Custom, Excise & Service Tax Tribunal
6. Mahendra Agarwal vs Thane I on 16 July, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS:
1.
1. E/723/2010
2. E/665/2010
3. E/674/2010
4. E/675/2010
5. E/676/2010
6. E/677/2010
7. E/682/2010
8. E/702/2010
9. E/733/2010
10. E/738/2010
11. E/782/2010
12. E/797/2010
13. E/879/2010
14. E/910/2010
15. E/929/2010
16. E/1621/2010
[Arising out of Order-in-Original No: 03/BR-03/Th-I/2010 dated 25/01/2010 passed by the Commissioner of Central Excise, Thane I.]
For approval and signature:
Honble Shri P.K. Jain, Member (Technical)
Honble Shri S. S. Garg, Member (Judicial)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
Yes
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
1. Babul Jain
2. Prem Rautramni Joshi
3. Yudhishtir Kumar Batra,
4. Atma Prakash Batra
5. Prakash Poddar
6. Rajesh Rameshwar Dayal Bansal
7. Manohar Mali
8. Ayush Murarilal Agarwal
9. Ajit Singh Choraria
10. Ajay Rameshchandra Mittal
11. Naresh J. Doshi
12. Farooq Razazk Gazi
13. Parameshwar Arjun Pareek,
14. Sumit H. Juneja,
15. Shyam Sunder A. Sharma,
16. Mahendra Agarwal
Appellants
Vs
Commissioner of Central Excise
Thane I
Respondent
Appearance:
Shri R. V. Shetty, Advocate for the appellant No.1 Shri A.K. Prabhakar, Advocate for the appellant No.2 Shri J. C. Patel with Shri K.I. Vyas, Advocates for the appellant Nos. 3 to 7, 10 and 13 Shri Mayur Shroff, Advocate for the appellant No.8 Shri Mukund Chauhan, Advocate for the appellant No.9 Shri Sunil Navenkar, Advocate for the appellant No.11 Shri S. Suriyanarayanan, Advocate for the appellant Nos.12 and16 Shri M.S. Jagesha, Advocate for the appellant Nos.14 and 15 Shri V.K. Agarwal, Addl. Commissioner (AR) for the respondent CORAM:
Honble Shri P.K. Jain, Member (Technical) Honble Shri S. S. Garg, Member (Judicial) Date of hearing: 16/07/2015 Date of decision: 29/09/2015 ORDER NO: ____________________________ Per: P.K. Jain:
All the 16 appeals being considered in this order are against imposition of penalty under Rule 26 of the Central Excise Rules, 2002. All the appeals are arising out of the common order-in-original based upon the investigation against Muni Group of companies relating to fraudulent availment of CENVAT credit amounting to ` 11,61,61,197/- (Eleven Crore Sixty One Lakh Sixty One Thousand One hundred Ninety Seven only) and thereafter passing it so as to get it encashed or utilise it for payment of duty liability. The penalty imposed on various appellants are as under: S. No. Appellants Penalty (`)
1.
Shri Babul Jain, Partner of Rainbow Silks, 2,00,000/-
2. Shri Prem Rautramni Joshi, Monika Impex 25,00,000/-
3. Shri Yudhishtir Kumar Batra, Partner/Proprietor of Vikram International & Dipika Overseas 2,00,00,000/-
4. Shri Atma Prakash Batra, of Guria Textiles 25,00,000/-
5. Shri Prakash Poddar Authorised Signatory of Karishma Overseas & Sheetal Exports 75,00,000/-
6. Shri Rajesh Rameshwar Dayal Bansal, Partner of R.J.Fashions 25,00,000/-
7. Shri Manohar Mali, Proprietor of Shree Ganesh Enterprises 2,00,000/-
8. Shri Ayush Murarilal Agarwal, Proprietor of Namaste Exports, Authorised Signatory of Prime Exports & Daffodils Exports 50,00,000/-
9. Shri Ajit Singh B Choraria, Proprietor of Shubham Silk Mills, Authorised Signatory of Shubham Textiles, Shubhlaxmi Textiles & Shubhlaxmi Exports 50,00,000/-
10. Shri Ajay Rameshchandra Mittal, Proprietor of K.V. Corporation, Shubhlaxmi and Sejal Overseas 50,00,000/-
11. Shri Naresh J. Doshi, Partner of Doshi Impex 1,00,000/-
12. Shri Farooq Razazk Gazi, Prop. of M/s Glory Exports 1,00,000/-
13. Shri Parameshwar Arjun Pareek, Ayush Exports 7,00,000/-
14. Shri Sumit H. Juneja, Proprietor, Keshav Impex & Raghukul Impex 25,00,000/-
15. Shri Shyam Sunder A. Sharma, Proprietor of Riddhi Siddhi International & Shree Laxmi Impex 1,00,00,000/-
16. Shri Mahendra Agarwal, M/s. Chandan Impex 15,00,000/-
2. Brief facts of the case are that Muni Group of Companies viz: Muni Trade Pvt. Ltd., M/s. Apex Corporation, M/s. Mansa Traders, M/s. Globe Traders and M/s. Venkatesh Mercantile Pvt. Ltd. got themselves registered under Rule 12B of the Central Excise Rules and fraudulently took credit on the invoices without receiving any inputs and thereafter they issued ARE-1s and invoices to various merchant exporters or other Rule 12B manufacturers without any corresponding goods. The quantum of fraudulently availed credit is ` 11,61,61,197/- (Eleven Crore Sixty One Lakh Sixty One Thousand Ninety Seven only). This was done to enable either themselves or the merchant exporters fraudulently claim rebate of purported duty paid against the exports made with reference to the ARE-1s. Various merchant exporters obtained ARE-1s and invoices from the above mentioned Muni Group of Companies without receiving any goods and exported locally procured non-duty paid or inferior quality goods and claimed rebate against the purported duty paid on these ARE-1s. Many of the appellants are merchant exporter. Most of the other appellants are Rule 12B manufacturers, who would utilise the fraudulent invoices issued by Muni Group for payment of their duty liability and perhaps ultimately get those encashed as rebate. Few appellants have other role which will be discussed while considering individual appeals.
