Roopchand Prasad vs Union Of India & Anr

Three writ petitions are taken up for analogous hearing as they involve the same order in original. The three writ petitioners are individuals who feel aggrieved by the imposition of penalty made in the order in original. The order in original received consideration by the Court in W.P. No. 529 of 2018 (M/s. V.K. Udyog Limited vs. Union of India & Anr.). Such writ petition was at the instance of a company where the three writ petitioners were involved as Managing Director, Director and Manager. The three writ petitioners before me are natural persons involved in the affairs of such company.

Learned Advocate appearing for the petitioners submits that, Rule 26 of the Central Excise Rules, 2002 is not applicable so far as the petitioners are concerned. He draws the attention of the Court to the show cause notice. He submits that, the impugned show cause notice is vague. He refers to the order in original and submits that, the order in original records the contentions of the petitioners. It does not attend to such objections raised by the petitioners. It proceeds to impose a penalty which it cannot do. He submits, once an entity is found to be a trader, such entity cannot be made a manufacturer for the purposes of the Central Excise Act, 1944. Since the petitioners are persons who are sought to be proceeded against in respect of transactions where the provisions of the Act of 1944 are not attracted, the proceedings are bad in law. Consequently the imposition of penalty is bad in law.

The respondents are represented.

As noted, the order in original received consideration of the Court in M/s. V.K. Udyog Ltd. (supra). There, it was found that the company, of which one of the petitioners is the Managing Director, the other is a Director and the third is the Manager, obtained benefits under a particular scheme declaring itself to be a manufacturer. In the proceedings emanating out of the provisions of the Central Excise Act, 1944, it was found that, such company was at best a trader, not a manufacturer. It would not have obtained the benefits under such scheme. The declaration of the company that it was a manufacturer, was found to be made wrongfully to obtain undue benefits. The contention made herein with regard to jurisdiction under the Act of 1944 and its applicability was considered in V.K. Udyog Ltd. (supra) and was negatived.

As on date, there is no appeal pending against M/s. V.K. Udyog Ltd.

(supra).

As noted above, the three petitioners before me are the persons connected with the affairs of the legal entity viz. V.K. Udyog Ltd. The department had issued a show cause notice dated September 11, 2013 against the petitioners. The show cause notice in paragraph 6.1 thereof mentions the three petitioners before the Court and alleges that, such petitioners being consciously aware of the fact that, the legal entity viz. V.K. Udyog Ltd. did not have any manufacturing facility in the factory and no such imported input had ever entered in its factory, they consciously used all ploys for illegal activities resulting in defalcation of Government money by fraudulently availing of CENVAT credit amounting to Rs.3,42,09,022/-. It is the contention of the petitioners that, there was no specific allegation made in the Show Cause Notice. Paragraphs 3.12.2 and 3.12.3 of the impugned order record such contention of the petitioner. It deals with such contentions.

Paragraph 6.1 of the impugned show cause notice deals with the involvement of the petitioners in the entire transaction. Such allegations stand substantiated in the adjudication proceedings. The impugned order in original proceeds on the basis that, the three petitioners before the Court as Managing Director, Director and Manager of M/s. V.K. Udyog Ltd. were involved in the fraudulent transactions. Therefore, the order in original proceeds to impose the penalty as sought to be done under Rule 26 of the Central Excise Rules, 2002.

The petitioners before me are seeking to contend that, although they made a fraudulent representation before the authority in obtaining SENVAT credit, then when the authority found the actual fact that, the petitioners did not indulge in any manufacturing activity, there is no reason for imposition of penalty under the Act of 1944.

Such a contention is downright dishonest. The petitioners were well aware about the benefits of CENVAT credit under the provisions of the Act of 1944. It was within their personal knowledge that, the legal entity viz., V.K. Udyog Ltd., was not carrying on any manufacturing activity. In fact, V.K. Udyog Ltd. is under the control and management of the three petitioners before me. These three petitioners cannot feign ignorance of the activities of V.K. Udyog Ltd. They were instrumentals in the affairs of V.K. Udyog Ltd. Knowing the activities of V.K. Udyog Ltd. they made a false representation to the authorities to avail of CENVAT credit. The are liable for such fraudulent activities.

In the circumstances, I find no merit in the three writ petitions.

W.P. No. 583 of 2018, W.P. No. 584 of 2018 and W.P. No. 585 of 2018 are dismissed.

There shall be no order as to costs.