Customs, Excise and Gold Tribunal - Mumbai
Nitin N. Singapuri, Ajay Prakash Dyg. ... vs Commissioner Of Central Excise And ... on 28 May, 2004
Equivalent citations: 2005(99)ECC406
ORDER Moheb Ali M., Member (T)
1. These appeals arose out the order of Commissioner (Appeals) Surat; Shri Pavan Kumar Poonamchand Jain is a gentleman worthy of emulation. He had a cloth shop in the name and style of M/s Trilok Enterprises somewhere in Surat, Gujarat. I hope he still has his shop and business after what the Providence and people have done to that part of the country. He is one of those rare people who believe that greatness does not lie in not offending an economic law, say Central Excise Act, but it truly lies in admitting the offence when caught/detected and reaching for ones own cheque book to write out post-dated cheques, in favour of government treasury, the exact amount of duty allegedly evaded. Rarely if at all, we come across offenders of the stature of Pavan Kumar Jain. They either do not confess or confess but retract or accuse the investigating officers of committing unspeakable horrors on them to extract confessions or if nothing else retrain from writing out post dated cheques in favour of the government treasury covering the alleged amount of duty evaded. Shri Pavan Kumar Jain did issue cheques (Post dated) for the entire amount of fluty not levied/paid without even whisper of a show cause notice. He also did not retract his statement. He is worthy of emulation by all evaders and non-evaders alike.
2. It all started and ended like this.
3. The officers of Central Excise (Pre) as per the direction and instructions of Dy. Commissioner of Central Excise headed by the Superintendent of Central Excise visited the shop premises of Shri Pavan Kumar Jain for preventive checks. This particular Dy. Commissioner directs and instructs the officers to conduct preventive checks in cloth shops rather than in the factories. Others adopt other methods. This particular operation gave instant results.
4. There is this theory that a Gray fabric owner who gets his fabric processed is the real manufacturer in preference to the processor who actually manufactures the processed fabric on a job work basis. The theory assumes that the processor (the job worker) is a hired labourer. The community of processors may not actually enjoy being called hired labourers by some shopkeeper. It brings down their esteem in the eyes of the society but they don't seem to make an issue of it. The processors, who are reduced to the status of hired labour own mills and lead lavish lives. Pavan Kumar Jain, it appears, buys grey fabrics from the open market and sends them to the processors on job work basis.
5. To continue, the preventive check on 19.12.96 revealed that Sri Pavan Kumar Jain had in his possession 28660 mts of MMF (in the form of 4888 sarees) which he seemed to have received from processors during the period dated 13.9.96 to 19.12.96. One look at his sale books revealed that he sold 121307 L.mts. of MMF in the form of sarees during 24.10.1996 to 19.12.1996. He could produce duty-paying documents only for 28351 Lmts., of MMF. By applying some simple arithmetic the officers concluded that Shri Pavan Kumar Jain received non-duty paid fabrics from processors measuring 118,516 L.mts. valued at Rs. 21,92.546/-. The officers then asked Shri Pavan Kumar Jain to reveal the names of the processors who did the job work for him. He said that he got the grey fabrics processed through different processors but in the recent part he got them processed through two processors namely M/s. Ajay Prakash Dyg. & Printing Mills and M/s. Hindi Fabrics Wvg. Factory both of Surat. His memory being short at that time he could not reveal as to the exact quantity of fabrics he received illicitly from each of the above-mentioned processors. The officers let it pass and quickly calculated the duty evaded and confronted Shri Pavan Kumar Jain with a figure of Rs. 4,38,509/- calculated at the rate of 20% on Rs. 21,92,546/-. This value, it looks, is arrived at on the basis of price at which the sarees were sold by Shri Pavan Kumar Jain. Whether such price can be the basis for valuation is another matter. To come back to Shri Pavan Kumar Jain, he pulled out his cheque book and wrote his post dated cheques one for Rs. 2,00,000/- and another for Rs. 2,38,509/- in full settlement of duty evaded. The officers collected the post dated cheques thanked all concerned and left Shri Pavan Kumar Jain to continue his business. All this (except the thanking part of it) had come out in the statement of Shri Pavan Kumar Jain dated 19.12.96.
6. Soon the officers approached the persons in charge of the two processing units mentioned above and asked some questions. Shri Rakeshkumar Surajram Bachkaniwala, Director of M/s. Hindi Fabrics Wvg., Factory admitted that they did some job work for Shri Pavan Kumar Jain but cleared the job worked fabrics on payment of Central Excise duty only and no clearance was made without payment of Central Excise duty. The statement of this person is dated 21.12.96. The officer seemed to have been satisfied with this explanation.