3. From the investigation, it is clear that certain banking transactions had taken place which proved that whenever any bearer cheque were issued for purchase of goods against the ARE-1s or invoices by the merchant exporter/Rule 12B manufacturers, the cheques were discounted and cash payments against the cheque were made back to the merchant exporters/Rule 12B manufacturers subject to payment of certain commission to the middleman and to the cheque discounting man. Investigation also revealed that as and when account payee cheques were issued by the merchant exporters/Rule 12B manufacturers these cheques were deposited in different accounts of Muni Group of Companies and equal amount of bearer cheques were issued to the merchant exporters/Rule 12B manufacturers from these accounts. In some cases, some payments have been shown to be made in the account to the local supplier of Surat against supply of fabric/textile item, etc. which have been exported against ARE-1s/Rule 12B manufacturers. The claim of the merchant exporter/Rule 12B manufacturers relating to the transport of the goods from the Muni Group of companies to the purported buyers viz: merchant exporter/Rule 12B manufacturers were found to be false as the transporters were found to be non-existent and bogus. Investigation conducted at the port of export revealed that the goods were transported by actual transporters from various suppliers of Surat to the port of export and none from the Muni Group of Companies located near Mumbai.
4. Thus, in brief, Muni Group of Companies were involved in only channeling documents such as invoices to the Rule 12B manufacturer for taking CENVAT credit and ARE-1s to the merchant exporter for claiming rebate of duty on exports against ARE-1s. The merchant exporters in these cases have knowingly purchased bogus ARE-1s from Muni Group of Companies and presented these ARE-1s to the customs authorities at the time of exports along with the goods so as to justify the duty-paid nature of the export goods and enabling them to claim rebate of duty from excise authorities later on. Investigation also revealed that Superintendent of Central Excise in-charge of Muni Group of Companies was in connivance and whenever any reference was made by the rebate granting authority about the duty payments, the same was confirmed by the Superintendent without checking or verifying the documents. Similar position exist in case of Rule 12B manufacturers, purchaser of invoice.
5. The case was extensively heard on 14th to 16th July, 2015 wherein different advocates representing various appellants argued their case.
5.1. The learned advocate for appellant Nos. 3, 5, 10 and13 submitted that they are merchant exporter and they have purchased processed fabrics from M/s. Muni Group of Companies and exported under the claim for rebate of duty and the said claim was made by M/s. Muni Group of Companies and the appellants have not received any rebate in respect of the any of the exports. It was further submitted that the departments case is that Muni Group of Companies has availed CENVAT credit on various inputs which are shown as having been used in the manufacture of fabrics and the said credit has been used to pay duty on the fabrics and according to Revenue Muni Group of Companies have not manufactured any goods and the fabrics which were exported were not manufactured by Muni Group of Companies but procured from the open market. It was submitted that Commissioner has imposed penalty under Rule 26 on the ground that the merchant exporter have dealt with the export goods which were not manufactured by Muni Group of Companies but procured from the market and which export goods were liable to confiscation. It was submitted that the Commissioner has not indicated as to who and under which provisions of law, the goods allegedly procured from the local market and exported are liable to confiscation.
5.2. In respect of appellant No. 4 and 6, it was submitted that they are Rule 12B manufacturer and they have purchased grey fabrics from Muni Group of Companies and availed CENVAT credit of the duty paid by Muni Group of Companies. Such goods were processed by job-workers who pay duty on the processed fabrics by availing CENVAT credit of duty paid by Muni Group of Companies as well as through PLA on account of value addition. It was submitted that the processed fabrics were then exported under claim for rebate. It was submitted that no rebate has been received by them in respect of 12B manufacturers. Also penalties imposed under Rule 26 on the ground that the fabrics received by them were not manufactured by Muni Group of Companies but were procured from the open market and that such goods are liable to confiscation. It was submitted that the Commissioner, however, has not indicated that as to how and under which provision of law the goods allegedly procured from the market and exported are liable to confiscation.
5.3. As far as appellant No. 7 is concerned, it was submitted that he was name sake proprietor of Shree Ganesh Enterprises whose name was used by Shri Shyam Sunder Sharma of Surya Exports for discounting of cheques. It was, however, submitted that appellant No.7 has, in his statement, stated that though his name was used for discounting of cheques, the cash was received by Shri Shyam Sunder Sharma and the Commissioner has imposed penalty of ` 2 lakhs under Rule 26 without indicating as to how Rule 26 is attracted against the appellant for his name having been used to discount cheques.
5.4. The learned counsel further submitted that appellant No.3 is a partner of Vikram International and the present show cause notices and adjudication order are a duplication of proceedings in respect of very same export goods which are subject matter of an earlier show cause notice and adjudication. It was submitted that the present show cause notice proposes imposition of penalty in respect of export goods which are specified at serial No. 426 to 460 of Annexure C to the show cause notice and in respect of these very same export goods there were adjudication proceedings by order No. 17/MS(06)/ COMMR/RGD/06-07 dated 20/09/2006. This Tribunal has set aside the said order and remanded the matter back to Commissioner vide order No. A/134-136/07-C-I/EB dated 09/02/2007 and is pending adjudication. It was further submitted that no penalty can be imposed on merchant exporter or Rule 12B manufacturers under Rule 26. Rule 26 provides for imposition of penalty on a person who acquires possession of, or any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner deals with excisable goods which he knows or has reason to believe are liable to confiscation under the Act or Rules. Thus, the primary condition is that the goods should be liable to confiscation and the person should have knowledge of the same. The mere fact that the goods were procured and exported by the appellants cannot by itself establish that the goods were liable to confiscation and appellant knew or had reason to believe that the said goods are liable to confiscation. It was further submitted that under Central Excise Rules, provision for liability to confiscation of excisable goods are contained in Rule 25 and as far as the appellants, it is the Revenues case that the goods exported were not manufactured by Muni Group of Companies but were procured from the open market and since the goods were procured from the open market, the appellant has no knowledge that the goods are liable to confiscation. There is no evidence that the goods procured from the local market are liable to confiscation. It was further submitted that the goods procured from the open market are to be taken as duty paid unless shown otherwise. In support of the said contention, following case laws are quoted:
(i) Commissioner of Central Excise vs. Decent Dyeing Co. 1990 (45) ELT 201 (SC);
(ii) Nagpur Re-Rolling Mills vs. Commissioner of Central Excise 2001 (136) ELT 423.
5.5. It was submitted that the Commissioner has not indicated as to how and under which provision of the law goods procured from the open market and exported are liable to confiscation and no penalty can be imposed under Rule 26.
