ORDER
M. Veeraiyan, Member (T)
1. These three appeals emanate from a common show cause notice, a common order-in-original and a common order-in-appeal of the Commissioner (Appeals)
2. Heard both sides.
3. The relevant facts, in brief, are as follows:
a) M/s Chistia Textiles, a 100% EOU was found to have removed clandestinely imported raw material from the bonded warehouse without payment of duty and the duty evaded amounting to Rs. 68,109/- was paid on 30.10.2001
b) Other appellant M/s Iqbal Synthetics Pvt. Ltd. was found to nave clandestinely removed domestically procured raw materials and finished excisable goods without payment of duty and the duty evaded amounting to Rs. 1,96,225/-was paid on 30.10.2001.
c) Shri Azam Satar Motiwala, Director of M/s Iqbal Synthetics Pvt. Ltd. is the third appellant.
d) A common show cause notice was issued on 28.3.03 against the three appellants herein demanding duty as mentioned above and proposing appropriation of amount already paid by them. The show cause notice proposed to impose penalty under Section 209(A) against Shri Azam Satar Motiwala. Show cause Notice was also issued to Shri Farook Harun Galani, partner of M/s Chistia Textiles proposing imposition of penalty.
e) The Additional Commissioner in his order-in-original confirmed the duty demand from M/s Chistia Textiles under Section 28(2) of the Customs Act and appropriated the amount already paid as duty due. He demanded interest at the appropriate rate from M/s Chistia Textiles under Section 28AB of the Customs Act. He also imposed Rs. 10,000/- as penalty or Shri Farook Haran Galani, Partner of M/s Chistia Textiles who is reportedly no more.
f) The additional Commissioner in the same order confirmed duty demand from M/s Iqbal Synthetics under Section 11A of Central Excise Act and appropriated the amount already paid. He demanded interest under Section 11AB and imposed penalty of Rs. 25,000/- on Shri Azam Sattar Motiwala under Section 209A of the Central Excise Act, 1944.
g) Commissioner (Appeals) vide his order dated 26-7-2005 upheld the order of the Additional Commissioner.
4. The learned advocate for the appellants submitted that in both the cases duties evaded have been paid much before the issuance of show cause notices and that the show cause notices should not have been issued. He further submitted that interest is not payable and penalties are not imposable. He relied upon the following judgments
1. Jindal Vijayanagar Steel Ltd. v. Commissioner of Customs, Mangalore 2004 (177) ELT 937 (Tri – Bang.)
2. Commissioner of Central Excise, Delhi III, Gurgaon v. Machine Montell (I) Ltd
3. Commissioner of Central Excise, Mangalore v. Shree Krishna Pipe Industries
5. Learned SDR submitted the following;
a) He referred to the explanation 1 to Sub Section 11A(2B) of the Central Excise Act, 1944 according to which the provision relating to non issue of show cause notice and non collection of interest, non-imposition of penalty is not to be applied in cases involving fraud, collusion etc.
b) He also drew my attention to similar explanations to Section 28(2B) of the Customs Act, 1962
c) He also submitted the latest judgment of Hon’ble High Court of Punjab and Haryana in respect of Machine Montell (I) Ltd. vide judgment dated 28.7.2006 in CEA No. 13 of 2005
6. Learned advocate for the appellants mentioned that the decision of the Hon’ble High Court of Punjab and Haryana which was referred by the ld. SDR was in the context of show cause notice issued prior to the date on which Finance Bill, 2001 was passed.
7. I have carefully considered the submissions. In the present case 1 note that the show cause notice has been issued and it has been adjudicated and gone through the first appeal and the matter has come before the tribunal. The claim that the show cause notice should not have been issued is a much belated claim which need not even be discussed at this stage.
8. In both these cases, the fact of outright clandestine removal is admitted by the appellants. A person who has involved himself in outright clandestine removal cannot be permitted to make virtue out of the necessity. It will be gross injustice to a genuine tax payer if a person who has indulged in fraudulent activities is asked to pay only duty after he was caught red handed and absolved of interest liabilities and penal action. This will lead to a situation where an evader even when he is caught, he has nothing to loose. Evasion will become totally risk free and such a situation is not a healthy but a dangerous situation. In view of the above, the penalties under Section 11AC is imposable on M/s Iqbal Synthetics Pvt. Ltd. and penalty under Section 14A is imposable on, M/s Chistia Textiles.
9. As regards to the judgments relied upon by the learned Advocate for the appellants they are distinguishable from the facts of the present case. In the case of CCE v. Shree Krishna Pipe Industries the dispute involved was eligibility to exemption available to a small scale unit and in that context determining the value of clearances. There is no finding of any clandestine removal in this case In the case of Jindal Vijayanagar Steel Ltd v. CC the issue involved was, the Company removing the bonded goods prior to receiving the EPCG licence and thereafter producing the licence and filing bill of entry belatedly after clearance. In this case also it is not a case of outright clandestine removal As regards the case relating to CCE v. Machine Montell (I) Ltd., as already mentioned by the learned SDR the Hon’ble High Court of Punjab and Haryana in their latest judgment dated 26/07/2006 have clearly held that:
In view of the above, applicability of Section 11AC is not excluded at the threshold merely on deposit of the amount after having been caught and before the issue of show cause notice.
10. As regards the penalty on Shri Azam Satar Motiwala there is no clear finding on his personal involvement about the clandestine removal the penalty is imposable on the Director only if there is clear finding on the involvement of the Director. So, I set aside the penalty imposed on Shri Azam Satar Motiwala.
11. The appeal is disposed of in the following terms:
a) Duty demanded which is not in dispute are confirmed;
b) The interest demanded is in order;
c) Penalty imposed on M/s. Chistia Textiles under Section 114A of the Customs is modified as Rs. 68,109/- as against the penalty imposed of Rs. 68,200/-;
d) Penalty imposed on M/s. Iqbal Synthetics Pvt. Ltd. is modified as Rs. 1,96,255/- under Section 11AC of the Central Excise Act, 1944 as against the penalty imposed of Rs. 1,96,500/-
e) The penalty imposed on Mr. Azam Sattar Motiwala, Director is set aside.
12. The appeals are disposed of accordingly.
(Dictated in court)