Delhi High Court

Commissioner Of Central Excise vs Ms/ Bisht Electronics on 20 September, 2011

Author: Sanjay Kishan Kaul

*                   THE HIGH COURT OF DELHI AT NEW DELHI

%                                   Judgment delivered on: 20.09.2011

+                          CEAC No. 16/2006


COMMISSIONER OF CENTRAL EXCISE                         ...... APPELLANT


                                       Vs

M/S BISHT ELECTRONICS                                 ..... RESPONDENT

Advocates who appeared in this case:

For the Appellant: Mr. Staish Kumar, Sr. Standing Counsel. For the Respondent:

CORAM :-

HON'BLE MR JUSTICE SANJAY KISHAN KAUL HON'BLE MR JUSTICE RAJIV SHAKDHER

1. Whether the Reporters of local papers may be allowed to see the judgment ?

2. To be referred to Reporters or not ? Yes

3. Whether the judgment should be reported in the Digest ?

SANJAY KISHAN KAUL, J

CM No. 17155/2010

1. This is an application for early hearing on the ground that the

questions of law in issue already stand determined by the Hon‟ble

Supreme Court in Union of India vs Dharmendra Textile

Processors (2008) 231 ELT 3. In view of the averments made in

the application, the application is allowed.

2. Application stands disposed of.

CEAC No. 16/2006

3. The captioned appeal has been filed by the revenue against

the judgment of the Customs, Excise and Service Tax Appellate

Tribunal (in short „Tribunal‟) dated 01.12.2005. The appeal had

been admitted on 10.05.2006 by a division bench of this court. By

the said order following questions of law were framed for

adjudication:

(i) Whether CESTAT was right in law in reducing the penalty leviable under Section 11AC of the Central Excise Act, 1944, even when evasion of duty by the unit had been established?

(ii) In case answer to question no. (i) is in the affirmative whether the CESTAT was required to give reasons in support of the order of reduction.

(iii) Whether CESTAT was in law justified in deleting the penalty levied against the proprietor of the unit?

4. It was further directed that the said appeal be posted for

hearing in its own turn. We may note that the revenue had also

filed a separate appeal bearing CEAC no. 15/2006 qua that part of

the impugned judgment whereby the penalty against the proprietor

Rukam Singh was set aside. That appeal has been withdrawn today

by the learned counsel for the revenue in respect of which a

separate order has been passed.

5. The revenue on 22.09.2010 moved an application for early

hearing being CM No. 17155/2010 on the ground that the questions

of law framed were covered by the judgment of the Supreme Court

in the case of Dharmendra Textiles (supra) as is mentioned in the

very beginning of our judgment. Notices in the application had been

issued and several attempts were made to serve the respondent.

Since the respondent could not be served by ordinary process, an

application was moved by the revenue for substituted service under

Order V Rule 20 of the Code of Civil Procedure, 1908 (in short the

„Code‟). The said application was numbered as CM No. 3377/2011.

Order on that application was passed on 21.02.2011. The revenue

was given leave to serve the respondent by way of publication. In

the order dated 26.08.2011, it is noted that the respondent stands

served by way of publication. The matter was posted for hearing

today, i.e., 20.09.2011. There is no appearance on behalf of the

assessee even today. It is in these circumstances, we have

proceeded to decide the questions of law framed.

6. In order to adjudicate upon the questions framed, following

facts are required to be noticed. The assessee at the relevant time

was engaged in the business of manufacture of car stereos under

the brand name "Pioneer" falling under chapter 89 of the Central

Excise Tariff Act, 1985. Evidently, the manufacturing activity was

carried on by the assessee without obtaining the necessary central

excise registration. The assessee thus cleared the stereos without

payment of central excise duty.

7. On 16.03.2001, the officers of the central excise preventive

division-IV, Delhi raided the premises of the assessee. At the time

of the raid the assessee was found to be in possession of fifty (50)

car stereos carrying the brand "pioneer". The said car stereos were

valued at Rs 12,500/-. The said car stereos were seized by the

Central Excise officers, under a punchnama, in the reasonable

believe that the same had been removed with an intent to clear the

said branded car stereos without payment of duty. The goods in

issue were not, according to the revenue, eligible for SSI exemption.

The sample of cardboard boxes, used for packaging the car stereos

carrying the brand name pioneer, was also seized. Copies of the

challan found on the premises were also resumed under the said

punchnama.

8. The statement of Rukum Singh, i.e., the proprietor was also

recorded under Section 14 of the Central Excise Act, 1944 (in short

„C.E. Act‟). The revenue came to the conclusion that the assessee

had manufactured and removed goods during the period 1997 to

2001, and therefore evaded duty to the extent of Rs 21,19,735/-.

Accordingly, a show cause notice was issued on 18.06.2002. By

virtue of the said show cause notice, the assessee was called upon

to show cause as to why: duty to the extent of Rs 21,19,735/- ought

not to be demanded and recovered under Rule 9 of the Central

Excise Rules, 1944 read with the first proviso of Section 11A of the

C.E. Act; penalty not be imposed under Section 11AC of the C.E. Act

read with Rule 173Q of the erstwhile Rules; and, lastly interest not

be charged under Section 11AB of the C.E. Act.