5.6. In rebuttal of ARs contention, learned counsel also submitted that the case of Sanjay Vimalbhai Deora vs. CESTAT reported in 2014 (306) ELT 533 (Guj.) quoted by the learned AR is in different context and is in the context of clandestine removal of excisable goods. It was submitted that in the said case, the honble Gujarat High Court has said that a penalty is imposable if excisable goods have been rendered liable to confiscation and since in the present case the goods are not liable to confiscation, penalty cannot be imposed under Rule 26. Thus, the case law does not help the case of the department. It was also submitted that the other case law quoted by the AR relating to Commissioner of Central Excise vs. Navneet Agarwal 2012 (276) ELT 515 is also not applicable to present facts of the case as the appellants have not issued any CENVATable invoices without supply of goods. It was also submitted that the case of Veekay Enterprises vs. Commissioner of Central Excise 2011 (266) ELT 436, which was relied upon, the said case law has been distinguished by the same honble Punjab & Haryana High Court in the case of Mini Steel Traders 2014 (309) ELT 404. It was further submitted that the case of Veekay Enterprises (supra) and Deepak Roadways 2010 (254) ELT 26 related to imposition of penalty under Rule 26 for issuance of documents for passing on CENVAT credit without supply of inputs. These decisions are not applicable in the facts of the present case since none of the present appellants have issued documents for passing on CENVAT credit without supply of goods. It was further submitted that, in any event, the penalty imposed is excessive, harsh and disproportionate. It was also submitted that the appellants have not received any rebate and have not gained any benefit. Considering that the appellants have not received any rebate, there is no justification for imposition of such harsh penalty.
5.7. It was further submitted that, as far as penalty on appellant No. 7 is concerned, it is not imposable as Rule 26 is not attracted against the appellant as his name has been used to discount cheques.
5.8. The learned counsel for appellant No. 8 submitted that a penalty of ` 50 lakhs has been imposed on his purported capacity as proprietor of Namaste Exports, authorised signatory and brother of Shri Anuj Murarilal Agarwal, proprietor of M/s. Prime Exports and authorised signatory and son of Shri Murarilal Agarwal, proprietor of Daffodil Exports. It was submitted that the appellant is neither authorised signatory of Prime Exports or Daffodil Exports. Further the appellant has been penalised in his capacity as merchant exporter for purported contraventions by all the three firms on the basis of his statement that he looked after the affairs of the three firms. It was also submitted that a penalty has been imposed only on the basis that the appellant could not explain as to how detailed packing lists could be prepared without opening the packages, failure on the part of the appellant to give name and address of the representative of the Muni Group of Companies who approached the three firms and on the basis that the actual beneficiary of certain cheques issued to M/s. Muni Group of Companies by the three firms were firms like M/s. Eagle Textile, Metro Industries etc. indicating that they were actual suppliers and not Muni Group of Companies. The learned counsel submitted that the rebate claims preferred by Daffodil Exports and Prime Exports were initially allowed in revision application but the department approached the honble High Court who in turn remanded the matter to the revisionary authority. The revisionary authority remanded the matter back to the adjudicating authority who held adversely against the aforesaid firms. The appeal against the said order has been rejected by the Commissioner (Appeals) and the revision application is pending before the Government of India. Learned counsel submitted that they have received the goods from M/s. Muni Group of Companies and made payments by account payee cheques or crossed bearer cheques. It was also submitted that there is no need to open the packages as the packing list could be prepared on the basis of packing slips received from Muni Group. It was submitted that the partner transport company has stated that in his statement that the export goods of Namaste Exports and Prime Exports had been delivered to their godowns . It is thus clear that the goods were transported to godown of the firms of Muni Groups. It was further submitted that the statement of Shri Balaji Roadways of Surat is contrary to the statement of M/s. Surat-Ahmedabad Transport. IT is thus clear that the goods have been received by the three firms from Muni Group and, therefore, there is no basis for imposition of penalty on the appellants. It was submitted that they have received the goods form Muni Group of Companies and exported and, therefore, no penalty is imposable under Rule 26. It was also submitted that there is no basis for imposition of penalty on the appellant for export effected by M/s. Prime Exports and M/s. Daffodils. It was further submitted that as clear from para 98 of the impugned order what is sought to be confiscated is the goods presented to the customs authorities for export. Even if it is assumed that such export goods are not supplied by Muni Group of Companies but are purchased from the open market, such goods are deemed to be duty paid goods as held by the apex Court in the case of Decent Dyeing Co. 1990 (45) ELT 201 (SC) and such goods are not liable to confiscation. It was also submitted that para 98 does not invoke the provisions of Rule 25. It was also submitted that for imposition of penalty under Rule 26 knowledge or reason to believe that the subject goods are liable to confiscation is a must and therefore, penalty cannot be imposed. It was also submitted that a similar case was adjudicated by the Commissioner, Mumbai I vide order No. 01/M-I/2009/155 dated 03/02/2009 wherein no penalty was imposed under Rule 26 by the Commissioner and the said order has been accepted by the department. It was also submitted that the said order was quoted before the adjudicating authority, however, the present adjudicating authority has simply ignored the said order. It was also submitted that the Commissioner has given the findings in para 91 that the exporters were not required to follow any of the provisions of Central Excise law and the so-called 12B manufacturer were also not alleged for contravention of any of the provisions of Central Excise law or the rules made thereunder. It was also submitted that as per the decision of the honble Delhi High Court in the case of Commissioner of Central Excise vs. Balaji Trading Co. 2013 (290) ELT 200 the provisions of Rule 25 would be attracted only against the four category of persons mentioned therein and thus the said rule cannot be made applicable in the case of present appellant and hence since the goods cannot be confiscated penalty under Rule 26 cannot be imposed on the appellant. It was also submitted that Rule 26 was amended w.e.f. 01/03/2007 and the present dispute is for the period prior to that and therefore, Rule 26(2) is not applicable as held by various courts and hence no penalty can be imposed prior to 01/03/2007. It was submitted that the case of Shri Sanjay Vimalbhai Deora (supra) quoted by learned AR is not applicable as there the case was of clandestine clearance of the goods and in the personal knowledge of the Director In the present case, the goods held liable for confiscation are exported goods and not clandestinely cleared goods and hence the said case law is distinguishable. It was also submitted that the other case laws are also not applicable as the same have been distinguished by the honble Punjab & Haryana High Court in subsequent judgments. It was also submitted that the honble Bombay High Court in the case of Ramesh Kumar Rajendra Kumar & Co. vs. The Commissioner of Central Excise AIT 2010-553-HC has clearly held that only when invoices are issued without any corresponding movement of goods there is no basis for imposition of penalty under Rule 26 before amendment dated 01/03/2007. It was also submitted that under Rule 26, maximum penalty that can be imposed is ` 10,000/- or the duty involved. In the present case, the goods involved are export goods on which no duty is liable and hence the maximum penalty that can be imposed is ` 10,000/-. Imposition of penalty of ` 50 lakhs is not sustainable in law and requires to be set aside.
