Full Judgment
2. Shri T.R. Andhyarujina, learned Senior Advocate appearing on behalf of Shri Deepak Atal (applicant in E/Stay/634/93-NRB) and Shri Bhaskar Banerjee (applicant in E/Stay/635/93-NRB) contends that there is no specific allegation against either of these persons who were part-time Directors during the relevant period, in the show cause notice, and that the Department has not brought out the role purported to have been played by either of these applicants in the alleged offence. He relies upon the judgment of the Hon'ble Bombay High Court dated 11.11.1992 in the case of S.L. Kirloskar v. Union of India see 1993 (47) ECR 175 (Bombay) to support his contention that the Directors of a public limited company cannot be made liable to penalty under Rule 9(2) and Rule 175Q of the Central Excise Rules in the absence of specific provision either in the Act or in the Rules providing for Director's liability to penalty. He also brings to our notice the judgment of the Delhi High Court reported in 1988 (38) in the case of Santanu Ray v.Union of India wherein the Court has observed that it is permissible to lift a corporate veil to determine whether a particular Director can be proceeded against in pursuance of a Show Cause notice and submits that in these cases the adjudicating authority has not brought home the charge against the applicants so as to make them liable to penal action. He submits that the applicants were neither whole time nor Managing Directors of New Tobacco Company and only attended some of the meetings of the Board of Directors of NTC from time to time and the day-today working of the Company was not within their actual knowledge.
He also relies upon the acquittal of the applicants by the Court of Special Judge for Economic Offences at Hyderabad which order was confirmed by the Hon'ble Andhra Pradesh High Court as . Regarding the financial position of the applicants he states that their total income is not more than Rs. 2,25,000/- in the preceding 3 years and, therefore, it would cause undue hardship to the applicants if they are directed to deposit the entire penalty amount. He, therefore, prays for waiver of pre-deposit of the penalty and stay of recovery thereof.
3. Shri A.N. Haksar, learned Senior Advocate appearing for Amit'Sen Gupta adopts the arguments of the earned Counsel for the other two applicants and supplements these arguments by reference to the order of the Tribunal in the case of Karnataka Minerals wherein the Tribunal has followed the view expressed by the Delhi High Court in the case of Santanu Ray (supra), submitting that, even assuming without admitting that the corporate veil can be pierced, there is no evidence with the Department to establish the applicant's connivance in evasion of duty.
4. Shri M.M. Mathur, Jt. CDR strongly opposes the applications, reading extensively from the show cause notice which has reproduced extracts from statements of Shri Amit Sen Gupta and other officers such as Guha Roy, Factory Manager and Shri S.S. Dhar, General Manager (Finance) and N.K. Jain, Director of the Company, etc. and submits that the case of the Department against the applicants is primarily based on these statements which reveal the existence of a conspiracy to defraud the Revenue and which reveal the role played by the Directors in such evasion. He particularly refers to the statement of Amit Sen Gupta recorded on 5.10.1986 wherein he has stated that "the cigarettes removed without payment of duty and without accounting from Agarpara and Biccavolu factories were sold through some selected wholesalers like Hind Enterprises and National Cigarette Suppliers of Rajkumar Agarwal and Cigmat Distributors of Dr. Arora. The cash collection, onward transmission, flow back or siphoning were all controlled by Shri G.P. Goenka and Shri B.L. Jhunjhunwala" submitting that this would also go to show that the plan to evade duty was conducted on a large scale with the active involvement of the Directors who were aware of the suppressed production and clandestine removal and the Directors cannot disclaim all responsibilities in this connection. The show cause notice is to be read in its entirety which would clearly establish the involvement of the Directors in the offence. Lastly he submits that acquittal in criminal proceedings cannot by itself form the basis for waiver of penalty in quasi-judicial proceedings which are independent in nature.
5. On hearing both sides and carefully considering their submissions, we observe that the role assigned of each of the applicants will have to be viewed in the background of the entire case which will involve a detailed appreciation of the evidence, ?which is an exercise to be undertaken more appropriately at the time of hearing of the appeals. We further note that, in the absence of any appeal filed by M/s. New Tobacco Co. the findings of suppressed production of clandestine removal have assumed finality and this factor has also to be kept in mind. However, though the learned JCDR is prima facie correct in pointing out that criminal proceedings before Courts are on a different footing from quasi-judicial proceedings before the Departmental authorities, yet the fact that the Hon'ble Bombay High Court has quashed the proceedings against the directors and executives as non-maintainable as in the case of S.L. Kirloskar v. Union of India W.P. No. 952/86 : 1993 (47) ECR 175 (Bombay), and that the Hon'ble Andhra Pradesh High Court has, in its judgment in the case of Duncan Agro Industries Ltd. dismissed the appeal filed by the Revenue against the judgment of the Special Court for Economic Offences, Hyderabad acquitting the assessee company of the charges inter alia of evasion of excise duty, cannot be overlooked.
Therefore, in these circumstances, it has to be seen whether the applicants have been roped in merely because they happened to be Directors or whether their roles and responsibilities were such that they could be considered as persons concerned in the alleged offence shorn of the technicalities of evidence referred to in AP High Court order (supra), and at this stage it is also pertinent to note that the statement of one of the Directors, Shri Amit Sengupta in particular stares us in the face and coupled with the statement of other officers of the Company, makes us pause to consider the factual position as emerging in the light of principles of evidence and natural justice.
6. Looking to the totality of facts and circumstances and noting the above aspects in particular we are of the view that as regards Shri Deepak Atal and Shri Bhaskar Banerjee, the interests of justice would be met ifpre-deposit of penalty is waived and recovery stayed subject to their executing a bank guarantee for the penalty amount or a security to the satisfaction of the Collector within 8 weeks from the date of receipt of this order and we order accordingly. As regards, Amit Sengupta, we waive the predeposit of the penalty and stay recovery thereof subject to his depositing a sum of Rs. 2 lakhs and executing a bank guarantee for the rest of the amount within 12 weeks from the date of receipt of this order. Failure to comply with the above directions within the stipulated period shall result in the dismissal of the appeals without further notice. Matters to come up for ascertaining compliance on 10.2.1994.