Arora Products versus CCE 2009 (235) ELT 0818 (Raj.) 2009 (091) RLT 0890 (Raj.)

From : http://lawcrux.org/data4T/cl/clhigh/69612.htm

2009 (235) ELT 0818 (Raj.) 2009 (091) RLT 0890 (Raj.)

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR

N.P. Gupta and Deo Narayan Thanvi, JJ.

Arora Products

Versus

Addl. Commissioner of Central Excise

Central Excise Appeal No. 6 of 2005, decided on 19-3-2008

Cases Quoted -

Commissioner v. Machino Monteil - 2006(07)LCX0133 Eq 2006 (202) ELT 0398 (P & H) = 2006(07)LCX0133 Eq 2006 (004) STR 0177 (P& H) - Referred [Paras 5,6,10,12]

Commissioner v. Om);ar Steel Tubes Pvt. Ltd. - 2007(08)LCX0328 Eq 2008 (221) ELT 0200 (P & H) - Distinguished [Paras 5,6,12]

Raj Spinning & Weaving Mills Ltd. - Referred [Para 14]

Union of India v. Perfect Thread Mills Ltd. - 2009 (234) ELT 0049 (Raj.) - Referred [Paras 4,6,14]

Union of India v. T.P.L. Industries Ltd. - 2007(03)LCX0337 Eq 2007 (214) ELT 0506 (Raj.) - Relied on [Paras 4,6,13]

Advocated By -

Shri Anjay Kotharijor the Appellant.
S/Shri Rishabh Sancheti and V.K. Mathur, for the Respondent.

[Order per : N.P. Gupta, J.]. -

This appeal has been filed by the assessee against the impugned judgment of the learned Tribunal dt. 15-4-2004. The appeal was admitted on 24-5-2005, by framing the following substantial questions of law :-

"(i) Whether any discretion vests on the authorities under the Central Excise Act in quantifying the penalty imposable under Section 11 AC of the Central Excise Act, 1944?

(ii) Whether in appeal filed by the Revenue against the order of the Commissioner of Central Excise (Appeals) setting aside the penalty levied against the assessee, the Tribunal was justified in not entertaining the plea of the assessee that in case appeal is allowed, the quantum of penalty may be reduced, on the ground that no cross-examination has been filed?

(iii) Whether mens rea in any form is part of consideration before penalty under Section 11 AC can be imposed?"


2. We have heard learned Counsel for the parties.


3. The skeleton facts are, that on 5-10-2001, during course of transit check, vehicle No. RJ1G-4585 was intercepted, and on checking it was found that it was carrying 20 bags (585 Kgs) chewing tobacco (Natraj Brand) registered under the name and brand, being product of the assessee, was not carrying the necessary invoice. Thereupon the factory was visited, invoices were checked, and then, on 1-4-2002 show cause notice was issued to the assessee. The learned Additional Commissioner after completing all necessary proceedings passed the order dt. 25-6-2002, imposing the penalties mentioned therein. Against that order an appeal was filed, which was partly allowed by the learned Commissioner (Appeals), and the penalty imposed under Section 11 AC, being penalty equal to duty, was set aside, on the ground, that mens rea to evade duty was conspicuously absent. For that the learned Commissioner relied upon certain facts and circumstances. Against this order the Department filed appeal before the learned Tribunal, and the learned Tribunal allowed the same, finding, that the plea of the assessee, that the slip was left by the proprietor of the respondent firm with the Munshi, to issue the excise invoice, but the Munshi did not issue the same, being unfounded, and unappealable to reason, therefore, the order was set aside.


4. Arguing the appeal, learned Counsel for the assessee relied upon two judgments of this Court; one being in D.B. Central Excise Appeal No. 16/06 Union of India v. M/s. T.P.L. Industries Ltd. & Ors., decided on 2-3-2007 - 2007(03)LCX0337 Eq 2007 (214) ELT 0506 (Raj.) which judgment was followed in another D.B. Central Excise Appeal No. 41/2006, Union of India v. M/s. Perfect Thread Mills Ltd., decided on 10-8-2007 [2009 (234) ELT 0049 (Raj.)], and contended, that in view of the provisions of Section HAC(2b), since the assessee had deposited the requisite duty, even before issuance of show cause notice, no penalty under Section 11 AC could be imposed, and therefore, the impugned order of the learned Tribunal is liable to be set aside.


5. On the other hand, learned Counsel for the respondent relied upon two judgments of Punjab and Haryana High Court; one being in Central Excise Appeal No. 13 of 2005, decided on 25-7-2006, reported in 2006(07)LCX0133 Eq 2006 (202) ELT 0398 (P&H) = 2006(07)LCX0133 Eq 2006 (004) STR 0177 (P&H), Commissioner of Central Excise v. Machino Mon-tell (I) Ltd., and the other being in Commissioner of Central Excise v. Omkar Steel Tubes (P) Ltd. reported in 2007(08)LCX0328 Eq 2008 (221) ELT 0200 (P&H), mis judgment is rendered on 28-8-2007, to contend, that mere payment of duty before issuance of show cause notice, cannot be a ground to contend, that penalty under Section 11 AC could not be imposed.


6. We have heard learned Counsel for the parties, and have gone through the impugned judgments, and the cases cited at the Bar.