5.9. The learned counsel for appellant No. 9 submitted that they are not merchant exporter and never claimed any rebate and their role is as traders selling duty paid goods. It was submitted that in para 6(h) of the show cause notice the allegation made is that he had no sale-purchase transaction of goods with Muni Group and he was merely using the invoice/ARE-1s of Muni Group for showing exports from his firm and was also supplying the documents to other parties to show exports. Learned counsel submitted that this allegation is wrong as they have never purchased any goods from Muni Group and exported. The list of merchant exporter is given in annexure C to the show cause notice and their name is not appearing in the list. It was further submitted that no clear finding has been given by the Commissioner in para 93(XIV) of the impugned order. It was also submitted that if any inference is drawn by finding of the adjudicating authority that they have only supplied duty paid invoices to Muni Group and not actually supplied goods then also they are not liable to penalty under Rule 26 before 01/03/2007 as sub-rule (2) to Rule 26 came into force w.e.f. 01/03/2007. It was submitted that in view of the above position penalty under Rule 26 may be set aside.
5.10. learned counsel for appellant No. 11 submitted that the present proceedings are in the nature of double jeopardy as penalty of ` 1 lakh under Rule 26 has been imposed with respect to the credit amounting to approximately ` 3.5 lakhs availed by them on the basis of invoice No. 728 dated 04/02/2004 and 729 dated 05/02/2004 issued by M/s. Apex Corporation. The said investigation are also already subject matter dispute in another show cause notice F. No. V-Adj(52,54,63)/CSCN/M-I/15-16/2008 dated 09/07/2008. The said show cause notice was adjudicated and penalty on the present appellant was imposed under Rule 26. It was submitted that a person cannot be penalized twice for the same offence. It was submitted that the appellant is a customer of Apex Corporation and no role can be attributed to the present appellant as he is neither a supplier of goods/invoices to M/s. Apex Corporation on which M/s. Apex Corporation would have availed credit nor it is a merchant exporter. It was submitted that the allegation that that they have received the amount in cash is untrue as their employee Mr. Ashish in his statement dated 25/04/2007 has categorically denied the same. The bill discounter Shri Shreik Acharatlal Varaiya in his statement dated 13/10/2006 and 14/10/2006 has confirmed Mr. Ashish as only the person providing reference i.e. bringing the parties for bill discounting and further stated that the ultimate beneficiaries of cash are the person to whom the cheque belongs. It was submitted that no penalty has been imposed on the bulk bill discounter, there is no reason to impose any penalty on the person providing reference. It was further submitted that penalty under Rule 26 can be imposed only on the person who has dealt with the goods and have reason to believe that the goods are liable to confiscation. It was submitted that in this the appellant is only a customer of Apex Corporation and it cannot be said to have dealt with the export goods which have been confiscated in the impugned order. It was also submitted that liability to confiscation is sine qua non for invocation of Rule 26 as held by the honble Bombay High Court in the case of V. Anantharaman vs. Union of India 2003 (151) ELT 278. It was also submitted that the Rule 26(2) was introduced w.e.f. 01/03/2007 only and the present case pertains to the period October 2003 to June, 2004 and no penalty therefore can be imposed. It was submitted that there is no statement implicating them in the entire dispute.
5.11. The learned counsel for other appellants also took the similar arguments as in the above cases and the same are not being repeated for sake of brevity.
6. The learned AR explained the whole modus operandi and also took us through the impugned order and submitted the followings:
6.1. In respect of appellant No. 1, learned AR submitted that the said appellant is a merchant exporter and his role is detailed in para XII at page 88 of impugned order, para 13 on page 122 and findings are in para ii on page 173. Being merchant exporter they only received the ARE-Is without receiving any good physically. Investigation has confirmed from the bank account that the payment made by them to M/s Muni Group through Account Payee cheques and the same amount was paid back to different local suppliers of Surat. It was also submitted that appellant has paid back the rebate claim availed by them thereby accepting the charges.
6.2. In respect of appellant No.2, it is submitted that appellant No.2 is also a merchant exporter and used the ARE-Is of Muni Group for claiming rebate claim. Learned AR took us through para XXVI of page 51 and para XXVII of page 52 of the impugned order.
6.3. In respect of appellant No. 3, it was submitted that, Vikram Industries and Deepika Overseas are merchant exporters and they obtained ARE-Is from the Muni Group of companies without getting any goods, purchased locally non duty paid goods. Export rebate was claimed against the ARE-Is of Muni Group. It was submitted that the details from the banks and enquires with agents doing cheque discounting confirmed that whatever payment was made to Muni Group of companies, same was received back by these two companies in cash. Statement of transporters proves that goods did not move from Muni Group of Companies but somewhere else.
6.4. In respect of appellant No. 4, it was submitted that they have claimed inadmissible CENVAT Credit on the invoices of Muni Group without receiving any goods. Para XXVIII on page 52 and para 10 on page 130, para viii on page 174 of the impugned order were referred to explain the issues.
6.5. In respect of appellant No. 5, the appellant is a merchant manufacturer and claimed rebate against ARE-Is of Muni Group without receiving any goods. Para 51 and 53 on page 29 and 30, para 53.13 on page 33, para 54.2, 54.4 on page 34, para 54.3 of page 54, para XIX of pg. 50, para V of pg. 56, para 8 on page 120,para 14 on page 143,para iii on page 173,para vii on page 174 were explained by learned AR.
