Hi Sugam,
What you are describing is normal and is experienced by everyone: by default, SFDC has no mechanism to prevent duplicates on email and the SFDC ID is the ID, so by definition it is always unique. In other words : deduplicating on SFDC Id is not really deduplicating, except for SFDC admins to export data, change it and reimport to update the records.
The basic reason why Marketo and other Marketing automation solution deduplicate on emails is because it's easier to request leads to provide you with their email in a form than to ask them to enter their SFDC ID 
In other words, there in no possibility for Marketo to know the ID of an existing contact on a form fillout. It has to recognize it on some other criteria.
You need to define on which Business fields you want to recognize and deduplicate contacts and leads. Some businesses have a strong business reason for using other deduplication criteria than the email, but in any case, it will always be business fields, not technical ones such as the SFDC ID. Once you are clear on this, you can invest into some solutions to prevent the creation of duplicates and / or the cleansing. One of the them is SFDC own Duplicate Management tool (it can prevent, not cleanse). And if you end up with a deduplicate field that is different from the email address, then you can ask support to set your Marketo dedupe rule on this field (or multiple ones). But remember : whatever business field(s) you choose, it has (they have) to be info you can easily capture in forms or in import files, otherwise, it will be totally inefficient.
Also, I gather from your post that probably a significant number of leads and contacts do not have an email address. This is surely something you need to address from various standpoints
- With the sales, to ask them to enter this data
- From your data sourcing strategies
-Greg
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