TIOL-DDT 2765
14 01 2016
Thursday

A Commissioner of Central Excise imposed a penalty of Rs. 50 lakh on a Chartered Accountant for allegedly giving a false certificate in a case that the Commissioner was adjudicating.

Before the Tribunal, the Chartered Accountant pleaded:

1. that no certificate had been issued by him;

2. that in any case, the provisions of Rule 26 of Central Excise Rules, 2002, as the same existed during the period of dispute, are not attracted in his case, as he has neither dealt with any excisable goods nor is involved in acquiring possession of or sale, harbouring, concealment, transportation, etc of any excisable goods which he knew or had reason to believe were liable for confiscation;

3. that the Tribunal had set aside the penalty under Rule 26 of the Central Excise Rules, 2002 on the Company and its Directors observing that the allegation against them is basically of money laundering for which there are no provision in the Central Excise Act, 1994 or the rules made thereunder for imposition of penalty;

4. that Rule 26 of the Central Excise Rules, 1944 is attracted in respect of any person who is concerned in acquiring the possession of or the sale, concealing, transporting, etc of excisable goods in respect of which he knew or had reasonable belief that the same are liable for confiscation.

5. that the findings of the Tribunal in respect of the Company and its Directors would also apply in his case, even if the department's allegation that the appellant had issue the certificate, is accepted;

The Role of the CA and the allegations against him, as discussed in the Commissioner's order is that the Chartered Accountant, by his act of omission and Commission, committed criminal conspiracy and in connivance with others executed scheme of arrangement of providing fictitious and bogus entries in the books of account to facilitate the assessees to escape from the penal action against them for contravening the provisions of Central Excise Act, 1944 and the Rules made thereunder and, therefore, he is liable for penal action under the provisions of Rule 26 and 27 of the Central Excise Rule, 2002.

The CA's plea is that he had not issued any certificate and even if the department's allegation against him is accepted, it looks down to money laundering, i.e., fabricating documents to legalize the unaccounted income of the assessee. For this alleged activity, penalty was imposed on him under Rule 26 & 27 of the Central Excise Rules.

The tribunal observed,

Rule 26 of the Central Excise Rules, 2002 as the same stood during the period of dispute, provided for imposition of penalty not exceeding the duty involved on the goods or Rs. 2000/- whichever is greater, on a person who acquires possession of, or is in any way concerned in transporting, depositing, removing keeping, concealing, or in any other manner dealing with any excisable goods which he knew or had reason or liable for confiscation.

It is settled law that the expression in any other manner in Rule 26 has to be construed in ejusdem generis with the words appearing before this expression and therefore, penalty under this Rule is imposable on a person who has dealt with any excisable goods in the manners specified in this Rule while knowing or having reason to believe that the goods dealt with are liable for confiscation.

Abetment of duty evasion or of the activities enumerated in these rules is not covered. In the present case, the appellant has not dealt with any excisable goods inasmuch as he has neither acquired possession of any excisable goods nor he is in any way concerned in transporting, removing, keeping, depositing, concealing, selling, or in any other manner dealing with excisable goods which he knew or had reason to believe are liable for confiscation.

The Appellant's alleged activity would at the most amount to abetment of duty evasion which as discussed above is not covered by Rule 26. Therefore, the penal provisions of Rule 26 are not attracted in the case of the appellant for his alleged act of fabrication of documents to give legal cover to illicit income of the assessee.

Rule 27 provides for penalty up to the maximum limit of Rs. 5000/- for breach of the Central excisable goods where no other penalty is prescribed. For invoking Rule 27 there must be a breach of Central Excise Rules and in the present case, the department has not spelled out as to which the provision of Central Excise Rules has been contravened by the appellant by his action as mentioned above .

So, the Tribunal held that neither the Rule 26 nor Rule 27 of the Central Excise Rules, 2002 is applicable and set aside the penalty of Rs. 50 lakh imposed on the CA. (2016-TIOL-145-CESTAT-DEL)

The Commissioner was aggrieved with this order of the Tribunal and took the matter in appeal to the High Court.

The Allahabad High Court recently upheld the order of the Tribunal and dismissed the appeal by the Commissioner.

The High Court, dismissing the appeal, observed,

The certificate appears to have been obtained at the time of the proceedings that were initiated for the purpose of imposition of penalty and taking action against the trader. This therefore could not be described as an act to attract penalty under Rule 26 and 27, even though this may give a separate cause of action on the ground of money laundering or providing incorrect evidence in order to extend any benefit to the trader or the assessee. The penalty under Rule 26 and 27 therefore would not be attracted in the said background and accordingly we do not find any substantial question of law so as to entertain this appeal.

Penalty even otherwise could not have been imposed as the original liability itself was made subject matter of remand by the Tribunal itself in relation to the decision taken in the appeal filed by the trader .

Please see Breaking News for more details of the case.