6.6. In respect of appellant No. 6, the appellant had received only invoices in his firms name from Muni Group and on these invoices he took CENVAT credit of ` 1 crore. The payment was made through cheques which were discounted and cash was paid back to them. Learned AR also explained observations in para XXIV of page 51,para 72 of page 103, para 17 of page 124, para XXI of page 167 of the impugned order.
6.7. In respect of appellant No. 7, the appellant has availed credit on 8 invoices from Muni Group of Companies without receiving any goods. The payment made by cheque , which were discounted and received the cash back. Para IX of page 58, para (a) of pg. 59, para (g), (h), of page 129, para IX of page 174 in the impugned order were explained.
6.8. In respect of appellant No. 8, it is submitted that the appellant has admitted that he was managing not only the Namaste Exports but he was also managing M/s Daffodil Export owned by his father and M/s Prime Exports owned by his brother. All the three firms were being run from the same office. Thus, other two firms were being run by him only. Para XII on page 45 and 46, para VIII on page 79, para 68.13 on page 99, para 1a on page 117, para 8 of pg. 120 and findings in para III on page 173 of the impugned order were explained in detail.
6.9. In respect of appellant No. 9, it was submitted that the appellant is the proprietor of Subham Silk Milk and Authorised Signatory of Subham Textile and SubhLaxmi Overseas. It was submitted that Muni Group has taken CENVAT Credit based on the invoices issued by the appellant. Thus the appellant has supplied invoices to Muni Group without supplying any goods. It was submitted that they have also taken ARE-Is from Muni Group and claimed rebate against export. Learned AR also referred to para e, f, g, h, l of page 94 and 9, para ii on page 121, para xv on page 175.
6.10. In respect of appellant No.10, it was submitted that exporters viz: M/s Karishma, M/s Deepika and Rainbow Silk have confirmed that ARE-Is of Muni Group were supplied to them by the appellant and the appellant was proprietor of M/s Shubh Laxmi Fabrics. During investigation, appellant he stated that one Shri Shyam Sunder Sharma was looking after the work of his firm and he was arranging deals between the Muni Group of Companies and Merchant Exporters. It was further submitted that the appellant was also found to be proprietor of M/s K.V. Corporation and was getting the cheques discounted and collecting the cash back. His role as discussed in Para V and para (a) on page 56, para VII (a), (b) on page 57 and 58, para 5 on pg. 92, para 8 on pg 128 of the impugned order, was explained in detail.
6.11. As far as appellant No.11 is concerned, appellant is a merchant exporter and has claimed rebate against the ARE-Is of Muni Group without actually receiving any goods. The Commissioner has given findings in para V on page 173 of the impugned order. Para 63 on page 65, 66 and para 9 on page 129 of the impugned order details his role.
6.12. In respect of appellant No. 12, it was submitted that, again the appellant is a merchant exporter, obtained ARE1 from Muni group and claimed rebate. Para V on page 42, para iv on page 73 and para xi on page 174 of the impugned order refers to his role.
6.13. In respect of appellant No. 13, it was submitted that the appellant is a merchant exporter and his role is discussed in the impugned order at para 58.1(ii) on page 40, para a, b c on page 41, para ii, ii(a) on page 72.
6.14. As regards appellant No. 14, it is submitted that, again, the appellant is a merchant exporter and shown exports against ARE-Is of Muni Group without receiving any goods and claimed rebate. His role is explained in Para 20 on page 50, para xiii on page 88 and 89 of the impugned order.
6.15. With regard to appellant No. 15, it is submitted that this appellant has received invoices from Muni Group of Companies without receiving any goods and availed CENVAT credit, made payment to Muni Group through Account Payee Cheques and after cheque discounting got the cash back. Learned AR drew attention to para VII on page 57, (a), (b), (c), para VIII on page 57 and 58,para 6 on page 93, para 8 on page 128, para (g), (h) on page 129,para 50 on page 152, para XV on page 176.
6.16. As regards appellant No. 16, it is submitted that this appellant is a merchant exporter and used ARE-Is of Muni Group of Companies and claimed rebated against those exports. Para (a), (b) on page 127 and 12, para xviii on page 167 details his role.
6.17. Learned AR further relied upon the following case laws to support his contention that the goods in the present situation are liable to confiscation and the appellants are liable to penalty under Rule 26:
(i) Sanjay Vimalbhai Deora vs. CESTAT 2014 (306) ELT 533 (Guj.);
(ii) CCE, Ahmedabad vs. Navneet Agarwal 2012 (276) ELT 515 (Tri.-Ahmd);
(iii) Vee Kay Enterprises vs. CCE 2011 (266) ELT 436 (P&H);
(iv) M.S. Metals vs. CCE, Haryana 2014 (309) ELT 241 (P&H);
(v) CCE, Ludhiana vs. Deepak Roadways 2010 (254) ELT 26 (P &H);
(vi) Nashik Strips Pvt. Ltd. vs. CCE, Nashik 2010 (256) ELT 307 (Tri.-Mum);
(vii) Order No. A/204-215/14/EB/C-II dated 08/01/2014, Sujana Metal Products Ltd. vs. CCE, Thane I;
(viii) Order No. A/1950-1967/15/15/EB dated 11/03/2015, Bhagwati Steel Cast Ltd. vs. CCE, Nashik.
7. We have gone through the impugned order as also the submissions made by the counsels of various appellants as also the AR.
8. One of the common contentions by various learned counsels for the appellants was that penalty under Rule 26 cannot be imposed on the appellants, many of them are merchant exporters or Rule 12B manufacturers. It was the contention of the learned counsels that as per the departments case Muni Group of Companies have only supplied duty-paying invoices and the goods have come from some other sources and these goods along with the invoices of the Muni Group of Companies were exported and rebate was claimed. It was the contention of the learned counsels that Commissioner has not indicated as to how and under which provisions of law the goods allegedly procured from the market and exported are liable to confiscation.
8.1. We have given considerable thought to the submission. We reproduce Rule 25 and 26 of the Central Excise Rules, 2002 as under:
RULE 25.?Confiscation and penalty. (1) Subject to the provisions of section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer, -
(a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or
(b) does not account for any excisable goods produced or manufactured or stored by him; or
(c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or
(d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (c) or clause (d) has been committed, or [rupees two thousand], whichever is greater. (2)?An order under sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice.
