ORDER
K.K. Agarwal, Member (T)
1. This is a stay application against, the denial of credit amounting to Rs. 12,85,33,777/- and imposition of penalty of equal amount under Rule 571U(6) on the manufacturing unit namely M/s. Rama Newsprints & Paper Ltd, imposition of penalty of Rs. three crore each on Shri C.U. Mangtani, Vice President, Shri R.M. Pherwani, Deputy Manager, Shri Vasu Ramsinghani, Chairman cum Managing Director, Smt. R.M. Gwalani, Ex. General Manager and Shri P.K. Upadhyay, Consultant of M/s. Rama Newsprints & Paper Ltd, and penalty of Rs. 10 lacs each on Shri Jignesh Desai, Senior Assistant and Shri R.C. Bhardwaj, Senior Assistant of M/s. Rama Newsprints & Paper Ltd under Rule 209A, 210 and 226 of the Erstwhile Central Excise Rules, 1944 represented by Shri V. Shridharan, advocate. Another penalty of Rs. 50 lacs has been imposed on Shri V.D. Sharma, the retired Superintendent under Rule 209A and 210 of the Erstwhile Central Excise Rules, 1944.who is being represented by Shri Suryanarayan, Advocate.
2. The brief facts of the case are that a show cause notice dated 24-3-1988 was issued to the appellants seeking to deny credit of Rs. 12,85,33,777/- taken by the appellant during March, 1996 to June, 1997 in respect of capital goods received during the period from August, 1994 to April, 1997, The ground for issue of show cause notice was that the declaration filed by the appellant in terms of Rule 57T(1) and 57T(2) were fabricated and no copy of the so called fabricated declaration was found in the record of the Central Excise. Original of the duplicate copy of the invoice alleged to contain fabricated defacement were found in the office of the appellant only. No copy of the same was found in the Central Excise record. These were seized by the Central Excise Department and are lying with the CBI.RT-12 return for the period in question were pre-dated, modified and substituted. The substitute version of the RT-12 returns were found in the Central Excise record. By this substitution, RT-12 -return originally filed were modified by the inclusion of extract of RG-23 C Part I & Part-II register. For the month of August, 1996 and September, 1996 both original return as well as the modified and pre-dated returns are still available in the Central Excise record. RG-23C part I and part II Account were alleged to be written in January, 1997 only for the capital goods received from December, 1994. No installation certificate was ever given by the appellant either fabricated or otherwise. It was accordingly alleged that the credit of Rs. 12.85 Crores was taken only in around January, 1997. The show cause notice therefore sought to deny the credit of Rs. 12.85 Cores taken by the appellant and also proposed to impose penalty on the company and its various officers and charge interest on the appellant. The show cause notice was adjudicated by the Commissioner who vide his order in original dated 22-11-2005 has disallowed the credit of Rs. 12.85 Crores and imposed penalties on the company and its various officers as mentioned above.
3. The learned advocate Shri V. Shridharan for the appellant submits that the credit of Rs. 12.85 crores taken by them has not been utilised till now and therefore the question of paying back the same at this stage does not arise. It was submitted that in this case the show cause notice was issued in the year 1998 under the erstwhile Modvat Credit Rules. These rules were in existence till March, 2000. Thereafter these rules were substituted by Cenvat provisions by notification No. 27/2000-C.E./NT dated 31-3-2000, Therefore on the date of the issue of show cause notice modvat credit rules were not in existence in the statute book having been substituted. There is no saving clause contained in the notification No. 27/2000-CE/NT dated 31-3-2000 by which it substituted modvat provisions with Cenvat provisions.
4. Board has issued circular dated 18-10-2000 directing its field formation that all proceeding in the matter relating to recovery and imposition of penalty under the erstwhile modvat rules be kept pending till such time an appropriate legislation to validate action is enacted. Thereafter by Section 131 of the Finance Act, 2001 Section 38-A was inserted in the Central Excise Act, 1944 providing that any amendment, repeal, suppression or rescinding will not affect any investigation, legal proceeding or remedy in respect of any right, privilege, obligation, liability, penalty or forfeiture and investigations, legal proceeding etc. may be continued as if there had been no amendment, repeal etc. Section 132 of the finance Act, 2002 further validated the action taken prior to the receipt of the assent of the President on the Finance bill, 2001. There was an explanation attached to Section 132, which read as under:
Explanation:- For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be punishable as an offence which would not have been so punishable if this section had not come into force.