Public Officers also Accountable

IN a recent judgement (2016-TIOL-63-HC-PATNA-CUS), the Patna High Court observed, "the law is well settled that the public officers have to be also held accountable for their acts of omission and commission." Some gems from the judgement:

1. In a modern society no authority can arrogate to itself the power to act in a manner which is arbitrary.

2. It is unfortunate that matters which require immediate attention linger on and the man in the street is made to run from one end to other with no result. Even in ordinary matters a common man who has neither the political backing nor the financial strength to match the inaction in public oriented departments gets frustrated and it erodes the credibility in the system. 

3. The concept of public accountability and performance of functions takes in its ambit, proper and timely action in accordance with law. Public duty and public obligation both are essentials of good administration whether by the State or its instrumentalities.

4. it is a known fact that in transactions of Government business, no one would own personal responsibility and decisions would be leisurely taken at various levels.

5. Greater the power to decide, higher is the responsibility to be just and fair.

6. Every officer in the hierarchy of the State, by virtue of his being `public officer' or `public servant', is accountable for his decisions to the public as well as to the State. This concept of dual responsibility should be applied with its rigours in the larger public interest and for proper governance.

In this case, the Court had directed recovery of over Rs. 14 lakh from Central Excise officers.

Zero tolerance to corruption - DGFT Initiative

THE DGFT in a Trade Notice states that the highest standards of integrity are to be maintained by all government servants in discharge of their official duties.

The DGFT further states:

1. RAs must ensure the highest standards of integrity and transparency in their offices and zero tolerance should be shown for any blemish that comes to light in this regard.

2. Apart from being abhorrent and criminal by definition, deserving strictest action by way of prosecution and departmental action, acts of corruption also bring the entire governmental structure into disrepute and cause inconvenience and harassment to citizens availing services from it.

3. It is reiterated that the strictest vigil be kept in this regard and the highest standard of integrity ensured.

4. Officers and staff with dubious reputation may be identified and placed on a 'Watch List' and closely monitored and be kept in non-sensitive positions.

5. Work rotation to avoid long tenures in sensitive positions may also be ensured.

6. RAs may also identify touts and middlemen who operate in their offices and immediately report their names for necessary action to authorities concerned and make them persona non grata in the offices.

7. By way of this Trade Notice, this information is shared with the entire Exporter/Importer community to elicit their cooperation in fulfilling the above objective.

8. The entire Exporter/Importer community is requested to act in unison and not cooperate with any such improper activity and immediately bring it to the knowledge of senior officers including DGFT and the Vigilance apparatus.

9. Trade Community is also requested to not encourage middlemen and touts who accentuate this problem

•  Utopia?

DGT Trade Notice No. 12/2015., Dated January 13, 2016

Guard of Honour for Chief Commissioner!

DDT reported yesterday about a Deputy Commissioner in a written official communication ordering Inspectors to escort senior officers up to the rank of Joint Commissioner to their respective cabins.

A more interesting communication has come to our notice. By an Office order in F. No. II/39-10/Office Order/2007-Estt, dated 11.01.2016, three Additional Commissioners of Surat Central Excise Commissionerates have given the following missive.

It is to inform that the Chief Commissioner, Central Excise, Customs & Service Tax, Vadodara Zone is visiting Surat on 12.01.2016.

The officers of Surat-I & II, audit-II Vadodara, appeals-II Vadodara Commissionerate located in Surat listed in the Annexure, are hereby directed to remain present in the office compound to participate in the Guard of Honour Ceremony, in full uniform without fail at 08:30 hrs on 12.01.2016. Officers may note that attendance will be taken after the parade and strict action will be taken against the absentees.

What is happening in the Department? Are they meant for tax collection or ceremonies and guard of honour? And in any case are the Inspectors in the department trained for performing such ceremonial functions?

Just because some officers in the Department are provided with a uniform, does it mean that their services should be misutilised for this kind of farce. The Income Tax department is able to collect their taxes without uniform and without control rooms and guard of honour for their senior officers.

Writing in our Message Board on 30.10.2014, Advocate Gururaj commented,

The photo of the CBEC Chairperson with hand raised in salute makes an anachronistic picture. Is she saluting someone, or is she receiving guard of honour? In either case, this gesture is out of place in a taxation department. Central Excise and Customs departments are not paramilitary forces. Why do they need uniform, why should they salute when they see a superior? The uniform, saluting etc seem like a hangover of British Raj. The moment a person wears uniform, he feels like bossing over citizens who are in mufti. These are out of place and out of time, when the tax departments are consciously trying to cultivate customer oriented approach towards tax payers. In my view, only customs officers who deal with passengers either in ports or airports need to wear uniform, so that the passengers can readily identify them as customs officers.

Are the taxpayers impressed with these activities of the department?

When GST comes will there be a guard of honour only for the CGST Chief Commissioner or will the SGST Chief Commissioner also get the honour?

Until Tomorrow with more DDT

Have a nice day.

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