RULE 26.?Penalty for certain offences. ?Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees, whichever is greater. 8.2. In the present case, there is no doubt or confusion that penalties have been imposed under Rule 26 ibid. Rule 26 as reproduced above would indicate that any person, who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to penalty. There is no doubt that the so called merchant exporters or Rule 12B manufacturers have dealt with the goods inasmuch as they purchased the goods from market and in order to claim the rebate/or avail CENVAT credit they approached Muni Group of Companies and purchased certain invoices from them so as to fraudulently show as if the goods were purchased from Muni Group of Companies on the invoices of Muni Group and thereafter exported or used in processing. Thus, there are excisable goods which are purported to be cleared on the invoice of Muni Group. In all cases, the investigations have indicated that the goods were never transported from Muni Group of Companies to the appellants or to the port of export. Investigations revealed that the goods were lifted from some dealers in Surat, etc. Further, investigations indicate that some payments were made to Muni Group of Companies through account payee cheques. However, immediately, thereafter, Muni Group of Companies have issued cheques in the name of some other entities. These cheques were, in turn got discounted by the merchant exporter/appellants. In some cases, the amounts were paid by crossed bearer cheques to Muni Group of Companies. However, these cheques were, in reality, not deposited in the accounts of Muni Group of Companies, but were deposited either in the name of certain dealers or got discounted from various bill discounters/shroffs. In nutshell, the money which was purported to have been paid to Muni Group of Companies for purchase of material was not paid to them but either was taken back by the appellants-merchant exporters, or in some cases, some amount was paid to certain dealers in fabric. (Perhaps, some fabrics might have been purchased from them.) Thus, it is evident that the invoices of Muni Group of Companies and the goods purported to be covered by such invoices were dealt by the merchant exporter-appellants. There can be no doubt, that these goods are liable to confiscation under Rule 25(1)(d) of the Central Excise Act, 1994. In view of the above said position, there can be no doubt that penalty is imposable under Rule 26 on the merchant exporter/manufacturer under Rule 12B.
8.3. We also like to add the very fact that the appellants have procured invoices from a source other than the actual manufacturers of the goods would indicate that these goods were in reality not duty-paid goods. If these goods were duty-paid then there was no reason for the appellants-merchant exporters/manufacturers under Rule 12B to undertake the above mentioned fraudulent activity of approaching Muni Group of Companies and getting the invoices from them so as to create a fraudulent cover that the goods are duty-paid and are manufactured by Muni Group of Companies. In fact, the whole purpose of this exercise was to finally encash duty purported to have been paid (which in reality was never paid to the Government) on the goods through the invoices of Muni Group of Companies and share such booty between Muni Group of Companies and the appellants. In our considered view, there can be no doubt that penalty under Rule 26 is imposable in the facts of the case.
8.4. Even in respect of Rule 12B manufacturers, they have procured the invoices from Muni Group of Companies and the goods from some other source. Here again, goods procured from some other sources would be non-duty paid goods otherwise, there was no need for them to get the invoices from Muni Group of Companies. The findings recorded above in respect of merchant exporters equally be applicable in the case of Rule 12B manufacturers and, therefore, penalty is imposable. Thus, these are the cases of fraud wherein the appellants as also Muni Group of Companies were equally involved and would be equally benefitted by getting the money from the government exchequer, in the name of rebate even though in reality, no duty was paid in the scheme of the above fraud, it was fraudulently shown that the duty was paid and the appellants or Muni of Group of Companies would be able to get refund of the duty in the form of rebate which thereafter will be distributed among themselves.
8.5. The reasoning adopted by the honble Gujarat High Court in the case of Sanjay Vimalbhai Deora (supra) which in turn has been upheld by the honble Supreme Court is equally applicable. Similarly, the judgment of the Punjab and Haryana High Court in the case of Veekay Enterprises and M S Metals (supra) are equally applicable.
8.6. The learned counsel for the appellant has also submitted certain judgments wherein honble Supreme Court and other courts have held that the goods purchased from the market are deemed to be duty-paid. We have gone through the said judgments. We find the facts in the present case are very different. In fact, if the goods were duty paid, there was no reason for the appellants to approach Muni Group of Companies and procure the fraudulent invoices. In that situation, the appellants could have got the invoices from the seller of the goods and could have claimed the rebate. The very fact that this fraudulent exercise has been done indicates that the goods which were exported and procured from the market were non-duty paid goods. In case of some appellants, the goods were produced in their own unit and if in their own unit they would have paid duty, there was no reason for them to procure the invoices from Muni Group of Companies.
8.7. Various counsels have submitted that Rule 26 was amended w.e.f. 01/03/2007 wherein dealers were also become liable to penalty and thus, prior to 01/03/2007 no penalty could have been imposed on the dealers. We have considered this submission. While Rule 26(2) is prospective in nature, we find that in this case almost all appellants are Rule 12B manufacturers or merchant exporters. In the case of 12B manufacturers even though they may not have the manufacturing facility themselves, but they were treated as manufacturer under the Central Excise law and hence penalty under Rule 26 as it was existing prior to 01/03/2007 can be imposed. Even in respect of merchant exporter they were not the dealer in the normal sense i.e., who were passing on the CENVAT credit along with the invoices. In fact all such dealers are required to get themselves registered with the excise department and thereafter only they could issue cenvatable invoices. The merchant exporter were not that type of registered dealer with the excise department but they were the person who were party to the fraudulent claim of rebate with the connivance of the Muni Group of Companies either claiming the rebate in their name or giving the right to claim rebate to Muni Group of Companies. Hence the position is different and the penalty under old Rule 26 can be imposed on them.
8.8. Some of the learned counsels have submitted about the one adjudication order passed by the Commissioner, Mumbai wherein he has taken a view that penalty under Rule 26 cannot be imposed. In our view this is not the correct position in law as there are goods which are purported to covered by certain invoices. One has to deal with such invoices along with the goods and a holistic view of the two has to be taken. One cannot segregate invoices from the goods for the simple reason that both are submitted together for excise purpose. The interpretation taken by the Commissioner is therefore as per his understanding of the law and we do not agree with such an understanding. Such an interpretation of law will make minor violators of the procedure as liable to penalty under Rule 26 while the outright law violators or fraudsters will go scot free. We therefore take no cognizance of the order passed by the Commissioner and the fact that such order has been accepted by the department is of no consequence.