7. The officers, then went to the other processor Shri Nitinbhai Manaharlal Singapuri partner of M/s Ajay Prakash Dyg. & Ptg. Mills on 27.12.96. In his statement he narrated how he did job work for Shri Pavan Kumar Jain and how he faithfully paid Central Excise duty on fabrics cleared to him. The officers seemed to have been satisfied with his version as well.
8. All concerned thought that the matter had come to a happy ending. Shri Pavan Kumar Jain went back to his business of buying grey fabrics and getting them processed etc and the other two to processing of grey fabrics and clearing them on payment of duty always as usual.
9. Some four years and ten months have passed when Shri Pavan Kumar Jain, the gentleman who paid up the duty by post dated cheques which were duly honoured, got another call from Central Excise officers of Surat. Just a he was thinking that another bout of measurement of fabrics, scrutiny of his sale books and recording of his statement would start all over again, to his surprise he was only asked to go-down the memory lane and tell the officers the exact quantity of processed fabrics he received without payment of duty way back in 1996 from each of the two processors, namely M/s Hindi Fabrics Wvg. Factory (Now freshly named as M/s Ferario (India) Ltd. Hindi was not good enough) and M/s Ajay Prakash Dyg. & Ptg. Mills. Memory lapses from which he suffered in 1996, by now abated. In his statement dated 18.10.2001, he inter alia recollected that he received 50,216 Lmts of processed fabrics on which no Central Excise duty was paid from M/s Ajay Prakash Dyg. & Ptg. Mills and some 68,300 Lmts. from M/s Hindi Fabrics again without payment of duty. He did not want to burden any one of them by stating lopsided figures.
10. Armed with this fresh statement the officers approached the two processors in question to ascertain their version of the events that took place in 1996. Both the persons concerned in their statements dated 18.10.2001 stated something to this effect. 'Seen the statement of Shri Pavan Kumar Jain proprietor of M/s Trilok Enterprise and do agree with the statement. Nothing further to say.'
11. Now it is time to issue show cause notice's to all concerned. In the show cause notice dated 23.10.01, the processors were asked to explain why Central Excise duty should not be demanded from them to the extent of evasion they indulged in, why penalties should not be imposed on them etc. For good measure Shri Pavan Kumar Jain of M/s Trilok Enterprises was asked as to why penalty under Rule 173 Q (1) read with Rule 209A of Central Excise Rules should not be imposed on him. He was however not asked to explain why the amount collected from him by way of duty should not be refunded to him as the duty liability is now fastened on the processors.
12. The show cause notice was of course issued with the Prior Permission of the Commissioner of Central Excise Surat-1 who in his wisdom thought such a show cause notice could be issued on the basis of whatever evidence gathered by his subordinates.
13. The show cause notice was duly adjudicated upon by the Jt. Commissioner, who in an order running into ten pages demanded duty from the processors in question, imposed penalties, on all concerned, demanded interest etc. and also imposed a penalty on Shri Pavan Kumar Jain for all his troubles.
14. In appeal the Commissioner (Appeals) confirmed the order of the lower authority except that he reduced the penalty on Shri Pavan Kumar Jain from Rs. 50,000 to Rs. 20,000/- while disposing of the appeals the Commissioner observed I quote "I find that the officers have brought on record sufficient evidence as shown above. Moreover the proprietor of the shop Shri Pavan Kumar Jain had admitted the illicit receipt of processed MMF in his statement. I do not find any force in the plea of the appellants that the adjudicating authority demanded duty without corroboration of documents/particulars. I have also considered the plea that the statement of proprietor of shop was recorded under duress. I find that the said statement was never retracted and under the circumstance the plea that the statement was recorded under duress cannot be accepted."
15. These appeals were filed by the two processing units and the Director of one and the partner of another. Shri Pavan Kumar Jain, the gentleman did not find it necessary to file any.
16. The ld. advocate argued that the Commissioner (Appeals) chose to rely on the statements dated 18.10.2001 and 23.10.2001 ignoring the statement given by Shri Pavan Kumar Jain on 19.12.1996 and the ones given by the appellants, Shri Rakesh Kumar and Singapuri on 21.12.1996 in which both of them denied having cleared any goods without payment of duty. Statement of Shri Pavan Kumar Jain can not be relied upon to fasten duty liability on the appellants.
17. In view of the lengthy narration, I have attempted describing the circumstances under which the show cause notices came to the issued, I do not consider it necessary to cite any case law to conclude that the kind of evidence gathered by the department, by fits and starts is not good enough to sustain any charge on the appellants much less to demand duty. I set aside the order of the Commissioner (Appeals) and allow the appeals. This order does not express any view on whether or not duty is payable on the goods alleged to have been cleared without payment of duty.
(Operative part pronounced in Court)