable goods as required u/s 6 of the said Act read with Rule 174 of the said Rules; the other allegations were failure to file classification declaration; file price-declaration and/or declaring correct prices on their Central Excise invoice; determining appropriate Central Excise duty, leviable on such goods, prior to their removal as required under Rule 173F; payment of Central Excise Duty on the said goods by making debit entries in their personal ledger account and/or in the manner prescribed for such payments, prior to their clearances; cover of valid Central Excise transport documents viz. Invoice to transport the said goods; filing of the returns with the proper officer as required under Rule 173G(4) and; accounting for the said goods in the prescribed Central Excise statutory records.

The Respondents were asked to show cause as to why Central Excise duty leviable on the clearance of such products during the period from April 1996 to March 1997 totally amounting to Rs. 2,66,223/- should not be demanded and recovered from them, and why amounts of Rs. 1,00,000/-, Rs. 75,000/- and Rs. 80,000/- totally amounting to Rs. 2,55,000/- paid voluntarily by them vide T.R. 6 challan dated 18-11-97, 4-12-97 and 13-2-98 should not be appropriated against the duty demanded and, why mandatory penalty equal to the amount so determined should not be recovered and interest at the appropriate rate on the duty so determined as also penalty under Rule 173Q(1) read with 9(2) and Rule 52A(8) should not be imposed upon them and, why land, building, plant, machinery, materials etc. should not be confiscated under Rule 173A(2). The substratum of the said notice was based on the statement of one Dinesh T. Magia, who according to the Appellant, was the Incharge of the Respondents and, who according to the Respondents masterminded the act of evasion of Central Excise duty committed by the Respondents.

The said show cause notice was adjudicated upon by the Joint Commissioner, Central Excise, Mumbai-III and the Joint Commissioner principally on the basis of the admission of the said Dinesh T. Magia in the statement recorded during the course of interrogation to the effect that goods have been cleared in excess quantities than shown in the quadruplicate copies of the bills. The Joint Commissioner, by the order in original, therefore imposed penalty of Rs. 2,66,223/- and also ordered interest at the appropriate rate be charged and recovered under the provisions of Section 11AB of the Central Excise Act, 1944 and also imposed penalty of Rs. 1,00,000/- on the Respondents and penalty of Rs. 25,000/- on Shri Dinesh T. Magia.

Aggrieved by the said order dated 26-12-2000, the Respondents carried the matter in Appeal before the Commissioner, Central Excise (Appeals), Mumbai. The First Appellate Authority allowed the appeal to the extent of allowing conversion of penalty of Rs. 2,66,223/- imposed u/s 11AC of the said Act to one under Rule 173Q of the said Rules and set aside the penalty of Rs. 1,00,000/- imposed under Rule 173Q r/w Rule 9(2) and Rule 52A(8) of the said Rules. However, the First Appellate Authority did not find any valid grounds to interfere with the remaining part of the order in original passed by the Joint Commissioner. Therefore, in so far as imposition of penalty on Shri Dinesh T. Magia was concerned, the same was confirmed.

Being aggrieved by the said order dated 30-10-2003, the Respondents filed Appeal before the Customs Excise and Service Tax Appellate Tribunal West Zonal Bench at Mumbai (CESTAT) along with the said Appeal, the Respondents also filed an application for waiver of pre-deposit and by order dated 2-12-2004, the CESTAT, in view of the fact that entire duty amount stood paid by the Appellants, dispensed with the condition of pre-deposit of penalty. The CESTAT thereafter proceeded to hear the appeal on merits and by order dated 8-7-2005 allowed the appeal and set aside the order passed by the Commissioner of Central Excise (Appeal) in Appeal No. E/479/04 and E/481/04. The present Respondents are concerned with Appeal No. E/481/04.

The gist of the reasoning given by the CESTAT was that in the absence of corroboration, the statement made by said Shri Dinesh T. Magia could not be relied upon for imposition of penalty on the Respondents as well as on Shri Dinesh Magia. The CESTAT was of the view that mere admission of the said Dinesh T. Magia would not cause the sale of 500 to 550 kgs at the amounts charged on cash for 200 kgs until there is pro rata collection of additional cash for actual 500 or 550 kgs. sent/despatched by buyers. The CESTAT was of the view that in the light of the fact that the Appellant has produced material in the form of Octroi check post returns to establish that quantity was not misdeclared, the lower authorities had erred in holding that the charges in the show cause notice stand confirmed on the basis of the statement of Shri Dinesh T. Magia which was without any corroboration. The CESTAT therefore set aside the orders and allowed the appeals including the appeal filed by the Respondents above named.

We have perused the findings recorded by the Tribunal. The order passed by the lower authorities disclose unequivocally that both the authorities have relied upon the confessional statement made by Shri Dinesh Magia who was allegedly Incharge of the business of the Respondents. In the absence of any other material to corroborate the said statement as regards misdeclaration of the quantity of goods, in our view, the view taken by the Tribunal can be said to be a plausible view in the facts and circumstances of the case. The learned Counsel for the Appellant fairly submitted that the fact that there was no corroborative material on the basis of which liability could be fastened on the Respondents cannot be disputed. In that view of the matter, we do not find any merit in the above Appeal which is accordingly dismissed and the question of law stands answered accordingly.