8.9. As the facts and role of each appellant are varying, role of each appellants and findings of this Tribunals on these facts are as under:
9. Appeal No. E/723/2010: The appellant in the present case is a merchant exporter. From the investigation statements made by Shri Babul Jain, partner of Rainbow Silks and other details as discussed in the impugned order, it appears that the appellant is an established exporter of textiles for the last so many years and they procured certain textile material i.e., printed polyester fabric through one broker, Shri Ajay Mittal who supplied them the said goods vide Central Excise invoice No. 73, dated 20/04/2014, invoice No. 99 dated 25/04/2004 and 108 dated 15/05/2004 and the corresponding ARE-1s. These ARE-1s are of M/s. Globe Traders, Bhiwandi, a Muni Group of Company. From the investigation, it is clear that the appellant has paid the amount through account payee cheques deposited in the accounts of Globe Traders. It is also clear that, thereafter, the cheques were issued by Globe Traders in the name of local parties of Surat. From the investigation it comes out that the appellant had no connection with Shri K. K. Gupta, Shri Dashrath More, Shri Deepak Jare, and also Shri M.K. Patel, Superintendent and he was dealing with Shri Ajay Mittal from whom they have bought the goods in good faith. It also appears that for getting the rebate claim, the invoices and duty-paid character got verified by the department form the Range official. Further, the appellant, as soon as he came to know about the whole episode, has returned the rebate sanctioned to him. Keeping in view the overall facts and the conduct of the appellant during purchase of the goods, claiming the rebate and also during investigation, etc. we are of the view that the appellant was not aware of the wrong doings of the Muni Group of Companies and was not aware that the invoice and the goods had come from different source and hence the goods are confiscable and in view of these facts, in our view, no penalty under Rule 26 is called for. Appeal is therefore allowed.
10. Appeal No. E/665/2010: In respect of Shri Prem Rautramni Joshi of Monika Impex, from the impugned order, it is clear that Shri Prem Rautramni Joshi was controlling Monica Impex. Monica Impex, in turn, had exported the goods using the invoice and ARE-1s of Muni Group of Companies as detailed in the show cause notice. From the investigation, it is clear that the appellant was having a unit located at Adarsh Chemical Factory, Swami Narayan Mandir Road, Udhana where a crushing machine and other manufacturing facilities for manufacture of items such as scarf, etc. was present. Investigation also reveals that the goods were loaded from the said place and taken to JNPT from where the goods were exported. This is evident from the statement of Shri Mirza Siddique of M/s. South Gujarat Transport Service, statement of Shri Lalsahab P Singh, proprietor of Shri Time Space Cargo. Export documents recovered from CHA, warehouse of M/s. Shiv Shakti Warehouse located in JNPT as also the statement of Shri Sitaram Tambe, proprietor of M/s. Setwin Shipping Agency (CHA). It is also seen that the conduct of the appellant has been totally non-cooperative and misleading. Large numbers of documents were shown to him and these documents were recovered from different set of person which includes transporter, CHA, warehousing agent in port, etc. In these documents, name and phone numbers of the appellant was mentioned. When the appellant was confronted with these documents he did not gave any reply or any satisfactory explanation but tried to disown everything. It was also found that a number of cheques which were issued to Muni Group of Companies bear his name on backside as identification marked by the person to whom cash or discounting was given. Faced with such details, no proper explanation was given by the present appellant. From large number of documents it is very clear that the appellant exported the goods manufactured from the unit located in Adarsh Chemical Factory but he showed invoices and ARE1s of Muni Group of Companies to claim the rebate.
10.1. Learned counsel for the appellants main submission is that the appellant has not received the show cause notice which was issued to the appellant at his residential address and hence the order-in-original was passed in gross violation of natural justice. It was also submitted that in his statement, the appellant has stated that he was not concerned with Monica Impex in any way and hence no penalty is imposable on him.
10.2. We are not impressed by any of these arguments. We find from the impugned order that the show cause notice was serviced on all the appellants. It is not the appellants case that the show cause notice was not served on the old address. It was his responsibility to ensure that such documents which are sent at his old residential address are re-directed to the new address by informing the concerned postal authorities. Appellant also did not care to inform the Revenue about the change of address. It is also seen from the impugned order that the personal hearings were held on more than 10 occasions and on each occasion not only the personal hearing notice was sent through the known postal address but also got serviced through jurisdictional excise authorities. Under these circumstances, we are not impressed with the argument of the appellant. We also note that even the order-in-original was sent to his old address, even then he has filed the appeal before this Tribunal. Keeping in view his conduct during investigation as also during adjudication, we are of the view that, the plea that appellant did not receive the show cause notice needs to be rejected as the appellant has mis-used the process of law.
10.3. We note that before this Tribunal, no explanation about the allegation of wrong doings is given by the appellant. Impugned order reproduces the show cause notice as also all evidences. The least that was expected was to provide explanation. In that case, we could have come to a conclusion that his explanation needs to be examined by the original authority.
10.4. From the statements of the transporters, CHA and warehouse agent, it is obvious that the appellant had the manufacturing facility in Surat wherein the export goods were manufactured and thereafter exported using the concerned transporters warehousing facility but on paper these were shown as purchased from Muni Group of Companies and fraudulent rebate were claimed. Obviously, if the appellant had paid duty on such goods, there was no need to approach Muni Group of Companies to procure fraudulent invoices. Obviously appellant was active partner in the fraud and was in the knowledge that the goods involved in question are confiscable and hence penalty under Rule 26 is correctly imposed. Keeping in mind the amount of rebate claim involved, we find that the penalty imposed on the appellant is not on the higher side and we dismiss the appeal filed by the appellant.
