Can proceedings against co-noticees be deemed to be concluded if main assessee pays duty, interest and penalty - Yes
WE received this mail from a Netizen -
"The Supreme Court in the case of Onkar S.Kanwar [Civil Appeal Nos. 6260-6265 of 2000 with C.A. Nos. 633-642 of 2002, decided on 27-9-2002] has held that when the matter had been settled under Kar Vivad Samadhan Scheme, 1998 (KVSS) by the main appellant, other persons, on whom show cause notices were issued on the same matter, too get the benefit of settlement.
Taking a leaf out of this judgment, the CESTAT has been granting similar benefits to co-noticees who did not join the main noticee when he settled his case before the Settlement Commission by accepting an additional duty liability. Inasmuch as where the applicant was granted immunity from imposition of penalty etc. the co-noticees too reaped the benefit.
A few decisions in this regard are -
+ Shri Malkosh Madhusudan Danak -
+ S. K. Colombowala -
In the above backdrop, I would like to invite your kind attention to the following provisions of Section 11A(1A) of the CEA, 1944 as it existed before the said section 11A was substituted by the Finance Act, 2011 [w.e.f 08/04/2011] -
11A (1A) When any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded, by reason of fraud, collusion or any wilful mis-statement or suppression of fact, or contravention of any of the provisions of this Act or the rules made hereunder with intent to evade payment of duty, by such person or his agent, to whom a notice is served under proviso to sub-section (1) by the Central Excise Officer, may pay duty in full or in part as may be accepted by him, and the interest payable thereon under section 11AB and penalty equal to twenty-five per cent of the duty specified in the notice or the duty so accepted by such person within thirty days of the receipt of the notice.]
(2) The [Central Excise Officer] shall, after considering the representation, if any, made by the person on whom notice is served under sub-section (1), determine the amount of duty of excise due from such person (not being in excess of the amount specified in the notice) and thereupon such person shall pay the amount so determined.
[Provided that if such person has paid the duty in full together with, interest and penalty under sub-section (1A), the proceedings in respect of such person and other persons to whom notice are served under sub-section (1) shall, without prejudice to the provisions of section 9, 9A and 9AA, be deemed to be conclusive as to the matters stated therein:
Provided further that, if such person has paid duty in part, interest and penalty under sub-section (1A), the Central Excise Officers, shall determine the amount of duty or interest not being in excess of the amount partly due from such person.]
On account of the above, it is being concluded that even co-noticees who are made a party to the show-cause notice and against whom penal proceedings are proposed under the Central Excise Rules/CCR are entitled for claiming the immunity inasmuch as the penal proceedings are to be dropped and even if imposed cannot sustain.
I have a small doubt. The first proviso speaks of "other persons" to whom notice is served under sub-section (1) and it is against these persons that the proceedings are deemed to be conclusive.
Sub-section (1) of section 11A of the CEA, 1944 refers to issuance of show cause notice for recovery of Central Excise duty not paid/short paid by a person.
Admittedly, against Co-noticees penal proceedings have been initiated by invoking the Central Excise Rules and not Section 11A of the CEA, 1944.
So, in such a scenario will the stand taken of granting immunities from penalty to co-noticees stand legal scrutiny?
I request DDT to solicit the views of netizens on the issue."
Netizens may like to respond.
DDT adds - On the subject matter, we came across a CESTAT decision recently, where the applicants were imposed with penalty by the lower authorities.
The order passed by the CESTAT is extracted as below - "the SCN was issued on 02.04.2008 and one of the co-noticee has paid duty, interest and penalty equal to 25% of duty on 15.04.2008 i.e within 30 days of from the date of issuance of show-cause notice. Therefore, proviso 11A(1)(a) applies to the matter. Accordingly, penalty against the applicant is not imposable .