9. After giving opportunity to the assessee, by an order dated

31.07.2003 the Commissioner of Central Excise passed an

adjudication order. By virtue of the said order the assessee was

called upon to pay not only the central excise duty in the sum of Rs

21,19,735/- but also in addition penalty equivalent to the duty

imposed. In so far as the proprietor Mr Rukam Singh was concerned

a penalty in the sum of Rs 5,00,000/-, under Rule 209A of the

Central Excise Rules, 1944 read with Section 38A of the C.E. Act,

was imposed.

10. Aggrieved by the aforementioned order, two appeals were

preferred with the Tribunal. The Tribunal by the impugned

judgment sustained the duty on the ground that the goods in

question were not eligible for exemption as the goods bore a brand

name of another entity. Accordingly, the Tribunal came to the

conclusion that the assessee was required to pay duty before

clearance of the goods in issue. The Tribunal, however, held that

the quantification of the duty demanded was incorrect, in as much

as, the sale price had to be treated as cum-duty price. In these

circumstances, the revenue was directed to re-quantify the duty

amount treating the sale price as cum-duty price and, accordingly,

intimate the correct duty to be paid to the appellant. Since in this

case the Commissioner, Central Excise had levied penalty both on

the assessee (i.e., the unit) as well as the proprietor, the duty

imposed on the proprietor Rukam Singh was set aside while the

duty imposed on the assessee (i.e., the unit) was reduced to Rs 1

lac.

11. As noticed in the very beginning of the judgment, the revenue

had preferred two appeals. The appeal qua the proprietor Rukam

Singh has been withdrawn. The captioned appeal is thus restricted

to the assessee (i.e., the unit) whereby the penalty amount has

been reduced from Rs 21,19,735/- to Rs 1 lac.

12. The learned counsel for the revenue in support of his

contention that the Tribunal had no discretion to reduce the penalty

imposed on the assessee relied upon the judgment of the Supreme

Court in the case of Dharmendra Textile (supra) as well as Sony

India Ltd. vs Commissioner of Central Excise, Delhi 2004

(167) E.L.T. 385 (SC).

13. In so far as this part of the submission made on behalf of the

revenue is concerned, we had considered the issue in our judgment

passed on 01.09.2011 in CEAC No. 20/2006 titled Commissioner of

Central Excise, Delhi -I Vs. Radhika Containers Pvt. Ltd. In the said

judgment we observed as follows:

"....6. We have heard the learned counsel for the revenue. In our view the matter is no longer res integra. The view taken by the Supreme Court in the aforementioned judgment (i.e., Sony India Ltd.) has also been considered, and has found resonance in the Division Bench judgment of the Bombay High Court in Godavari Manar Sahakari (supra). In that case the Bombay High Court specifically considered a contrary view taken by the Division Bench in so far as the quantification was concerned in the case of UOI vs Kirloskar Oil Engines Ltd. 2006 (206) E.L.T. 85 (Bom). The relevant observations made in paragraphs 9 & 10 of the Judgment in the case of Godavari Manar Sahakari (supra) are extracted hereinbelow:

"9. The reasons for such a stiff and stringent provision, are not far to guess. As can be seen from the scheme of Sections 11A, 11AA, 11AB and 11AC of

the Act. It is evident that Section 11A prescribes procedure for recovery of duties not levied or not paid, or short-levied or short-paid, or erroneously refunded. Sub-Section (1) within itself and within its proviso covers the cases of duty not paid/ short paid in absence of mens rea or with intention. Section 11A(2) prescribes interest on delayed payment of the duty, in cases where, in spite of determination under Section 11A(2), the duty so determined is not paid within three months. Interest on delayed payment of duty, as can be charged under Section 11AB, is chargeable in both the cases, i.e., evasion of duty without, mens rea and wild intention to evade. It can be said that interest chargeable under Section 11AB, is a sort of civil liability imposed upon assessee for retaining the amount to which revenue was entitled, with him and utilizing the same, instead of allowing the same to come into the State coffer. Section 11AC is applicable only to those cases, where there is evasion of duty intentionally, by fraud, collusion or willful misstatement or suppression of facts. It may not be erroneous to say that penalty under Section 11AC is a sort of penal provision and, therefore, the said provision is harsh and stringent. The person, who deliberately evades the duty, is required to pay penalty equivalent to the amount of duty determined as evaded by fraud, collusion etc.

10. We, therefore, accept the submission of learned Assistant Solicitor General that under Section 11AC, there is no discretion left with the authority to impose any different quantum of penalty."

7. We are in respectful agreement with the view taken. We had taken a similar view in Poonam Sparks

(supra) case based on the view of the Supreme Court in Dharmendra Textile (supra)....."

14. In consonance with what is observed in the said judgment, the

Tribunal had no discretion to reduce the penalty, as was sought to

be done by way of the impugned judgment. Accordingly, question

number (i) is answered in the negative and in favour of the revenue.

This would also answer question no. (iii). Accordingly, question no.

(iii) is also answered in favour of the revenue. Since the question

no. (i) has been answered in the negative and in favour of the

revenue, we are not called upon to answer question no. (ii) as it is

axiomatic that once it is held that Tribunal had no discretion to

reduce the penalty, the question of giving reasons does not arise.

15. Accordingly, the appeal of the revenue is allowed. The order

of the Tribunal is set aside to the extent it reduced the penalty