7. Before proceeding further, it may be observed, that as appears from the order of the learned Additional Commissioner dt. 25-6-2002, that the duty was paid by the assessee, on 8-10-2001.


8. Thus all said and done this much is not in dispute, that the leviable excise duty had been paid before issuance of show cause notice, inasmuch as, as observed above, show cause notice was issued on 1-4-2002, and the duty was deposited vide TR-6 Challan No. 13, dated 8-10-2001.


9. Since the only question argued before us is, on the anvil of non-leviability of penalty under Section 11 AC, in view of the provisions of Section 11A(2B), we need not go into the question as framed in the order dt. 24-5-2005, and decide the appeal only on the question, as to whether on the face of provisions of Section 11A(2B), penalty under Section 11AC can be imposed, or not.


10. We propose to first take up the cases cited on behalf of the respondent being in Machino Montell (I) Ltd.'s case. Learned Counsel laid much stress on paras 7 and 8 thereof, wherein it has been held, that the provisions of Section 11 AC incorporates liability to pay penalty in the situation mentioned there^ and once a case is covered by the situation mentioned in the Section, mere posit, prior to issuance of show cause notice under Section 11A of the Act, will not necessarily negate the situation mentioned in the said section. In that case the matter related to the year 1999, and show cause notice was issued on 19-6-200, while the amount was deposited under protest on 23-5-2001. Then, in para 8 the submission of the assessee has been noticed, on the anvil of Section 11A(2B) and Section 11A(2C), interpreted the prohibition against imposition of penalty in that event of deposit having been made prior to issuance of show cause notice, and the submission of the Revenue was recorded, to the effect, that reliance was placed on explanation, which limited the applicability of sub-section 2B. However, the Bench did not go into the question, by observing, as under :-

"....we need not go into this question in view of Sub-section 2C of Section 11 of the Act (sic 11 A), which makes it clear that subjection 2B will not apply where duty has become payable prior to the date on which Finance Bill, 2001 was passed. Present case being governed by sub-section 2C of Section 11, issuance of notice under Section 11 was not barred."


11. We may at once observe, that the Finance Bill, 2001 became Finance Act No. 14 of 2001, w.e.f. 11-5-2001, while in the present case, as noticed above, the instant case relates to 5-10-2001, which is little short of five months later than the commencement of Finance Act of 2001. In that view of the matter, per force this judgment itself, so also in view of the language of sub-sections (2B) and (2C), the bar of Section 2B is clearly attracted.


12. Then, so far as Omkar Steel Tubes (P) Ltd.'s case is concerned, that was a case in which the appeal of the revenue was dismissed by recording a finding, question of mens rea in favour of the assessee. Then, reference was made to Machino Montell's case, in the manner, that the Tribunal below had relied upon the judgment in Machino Montell's case, which was over turned by the Division Bench of the Court, vide judgment dt. 25-7-2006, and therefore, mere fact, that duty has been paid before issuance of show cause notice, would not result into non-application of Section 11AC, and the penalty could still be imposed. From this judgment, it is not clear, as to what was the relevant date, inasmuch as in the earlier part we have found, that the order confirming the duty under Section 11A of the Act was passed; by the adjudicating authority on 13-8-2005. Then, the relevant thing to be noticed is, as observed above, the Machino Montell's case was a case on facts, depending upon facts of its own, relating to falling within a particular time zone, viz. as to whether it falls within a period before the date on which the Finance Bill received assent of the President, or within the time zone subsequent thereto. Since in the case in hand, the matter relates to the subsequent date, this judgment cannot help the Revenue, on any stand point.


13. Then a look at the judgment in M/s. T.P.L Industries' case, cited by the learned Counsel for the appellant, makes it clear, that a positive finding has been given therein as under :-

"The proposition appears to be well settled that where the duty has been deposited before issuance of show cause notice under Section 11A & Section 11AB of the Central Excise Act, 1944, no action under Section 11AC of the said Act for imposition of penalty can be initiated or taken. The reason is obvious. As on the date show cause notice is issued, there is no short levy of Duty for which such notice can be issued."

14. May be, that in the two cases, decided by this judgment, as we get from the judgment, that in one of the appeals decided thereby, being that in the case of M/s. Raj Spinning & Weaving Mills Ltd., even the show cause notice was given on 27-3-2001, and therefore, to that extent, the proposition may be open to some doubt on the face of language of Section 11A(2C), but then, the judgment in M/s. Perfect Thread Mills Ltd. related to surprise visit to the factory conducted on 10/11-1-2003, obviously after receipt of the assent of the President to the Finance Bill of 2001, and as observed above, the case in hand is related to that period.


15. In that view of the matter, in our view, on the face of a combined reading of provisions of Sections 11A(2B) and (2C), in view of the fact, that the matter relates to the period subsequent to receipt of the assent of President to the Finance Bill, 2001, in view of the fact, that leviable duty has been deposited immediately on 8-10-2001, while show cause notice was issued on 1-4-2002 only, no penalty under Section 11AC could be imposed.


16. Accordingly, the question stands answered. The appeal is allowed. The impugned judgment of the learned Tribunal is set aside, and the appellate order of the learned Commissioner Annexure-2 dt. 1-10-2002, is restored.

Equivalent 2009 (235) ELT 0818 (Raj.)

Equivalent 2009 (091) RLT 0890 (Raj.)