Commissioner Central Excise -I vs M/S Bansal Steel Corporation And ...
2017 Latest Caselaw 7004 Bom

                                                                                                     CEXA-108-07.doc

Sharayu.

             IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                ORDINARY ORIGINAL CIVIL JURISDICTION 

                    CENTRAL EXCISE APPEAL NO. 108 OF 2007



      Commissioner of Central Excise                                                         ...Appellant

              Versus

      1.     M/s. Bansal Steel Corporation & Ors
      2.     Shri Ashok Kumar Nageshwar Singh
      3.     Partner of M/s. Bansal Steel 
             Corporation                                                                     ...Respondents

                                                           ----------

      Ms. P.S. Cardozo, i/b Mr. H.P. Chaturvedi, for the Appellant.

      Mr.   Sudhakar   Thorat,   a/w   Mr.   Deepak   N.   Salvi,   for   the
      Respondents.


                                                           ----------


                                     CORAM                               :  ABHAY S. OKA  AND
                                                                            RIYAZ  I. CHAGLA, JJ.

Reserved on : 16 August 2017 Pronounced on : 12 September 2017

CEXA-108-07.doc

JUDGMENT : (Per RIYAZ I. CHAGLA J.)

1. The Appeal has been filed against order dated 7

March 2006 passed by the Customs, Excise & Service Tax

Appellate Tribunal, West Zonal Bench at Mumbai ("CESTAT" for

short). This Appeal raises a substantial question of law, which

reads thus :-

"Whether in the facts and circumstances of the case

and in law, the CESTAT is correct to hold that the

ingredients of Rule 209A of Central Excise Rules,

1944 under which the penalty has been imposed in

this case are attracted only if the persons concerned

have physically dealt with excisable goods with the

knowledge or belief that such goods were liable to

confiscation & that the provisions are not attracted

unless the person concerned has physically dealt

with such goods?"

2. The facts in brief that arise in the present Appeal are

CEXA-108-07.doc

as under :-

3. Respondent No. 1 is a partnership firm of which

Respondent No. 2 is the Work Manager and Respondent No. 3 is

a Partner and responsible for the day today affairs, trading

function, etc. of Respondent No. 1.

4. One M/s. Singhal Swaroop Ispat Ltd. was engaged in

manufacturing of mild steel ingots. Pursuant to certain

information regarding misuse of modvat credit by way of using

fake/forged/invalid documents, searches were conducted on 13

mini steel plants on 11 March 1992 and certain incriminating

documents had been seized. The investigations revealed that

M/s. Singhal Swaroop Ispat Ltd. had availed modvat credit on

19 gate passes and 158 certificates/subsidiary gate passes. Out

of these 19 gate passes, 12 gate passes were issued by

Respondent No. 1 and which were alleged to be

forged/fake/fictitious. It was alleged that Respondents No. 2

and 3 who were looking after day-to-day affairs of Respondent

CEXA-108-07.doc

No. 1 as well as one Shri. M.S.R.S. Gadhwal had used blank gate

passbooks of Respondent No. 1 for issuing fake gate passes,

which gate passes were endorsed by Shri. Gadhwal to M/s.

Singhal Swaroop Ispat Ltd. to enable them to avail modvat

credit. A show cause notice was issued to M/s. Singhal Swaroop

Ispat Ltd. demanding duty of Rs. 42,74,268.50 as well as Rs.

4,36,278.15 and proposing to issue penalty and confiscation of

land, building, plant, machinery, etc. Show cause notices were

also issued to 37 other parties including the Respondents. The

penal provision under Rule 209A of the Central Excise Rules,

1944 (for short "the said Rules") was invoked, inter alia, upon

the Respondents. The Adjudicating Authority being

Commissioner of Central Excise, Mumbai-III, (now Thane - I)

vide order in original dated 29 April 1997, disallowed the

modvat credit of Rs. 47,10,546.65 and imposed a penalty of Rs.

10,00,000/- each on Respondents No. 1 and 2 and Rs.

5,00,000/- on Respondent No. 3 under Rule 209A of the said

Rules.

CEXA-108-07.doc

5. The Respondents being aggrieved by the order in

original dated 29 April 1997 filed Appeals in CESTAT. The

CESTAT initially dismissed the Appeals by order dated 31

August 2004 for non prosecution. However, the same were

restored subsequently by the CESTAT vide order dated 4

January 2006 in view of the explanation given by the

Respondents that they did not receive notice for hearing of

Appeal. The CESTAT vide impugned order dated 7 March 2006

allowed the Appeals filed by the Respondents and set aside the

penalty imposed on them, by observing that the ingredients of

Rule 209A of the said Rules under which the penalties were

imposed is attracted only if the person concerned physically

dealt with the excisable goods with the knowledge or belief that

such goods were liable to confiscation. The Appellant being

aggrieved by the impugned order, has filed the present Appeal.

