By TIOL News Service

MUMBAI, JUNE 03, 2016: THE appellants (individuals) were co-noticees in a case booked against Pratima Syntex, Thane against whom a SCN was issued demanding CE duty & against the appellants penalties were sought to be imposed for their role in duty evasion.

M/s Pratima Syntex approached Settlement Commission and vide order dated 21.1.2008 their 'case' was finally settled.

In respect of the co-noticees, the matter was adjudicated and proceedings were dropped by the original adjudicating authority on the grounds that the proceedings against the appellants cannot continue in view of the settlement of the case by the main noticee.

This order was challenged by Revenue and the Commissioner (A) reversed the order of the original authority.

Now, the co-noticees are before the Tribunal against imposition of penalties.

The appellants argued the matter on two issues:

(i) Once the case against main noticee is settled in Settlement Commission, the case against all other noticees stands settled. [S.K.Colombowala - 2007-TIOL-1130-CESTAT-MUM-LB refers & followed in Virender Bansal - 2015-TIOL-1475-CESTAT-DEL.

(ii) Since there is no confiscation of goods, no penalty under Rule 26 of the Central Excise Rules can be imposed.

The AR inter alia submitted that the Tribunal in case of S.K. Colombowala (supra) has not considered the Supreme Court decision in S.P. Chengalvaraya Naidu v. Jagannath - 1994 (1) SCC (1) & relied on the decision in K I International - 2012-TIOL-2032-CESTAT-MAD but conceded that the said decision of the Tribunal in S K Colombowala has not been stayed by the Bombay High Court. A parallel was also sought to be drawn from the KVSS Scheme & section 32M of the CEA, 1944 to emphasise that the order of settlement is conclusive. Reliance is also placed on the Bombay High Court decision in Yogesh Korani vs. Union of India] 2003-TIOL-642-HC-MUM-CUS [upheld by apex court - 2003-TIOL-103-SC-CUS], while examining similar issue under KVSS and where it was held that when the order in original is a composite order and the liability fastened upon the principal noticee and the co-noticees are based on separate, distinct and independent causes of action and the principle noticee settles only part of the tax arrears arising out of composite order, then the benefit of K.V.S.S. granted to the principal noticee will not be available to the co-noticee. It was further submitted that penalty can be imposed even in case where there is no confiscation. [Amex Alloys Pvt. Ltd. - 2013-TIOL-1202-CESTAT-MAD refers.]

The Single Member Bench observed -

++ It can be seen that the Hon High court [in Yogesh Korani] has clearly held that if the liability of the co-noticees arise from same act they will get immunity from further proceeding in terms of the decision in case of Onkar S. Kanwar - 2002-TIOL-924-SC-MISC, however, if the liability of the co-noticees arise from different act they will not get immunity from further proceeding in terms of decision in case of Yogesh Korani (supra).

++ In the instant notice the facts are similar to those in case of Yogesh Korani Vs Union of India (supra) insofar as duty has been demanded from the manufacturer but penalty is sought to be imposed on the brokers involved in sale of impugned goods.

++ Furthermore the decision of tribunal in case of S.K. Colombowala (supra) seems to consider the term 'case' include all proceedings initiated by a notice. If a notice demands duty from two different noticees, then according to the decision of tribunal in case of S.K. Colombowala (Supra) if one of the noticee settles the case the other notice from whom duty is demanded would also get immunity. It cannot be the intention of the legislature.

++ It is seen that earlier in the case of K.I. INTERNATIONAL LTD. - 2012-TIOL-2032-CESTAT-MAD had differed from the decision of the tribunal in case of S.K. Colombowala (supra) and therefore the matter was referred to the President for constitution of a larger bench. The said reference was not answered by the larger bench in the said case of Rajesh Vs CC - 2013-TIOL-1770-Cestat-Mad-LB on the grounds that the decision in case of K.I. INTERNATIONAL LTD (supra) was challenged before Hon HC of Chennai and the matter was pending there. However in the instant case the decision of Hon HC of Mumbai in the case of Yogesh Korani (supra), which was approved by Hon SC, has not been considered by the tribunal in case of S.K. Colombowala (supra). A decision in which a particular matter is not discussed upon is said to be passed sub silentio in respect of that particular matter and cannot be relied as a precedent for that specific matter which is not discussed upon.

++ In view of the above, I am of the opinion that the decision of Hon'ble High Court in case of Yogesh Korani (supra) which has been approved by the Hon Supreme Court, is squarely applicable to the present case. The decision of larger bench in case of S.K. Colombowala (supra) has not considered the decision of Hon'ble High Court in case of Yogesh Korani (supra) and is sub silentio.

Confiscation & Penalty imposition

To the appellants' assertion that no penalty can be imposed u/r 26 of CER, 2002 unless there is confiscation of goods, the Single Member Bench observed -

"It is noticed that in the instant case there was a proposal for confiscation of goods and the matter was settled by the settlement Commission. Thus it is recognized that an offence was committed which required invocation of provisions for confiscation of goods. However, since the matter was settled there was no confiscation of goods as the applicants before the Settlement Commission were granted immunity from fine and penalty."

Holding that in the instant case the provisions of law for confiscation were invoked & the offence had been admitted before the Settlement Commission by the main party and settled, it could not be said that no offence meriting confiscation of goods was committed.

The appeals were dismissed.

(See 2016-TIOL-1329-CESTAT-MUM)