CX - When proceedings against manufacturer stand concluded on payment of duty plus interest, there would be no sense in continuing proceedings for penalty u/r 26 against other persons like traders & transporters: CESTAT
By TIOL News Service
NEW DELHI, 28 OCT, 2015: THE appellant is engaged in the manufacture and packing of edible oils. M/s.SLH International is engaged in the manufacture of PET jar and Bottles. The appellant purchased pet jars from M/s. SLH International which is used in packing of edible oils.
The AE wing learnt that M/s.SLH International cleared the goods to the appellant without payment of duty in clandestine manner.
Proceedings were initiated and penalties came to be imposed on the appellant, Inder Aggarwal and Santosh Aggarwal under Rule 26 of CER, 2002 who are now in appeal before the CESTAT.
The appellant(s) submitted that the main noticee viz. M/s.SLH International had already deposited duty demand alongwith interest and 25% penalty before issuance of the SCN and, therefore, as per proviso to 11A(2) of CEA, 1944, the proceedings against the appellants, who are co-noticees have also been concluded; that, therefore, no penalty can be imposed on the co-noticees. Furthermore, Santosh Agarwal is the partner of the firm and no separate penalty could be imposed upon him as penalty of Rs.1,50,000/- was imposed upon the appellant firm. Reliance is placed on the decision in Abir Steel Rolling Mills 2013-TIOL-1048-CESTAT-DEL.
The AR opposed the submission made by the appellants by emphasizing that the proceedings against the co-notices cannot be said to be concluded moreso since penalty had been imposed under Rule 26 which is an independent proceeding. Support is drawn from the decision in Anand Agrawal 2013-TIOL-26-CESTAT-DEL.
Sub-section (2) of Section 11A read :
(2) The Central Excise Officer shall, after considering the representation, if any, made by the person on whom noticee is served under sub-section (1), determine the amount of duty of 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:
Provided that if such person has paid the duty in full together with, interest and penalty under sub-section (1A), the proceedings in respect of such person and other persons to whom notice are served under sub-section (1) shall, without prejudice to the provisions of Sections 9, 9A and 9AA, be deemed to be conclusive as to the matter stated therein:
Provided further that, if such person has paid duty in part, interest and penalty under sub-section (1A), the Central Excise Officers, shall determine the amount of duty or interest not being in excess of the amount partly due from such person."
(emphasis supplied)
The Bench extracted the views taken by the Tribunal in both the cited cases and observed that whereas in the Anand Aggarwal case (supra), the Tribunal has held that - If the legislative intent was extending immunity to all connected persons, the language used would have been simpliciter "in respect of all persons", in the case of Abir Steel Rolling Mills (supra) this decision has been distinguished & it is held - that if the proceedings have been concluded against the main notice, as provided in these provisions then no further proceedings can be continued against co-noticees.
Thereafter, it was observed –
"9. The interpretation by the Tribunal of the words "such person" and "other persons" made in Abir Steel Rolling Mills case is more agreeable to me. The Tribunal in that case, has not only considered that when the proceedings against the manufacturer/assessee stand concluded on payment of disputed amount of duty plus interest and 25% of the duty as penalty, there would be no sense in continuing the proceedings for imposition of penalty under Rule 26 against other persons like traders who had purchased the goods, transporters who had transported the goods cleared by manufacturer/assessee, the directors/employees of the manufacturer/assessee company. The Tribunal has discussed the category of persons that would fall into the group 'other persons'. Further the Board's circular No. 831/08/06-EX dated 26.7.2006 has also been considered. I concur with the ratio laid in Abir Steel Rolling Mills case, which is squarely applicable to the instant case, the facts in issue being similar."
Holding that the penalty imposed on the appellants is unsustainable, the same was set aside and the appeals were allowed.
In passing : Also see 2013-TIOL-768-CESTAT-MUM.
(See 2015-TIOL-2305-CESTAT-DEL)
