KARAN PACKAGING (P) LTD. & ORS. Vs. CCE

JUDGEMENT

(1.) THESE 3 appeals, E/2592, E/2593 & - E/2594/98 -A of M/s. Karan Packaging (P) Ltd., Balbir Singh & P.G. Mohan Dass are directed against a common Order -in -Original i.e. Order No. 23/COMMR/CEX/IND -II/98 -99 dated 19.6.1998. Under the impugned order a penalty of over Rs. 86 Lakhs has been imposed on Karan Packaging under Rule 9(2), 52A(5) and 173Q of Central Excise Rules, 1944 read with Section 11AC of Central Excise Act, 1944 and a penalty of Rs. 20 lakhs each has been imposed on Shri Balbir Singh, Managing Director and Shri P.G. Mohan Dass, General Manager both of Karan Industries and Karan Packaging under Rule 209A of Central Excise Rules. The appellant Karan Packaging is a manufacturer of Polyethylene Films from polyethylene granules. They, alongwith Karan Industries Ltd, were parties in a common proceeding initiated under show cause notice No. V(39)15 -31/96/Adj/12017 dated 20.2.1997 by the Commissioner of Central Excise and Customs, Indore. The notice related to allegation of evasion of Central Excise Duty in the manufacture of polyethylene film manufactured by Karan Industries Ltd. and M/s. Karan Packaging Pvt. Ltd. Arguing the appeals, ld. Counsel Shri K.K. Anand submits that duty demand under the impugned order has been made only against Karan Industries Ltd. Thus Karan Industries have been held to be the manufacturer of the goods and the Unit which evaded Central Excise Duty. Shri Anand submits that, that being the case, no penalty could be imposed on Karan Packaging in terms of Rule 9(2), 52A(5) & 173Q of Central Excise Rules, 1944 read with Section 11AC of Central Excise Act, 1944, as these Rules and Section related to offences by manufacturers. As Karan Packaging have not been held to be manufacturer and as no duty has been demanded from them, the penalty is untenable. He also submitted that the duty demand in the instant case was for a period from (sic) 1990 to August, 1996 while Section 11AC was incorporated in the Central Excise Act only on 28th September, 1996. Therefore, the provisions of Section 11AC could not have been invoked by the Commissioner with regard to offences which took place prior to the enactment of the Section.

(2.) WITH regard to the penalties imposed on the other two appellants, ld. Counsel submitted that the order contains no finding whatsoever about the involvement of either person with regard to the alleged evasion of duty by Karan Industries. He drew our attention in particular to paragraph 8(b) and (c) of the Order -in -Original which dealt with the involvement of the appellants in the case. These paragraphs are reproduced below: - -

(3.) HEARD Shri P.K. Jain, ld. SDR for the Revenue. He submitted that the allegation in the notice was that both Karan Industries and Karan Packaging were involved in clandestine production of polyethylene film. The adjudication order also takes note of and accepts this position. Further, both the companies are part of the same group. In the circumstances, Commissioner was justified in imposing penalty on Karan Packaging also, even though there is no specific finding regarding the quantum of clandestine production by Karan Packaging or the duty involved in such clandestine production. With regard to penalties on Shri Balvir and Shri Mohan Das, he submits that the scheme of clandestine manufacture is revealed by a blue diary and Shri L.P. Singh authorised signatory of both the Units had stated that Shri Balvir and Shri Mohan were aware of the clandestine activities. He, therefore, submitted that the imposition of penalty on both the persons was justified.