6. The Division Bench of this Court by an order dated 5

June 2008 had admitted this Appeal on the substantial questions

of law framed therein.

CEXA-108-07.doc

7. Ms. P.S. Cardozo, the learned Counsel appearing for

the Appellant, has submitted that the CESTAT has erroneously

found in favour of the Respondents by setting aside the

penalties imposed against them under Rule 209A of the said

Rules, despite the gate passbooks being misused for the purpose

of issuing of fake/forged gate passes.

8. Mr. Deepak N. Salvi, the learned Counsel appearing

for the Respondents has supported the impugned order of

CESTAT and submitted that CESTAT had correctly arrived at the

finding that the ingredients of Rule 209A of the said Rules under

which the penalties were imposed could be attracted only if the

persons had physically dealt with the excisable goods with the

knowledge or belief that the goods were liable to confiscation. It

is submitted that CESTAT has relied upon its own orders in case

of Kamdeep Marketing Pvt.Ltd. Vs. CCE, Indore1 and in case of

Ram Nath Singh Vs. CCE, Delhi2 in support of this finding.

 1     2004(165)ELT 206
 2     2003(151)ELT 451







                                                                                                 CEXA-108-07.doc

9. Having heard the parties, we are of the view that the

only question of law which would arise for determination is

whether Rule 209A of the said Rules under which the penalty

has been imposed is attracted only when the person has

physically dealt with the excisable goods with the knowledge or

belief that the goods were liable to confiscation. Rule 209A of

the said Rules reads thus :-

"Rule 209A. Penalty for certain of fences. - Any

person who acquires possession of, or is any way

concerned in transporting, removing, depositing,

keeping, concealing, selling or purchasing, or in any

other manner deals with, any excisable goods which

he knows or has reason to believe are liable to

confiscation under the Act or these rules, shall be

liable to a penalty not exceeding three times the

value of such goods or five thousand rupees,

whichever is greater."

CEXA-108-07.doc

10. The Division Bench of this Court by a

judgment dated 14 September 2010 passed in The

Commissioner of Central Excise Vs. M/s. Ramesh Kumar

Rajendra Kumar & Co. & Anr.3, in paragraph 7 after extracting

Rule 209A has held that :-

"The sine qua non for a penalty on any person

under the above rule is: either he has acquired

possession of any excisable goods with the

knowledge or belief that the goods are liable to

confiscation under the Act or Rules or he has been in

any way concerned in transporting, removing,

depositing, keeping, concealing, selling or

purchasing or has in any other manner dealt with

any excisable goods with such knowledge or belief.

Acquisition of possession of goods is, indisputably, a

physical act i.e. the act which could not have been

done without handling or movement of excisable

3 Central Excise Appeal No. 18 of 2006

CEXA-108-07.doc

goods as mentioned in the rule. The words "who

acquires possession" would indicate that the person

sought to be penalized under this rule has to first

acquire the possession and then do the activity of

transportation etc. as contained in the rule. It is,

thus, clear that the physical possession of the goods

is a must for doing the activity of transporting

referred in rule 209A. The ratio laid down by this

Court in Jayantilal Thakkar & Co. (supra) covers

the issue. In the said judgment, it is held that in the

given situation, if the assess is only issuing invoices

wherein there is no movement of the goods, they

cannot be visited with penalty under rule 209A."

11. From the above judgment, it is clear that Rule

209A can be invoked and the penalty imposed only when the

person has physically dealt with the excisable goods with the

knowledge or belief that the goods are liable for confiscation. In

the present case, the allegation was of unused gate passbooks

CEXA-108-07.doc

being misused by the Respondents for the purpose of issuing

fake/forged gate passes to assist M/s. Singhal Swaroop Ispat

Ltd. There was no case of the Respondents having physically

dealt with the excisable goods with the knowledge or belief that

such goods were liable to confiscation. We are thus, of the view

that Rule 209A cannot be invoked in the present case. We follow

the view taken by the Division Bench of this Court in Judgment

dated 14 September 2010 (supra) whilst interpreting Rule 209A

of the said Rules. The question of law framed, thus, stands

answered in favour of the Respondents and against the

Appellant.

12. The Appeal is accordingly, dismissed, with no

order as to costs.

 [RIYAZ I. CHAGLA  J.]                                                         [ABHAY S. OKA, J.]