5. It was submitted that as per this explanation no penalty was leviable in respect of any act or omission on the part of any person which would not have been so punishable, had this section not come into force. Since in the present case the show cause notice was issued in 1998 under the erstwhile Modvat credit rules, the proceeding under those rules could not have been continued but for this section and therefore as per the explanation no penalty shall be liable to be imposed. It was submitted that a similar view was taken by the apex Court in JK Spinning and Weaving Mills Ltd. v. Union of India 1987(32) ELT 234(SC) which refer to the period when Rule 9 and 49 was amended in 1982 retrospectively from 1944, the Supreme Court in paragraph No. 35 relying on a similar Explanation held that no penalty could be imposed on the assessee for any action taken pursuant to the amended rule. Similar view was taken by the Larger Bench of Tribunal in the case of Chemo Pulp and Tissue v. C.C.E. . The Cegat was concerned with Section 112 of the Finance Act, 2000 which held that HSD oil is not an input under Section 57A or under Rule 57 B retrospectively from 1995. Relying on a similar explanation to Section 112 of the Finance Act, the Cegat held that no penalty could be imposed on the assessee who were denied the credit of duty paid on the HSD oil. This decision was followed in CCE v. Ranga Villas CS and W Mills 2002 (149) ELT 742 and Shaw Wallace Co. v. CCE 2003(l56) ELT 406, It was further submitted that CESTAT on a similar issue regarding modvat credit has in the case of Sunrise Structural and Engg. Ltd. v. CCE Nagpur 2004 (117) ECR 307 (Tribunal) following the above decision held that no penalty shall be imposable and that the show cause notice itself was void abinitio. In view of this it was submitted that no penalty are imposable on the appellant. Besides rule 209A is not applicable as the appellant have not physically dealt with (sic) the goods.
6. Shri Suryanarayan, the learned advocate for Shri V.D. Sharma submitted that Shri Sharma has carried out certain acts in his official capacity and was therefore entitled to protection under Section 40 of the Central Excise Act, 1944 and referred to the decision of the Cegat in the case of A.P. Sales and Anr. v. CCE Hyderabad 2006 (74) RLT 162 (CESTAT-Ban) wherein it was held that penalty under Section 114 of the Custom Act, 1962 was not imposable on officers of customs for charge of dereliction of duty in absence of allegation of abetting or collusion with exporter and CHA and that customs officers are entitled to protection under Section 155. It was submitted that though the charge of collusion is there but same is based merely on testimony of Shri P.K. Upadhyay who is also a co-accused and therefore his statement cannot be relied upon unless it is corroborated by other evidence.
7. It was further submitted that a composite penalty has been imposed on Shri Sharma under Rule 209 A and 210 of the Central Excise Rules, 1944. which is not permissible and cited series of Cegat decision like Indsil Industries Ltd. wherein in appeal it was held that composite penalty (without break up) under two independent penal provisions not sustainable. A similar decision was passed in case of Punjab Recorder Ltd. v. Commissioner of Central Excise, Chandigarh Alagappa Cements Ltd, v. Commissioner 2002 (148) E.L.T. 1220 (Trib.) and Agarwal Pharmaceuticals v. Commissioner . It was further submitted that penalty under Rule 209 A shall not be imposable as the charge against the appellant is only of receiving T-I and T-II challan on holidays and acceptance of RT-12 return after retirement but there is no charge of his physical dealing with the goods. He invited our attention to the Cegat decision in the case of Ramnath Singh v. Commissioner 2003 (161) E.L.T. 451 in support thereof.
8. The Learned S.D.R. Shri Bhagat however, submitted that explanation to Section 112 of the Finance Act, 2001 was contrary to the provisions of Sub-Clause (d) of Section 38-A which provides that amendment, repeals etc. will not affect any penalty, forfeiture etc. and therefore the explanation cannot over ride the substantive provisions of Section 38-A. The penalties were therefore rightly imposed. As regard Shri Sharma it was submitted that there is charge of collusion against him duly supported by the statement of Shri P.K. Upadhyay and the appellant have not asked for cross-examination of Shri Upadhaya and therefore his statement cannot be discarded.
9. We have considered the submission. We find that the appellant have been able to make out a prima facie case in their favour in as much as the facts of the facts are squarely covered by the Cegat decision in the case of Sunrise Structural & Engg, Ltd. and Ors. v. CCE, Nagpur 2004 (117) ECR 307, cited supra and according to this decision the penalties were not imposable. The learned J.D.R. has questioned the correctness of this decision and we find some force in it in as much as Section 38-E specifically provides that investigation, legal proceedings may be instituted, continued or enforced and any penalty, forfeiture or punishment may be imposed as if the rule, notification or order as case may be had not been amended, repealed, superseded or rescinded. The explanation is contrary to the express provisions of Section 38A. However, at present we are bound by the decision of the CESTAT and referring the matter to the larger Bench if at all can only be considered at the time of final hearing.
10 As regards penalty on Shri Sharma the retired Supdt. is concerned we find that a composite penalty has been imposed under Rule 209A and Rule 210 which is not sustainable in view of the CESTAT decision cited by the appellant.
11. We therefore waive the pre-deposit of the penalty on each appellant. So far as the cenvat credit of Rs. 12,85,33,777/- is concerned, the same shall not be utilised during the pendency of the appeal and the status quo should be maintained till the decision of the appeal.
12. Since the amounts involved are heavy the appeals are fixed for final hearing on 17-7-2006.
(Pronounced in Court)