Suraj Prakash vs Commissioner of Central Excise

Heard Shri Pankaj Bhatia, the learned counsel for the appellant. Shri Vinod Kant Srivastava appears on behalf of the respondents. By means of the present appeal, the appellant has sought to challenge the order of the Customs, Excise and Service Tax Appellate Tribunal, dated January 21, 2013, passed on the waiver-cum-stay application, u/s 35F of the Central Excise Act, 1944 by which the Tribunal has partly allowed the application and has asked the appellant to deposit a sum of Rs. 7.05 lakhs.

The brief facts, giving rise to the present appeal, are that the appellant is a director of M/s. Ram Shiv Industries Limited. For the relevant period in dispute a sum of Rs. 2.44 crores have been demanded by the impugned order, dated September 18, 2008, passed by the Commissioner. Further, a sum of Rs. 20 lakhs have been demanded towards penalty imposed on the appellant, being the director of the company. Against the order of the Commissioner, both the company as well as the appellant filed appeals along with waiver-cum-stay application. It appears that the waiver-cum-stay application of the company has been considered by the Tribunal, which has been allowed in part and the company has been directed to deposit a sum of Rs. 30 lakhs and the rest of the amount has been waived. It appears that the company has not deposited the said amount within the stipulated period and, therefore, the appeals filed by the company as well as by the appellant have been dismissed. It appears that the company has not challenged the said order of the Tribunal, dismissing the appeal, for want of non-compliance of the order. However, the appellant has challenged the order of the Tribunal, dismissing the appeal, before this court on the ground that no order has been passed on the waiver/stay application in the case of the appellant and, therefore, dismissal of the appeal was unjustified. This court allowed the appeal and remanded back the matter to the Tribunal to decide the waiver/stay application, u/s 35F of the Act. In pursuance thereof, the impugned order has been passed.

The learned counsel for the appellant submitted that the appellant was only the director of the company and was getting only a sum of Rs. 4,000 per month as salary. In support of the contention, along with the waiver/stay application, he filed a certificate issued by the Tehsildar showing his income as Rs. 4,000 per month. He further submitted that though in his first statement, the appellant stated that the manufacturing premises of the party was under his control and he was responsible for day-to-day work of the party and other two directors were not responsible for the same, but on the very next day, he retracted from the statement and, therefore, on the basis of the earlier statement, the appellant cannot be held responsible and having regard to the income and the financial condition of the appellant, the Tribunal ought to have waived the requirement of pre-deposit.

We have considered submissions advanced by the learned counsel for the appellant.

We do not find any substance in the arguments pressed by the learned counsel for the appellant. The Commissioner has imposed the penalty after recording the following findings:

I have considered the point of the advocate and of the view that all the ingredients as detailed in the rule 26 are available in the case and these are very well on the record. That is other thing that the advocate could not realise or see the same ingredients. The manufactory premises of the party is very well under the control of its director, i.e., Shri Suraj Prasad who himself in his statement admitted that he was responsible for day-to-day work of the party and other two remaining directors are not responsible for the same. It is therefore clear that for every unlawful act which was being committed in the manufactory premises and only Shri Suraj Prakash may be held responsible. The receipt of non-duty paid M.S. ingots was very well known to him as the same was clear by the statements of the different persons. It was admitted that the receipt of accounted and unaccounted goods were reported to the director of the RSIL. It was also in the knowledge of the director that the unaccounted and non-duty paid M.S. ingots were used in the manufacture of unaccounted M.S. bars and the same were cleared from the manufactory premises of the party. It was also very well in the knowledge of the director of the party that these goods should be received on payment of duty and the final products should also be cleared on payment of the duty. The active involvement of the director might be understood very easily. The director was also very well-known the entire activities and he was also known that the goods if cleared without payment of duty and also if received without payment of duty are liable to confiscation under the Central Excise Act, 1944. All the ingredients, which are required to penalise a person after proving his guilt, are sufficiently available in the case and only the director of the party may be held responsible for all the omission and lapses occurred in the manufactory premises. The motto behind receiving the non-duty paid goods, i.e., M.S. ingots from M/s. L. Kant Paper Mills Ltd. directly or through RRCPL and RRI through brokers, is very clear. The director wanted to receive the non-duty paid goods so that the final products manufactured from this non-duty paid inputs may also be cleared clandestinely without payment of duty. He wanted to be benefited on the cost of Government exchequer. All the persons who were involved in this chain had their mutual benefits/interests. It is sufficient to prove the guilty frame mind of the director, that he knew each and every thing, what was committed illegally in the manufacturing premises of the RSIL. The goods, removed clandestinely are liable to confiscation, under the provisions of the Central Excise Act, 1944 and rules framed therein. It was also in the knowledge of the director that the unaccounted goods are received in the factory and only those goods were taken on the records, which were followed by the invoices. This was the reason that the officers found a huge anomaly in the stock of inputs as well as in the stock of finished goods. All the ingredients of rule 26 are very well available in the case and I find that it is a very fit case for imposing penalty upon the director of the party under the rule. In my opinion Shri Suraj Prakash was very well known the consequences for the violation of the provisions of the rule. He was in practice to receipt the non-duty paid goods, stored the same in their manufactory premises. He manufactured the excisable goods from such non-duty paid raw material and also cleared the final products clandestinely without payment of duty due thereon. He was very well known that the non-duty paid goods cleared with the wrong intention are liable to confiscation. All these facts are clearly admitted by the director of the RSIL in his statement recorded before the officers u/s 14 of the Central Excise Act, 1944. Admittal of all the short-comings, are sufficient to prove the active participation of the director in all the illegal activities, being committed in the manufactory premises of the RSIL. I, therefore, find him to be penalised under the provisions of rule 26 of the Central Excise Rules as he violated the provisions knowingly for his own benefit.

The finding recorded by the Commissioner shows that at the initial stage, the appellant has admitted that the manufacturing premises was under his control and he was responsible for day-to-day work of the parry. Though the appellant has retracted from his earlier statement, but that may be subject-matter of adjudication by the Tribunal in the appeal that whether retraction from earlier statement is acceptable or not. The appellant has submitted that he was being paid a salary of Rs. 4,000 per month in support of which a certificate issued by the Tehsildar has been filed. Admittedly, the appellant was a director of the company and as such in order to substantiate his claim, he would have filed copies of the profit and loss account, his salary statement or the balance-sheet. The Tehsildar is not the competent authority to issue such certificate and, therefore, no reliance can be placed on such certificate issued by the Tehsildar, certifying the income of the appellant.

In this view of the matter, we are of the view that the appellant failed to establish that he is drawing the salary of the Rs. 4,000 per month only.

The company has not challenged the order of the Tribunal, passed on an application, u/s 35F of the Act, nor has complied with the directions of the Tribunal is concerned, it shows that the company has accepted the order of the Commissioner by which a sum of Rs. 2.44 crores was demanded towards the duty for clandestinely removal of the goods. Prima facie, we are of the view that the appellant, being the director of the company, cannot be absolved from the responsibility of such clandestinely removal of the goods. Prima facie, the material, on record, is against the appellant. The Tribunal, on consideration of entire facts and circumstances, has allowed the application in part and has directed the appellant to deposit a sum of Rs. 7.05 lakhs, which cannot be said to be unjustified.

In view of the above, we decline to interfere in the matter. However, since the period of deposit has expired, we allow the appellant to deposit the amount, as directed by the Tribunal, within a period of two months from today. In case if the said amount is deposited within the stipulated period, as stated above, the Tribunal is directed to decide the appeal, on merits, expeditiously. With the aforesaid observations and directions, the appeal stands disposed of.