I.S. GAMBHIR AND ORS. Vs. CCE

JUDGEMENT

(1.) FOR reasons recorded below, we dispense with the requirement of pre -deposit of penalty of Rs. 50 lakhs imposed upon the applicant herein and stay recovery thereof and proceed to decide the appeal itself with the consent of both sides. The case of the Department is that M/s. Maharashtra Steels Ltd. of which the applicant herein is the Director, contravened the provisions of the Central Excise Rules 1944 and evaded payment of duty of Rs. 2,20,56,658/ - on SS flats/other alloy steel flats/non -alloy steel flats clandestinely removed from their factory without payment of duty during the period from May to September 1994. The investigation of the case commenced with the interception of two trucks bearing Registration No. DIL 5752 and DIG 1999 by the Central Excise Preventive Officers, at Ghaziabad in the early morning of 15.9.1994 which resulted in recovery and seizure of billets not covered by duty paying documents. Further investigation revealed that Shri I.S. Gambhir floated 3 fake firms, M/s. Avadhesh Re -rolling (P) Ltd. (hereinafter referred to as ARPL), M/s. Guru Nanak Steel Traders (hereinafter referred to as GNST) and M/s. Lakshmi Metal Industries (hereinafter referred to as LMI) and made Shri Sandeep Batra, the Director of ARPL, and Proprietor of GNST and LMI. It was also revealed that Maharashtra Steels Ltd. (hereinafter referred to as MSL) had been clandestinely receiving SS billets from their sister concern, M/s. Nova Udyog Ltd. (hereinafter referred to as NUL) to ARPL and using such billets for clandestine manufacture and removal of SS flats. It was found that the modus operandi adopted by MSL was in connivance with ARPL and NUL used to raise documents in favour of ARPL; but the billets covered by the said documents were directly off -loaded in the factory premises of MSL. In order to show disposal of such billets, ARPL used to raise bills/invoices in the account of ARPL or other firms. Shri Batra was being paid Rs. 6500/ - per month as salary and expenses incurred on employees, office rent and maintenance. These facts are based upon the documents submitted by Shri Batra, his statements recorded in October 1994, February 1995, April 1995 and May 1995 and the fact that Shri Batra has been raising invoices under the instructions of Shri Gambhir even at the prices lower than the landed cost of billets in the hands of ARPL. The statement of Shri Sandeep Batra has been corroborated by Shri S.K. Taneja, Partner of the transport company, and by drivers of different trucks which revealed that the trucks had been used not only for carrying billets from NUL to MSL, but also to carry SS flats manufactured by MSL to Delhi. The adjudicating authority upheld the charges in the show cause notice, confirmed the duty demand as mentioned herein and imposed a penalty of Rs. 50 lakhs on I.S. Gambhir, Rs. 50 lakhs on Sandeep Batra and Rs. 10 lakhs on M/s. Taneja Road Lines under the provisions of Rule 209A.

(2.) LEARNED Counsel, Shri Kamaljeet Singh submits that the order has been passed in utter disregard of the provisions of natural justice inasmuch as, although Shri Gambhir had applied on 4.8.1997 for keeping the adjudication proceedings in abeyance in the light of the Sick Industrial Companies (Special Provisions) Act, 1985 since an appeal had been filed by MSL and Shri Gambhir to the Appellate Authority for Industrial and Financial Reconstruction under Section 25 SICA 1985, and had requested during the hearing on 14.8.1997 that if the proceedings could not be kept in abeyance, MSL and Gambhir should be heard on the merits of the matter, the adjudicating authority has not granted them any hearing after rejecting their request contained in their application dated 4.8.1997. Learned Counsel also submits that the rejection of his request for cross -examination has also resulted in denial of natural justice. He, therefore, prays that the impugned order imposing penalty may be set aside and the appeal allowed.

(3.) WE have carefully considered the rival submissions. We find that in a joint application dated 4.8.1997, MSL and Gambhir had prayed that the proceedings initiated by the Central Excise Department for recovery of duty and penalty may be kept in abeyance having regard to the provisions of Section 22(1) of the Sick Industrial Companies (Special Provisions) Act 1985, submitting that no proceedings for recovery and alleged dues of duty of excise could be taken without the permission of AAIFR to whom an appeal had been filed by MSL against the orders dated 1.12.1995 and 24.1.1997 passed by the BIFR. Sh. Gambhir has stated that during personal hearing which took place on 14.8.1997, he orally requested the adjudicating authority to hear him on merits in the event of the Commissioner holding that such request could not be allowed. We have carefully perused the impugned order and find that his contention has not been rebutted by the Revenue, nor was any hearing granted to Gambhir subsequent to 14.8.1997. We are of the view that it was required of the Commissioner to have given an opportunity to Shri Gambhir to explain his case before passing the impugned order and that non -granting of the personal hearing for explanation of the merits of the demand has resulted in an ex -parte order. We, therefore, set aside the order relating to imposition of penalty on Gambhir and remand the matter to the Commissioner of Central Excise, Meerut for de novo adjudication after granting an effective opportunity to him of appearing in person and explaining his case before passing fresh orders.