11. Appeal No: E/674/2010: Mr. Yudhishtir Kumar Batra, is Partner/Proprietor of Vikram International & Dipika Overseas, Surat. They have exported goods and acted as merchant exporter. The goods were exported on the basis of duty paying invoices issued by Muni Group of Companies and the investigations have revealed that no goods were manufactured by Muni Group of Companies but Mr. Yudhishtir Kumar Batra procured the goods from certain sources in Surat and such goods were purported to have been manufactured by Muni Group of Companies and thereafter exported. The details of investigation are indicated in para 50, 53, 53.1 to 53.14, which relates to financial flow/flow back and 54.4 relating to transport as also (xv) which indicates the conduct of the appellant during investigation and (xvi), (xvii) which are again relating to financial transaction. From the investigation it is clear that no goods were transported from the Bhiwandi godown to Surat by Muni Group of Companies and the concerned transporter was found to be fake and non-existent. Money transaction between the appellant and Muni Group of Companies clearly brings out that the appellant has issued two types of cheques viz. account payee and the other crossed bearer. In respect of account payee cheques, the cheques were deposited in the account of Muni Group of Companies. However, on the same date other cheques were issued from such banks/accounts in the name of certain textile firms which in turn were encashed or got discounted by the appellant. Similarly, in the case of crossed bearer cheques, these are either deposited in the name of the textile dealers of Surat even though these were purported to be shown as paid to Muni Group of Companies or these were again discounted or encashed by the appellant themselves. We also note that, after providing initial details, the appellant did not further cooperate in the investigation and also could not explain various discrepancies. We also note that neither before this Tribunal nor before the adjudicating authority, the appellant has disputed any of the details that has been unearthed during the investigation. Thus, the fraudulent nature of the transactions is not disputed. The only argument advanced by the learned counsel for the appellant was that penalty cannot be imposed under Rule 26. The said issue has been discussed by us in para 8 to 8.6. We therefore, do not find any force in these argument and hence reject. We also find that the penalty imposed is not on the higher side keeping in view the amount of rebate involved in the fraudulent claim. In view of the said para we do not find any force in the appeal of the appellant and accordingly the appeal is dismissed.
11.1. Learned counsel has also submitted for the same set of invoices the appellant has been issued another show cause notice which was adjudicated and finally remanded by CESTAT and is pending before the Commissioner since then. We note that the other case is for recovery of the fraudulent claim sanctioned to Muni Group of Companies based upon the invoices in question and goods exported by the present appellant. In the present case the issue is relating to incorrect availment of CENVAT credit by Muni Group of Companies and the present appellant is a co-noticee in the proceedings. The two issues are different. The pleas is therefore rejected.
12. Appeal No. E/675/2010: Shri Atma Prakash Batra was acting on behalf of M/s. Guria Textiles, M/s. Batra Overseas and M/s. Batra International. During investigation Shri Atma Prakash Batra did not cooperate and avoided investigation on some or other pretext. In their case, the investigation was done based upon the records received from Surat I Commissionerate. The allegation in the show cause notice is that they have claimed inadmissible CENVAT credit on the basis of invoices of Muni Group of Companies without actually receiving any goods. Thereafter they have used the said CENVAT credit in the clearance of the processed fabrics. These facts have not been denied by the appellant before this Tribunal. Learned counsel for the appellant have also not made any submission about the findings of the Commissioner or about anything stated in the order-in-original. The only submission made by him is that the Commissioner has not indicated as to how and under which provisions of law the goods allegedly procured from the market and exported after processing are liable to confiscation. We have already discussed in para 8 to 8.6 how the goods in such cases will be liable to confiscation and penalty under Rule 26. We also note that the penalty imposed is not on the higher side keeping in view the CENVAT credit availed by the appellant. Under the circumstances, we dismiss the appeal filed by the appellant.
13. Appeal No. E/676/2010: Shri Prakash Poddar appellant is authorised signatory of Karishma Overseas & Sheetal Exports. The investigations have revealed that present appellant was following similar modus operandi as is in the case of Shri Yudhishtir Batra and also exported the goods as merchant exporter. In his statement, SHri Poddar has stated that he has purchased the goods from Muni Group of Companies and one Shri Ajay Mittal of Surat approached him with the offer to deliver goods at their office with transport arranged by him. Shri Poddar has produced copies of lorry receipts of transporter Sahara Roadlines, Cottongreen, Mumbai and the said transporter lateron, on investigation was found to be fake. Thus transportation of goods was fake. Similarly, it was found that the appellant have made payments through account payee cheques and crossed bearer cheques and investigations revealed position similar to that in the case of Yudhishtir Batra discussed in para 11 above. From the payment details, it is clear that whenever account payee cheques were issued same were deposited in the bank account of Muni Group of Companies who immediately issued cheques in the name of certain textile dealers of Surat. Some of the cheques were given to such dealers and the remaining one were got encashed/bill discounted by the appellant. The crossed bearer cheques though purported to be paid to Muni Group of Companies were actually either deposited in certain account of textile dealers of Surat or got encashed through bill discounters/shroffs. Financial transactions are similar to the case of appellant Shri Yudhistir Batra. We also note that the learned counsel for the appellant has not disputed any finding of the investigation during the arguments or before the original authority. The fraudulent nature of the transaction is thus established.
13.1. The only argument advanced is non-applicability of Rule 26 of Central Excise Rules, 2002 for imposition of penalty in their case, even though they admitted the fraud committed by them. We have already discussed the said proposition of law in para 8 to 8.6 and in view of this we do not find any force in the argument of the appellant. We also note that the penalty imposed is not on the higher side keeping in view the rebate amount involved in the transactions carried out by the appellant. In view of the said position the appeal filed by the appellant is dismissed.
14. Appeal No. E/677/2010: Shri Rajesh Rameshwar Dayal Bansal, partner of R.J. Fashions, the appellant is a Rule 12B manufacturer i.e., they purported to have received certain grey fabrics from Muni Group of Companies and availed credit on the basis of the said invoices issued by Muni Group of Industries. The grey fabrics were purchased from somewhere else and got processed and fraudulent CENVAT credit was utilised for payment of duty on processed fabric. In fact in the statement, Shri Rameshwar Bansal has admitted that he has received the invoices in his firms name but were endorsed to different mills from where he used to receive the processed fabrics and on such invoices he took credit of about ` 1 crore on the basis of such invoices. During investigation he could not give the details of mills from where the goods were processed. Investigation also revealed that the payments purported to have been made to Muni Group of Companies were followed by cheques issued from Muni Group of Companies which were discounted by his partner and cash received back as per the statements of the shroffs. During the confrontation he could not explain any of these details. We also note that during the arguments before this Tribunal the appellant has not disputed the fraudulent nature of the transactions carried out by them. The learned counsel has only disputed the applicability of Rule 26 in their case. We have already discussed the same in para 8 to 8.6 and in view of the said discussion the contention of the learned counsel is rejected. We also note that the penalty imposed is not on the higher side keeping in view the amount of credit involved. Appeal filed is therefore dismissed.
15. Appeal No. E/682/2010: Appellant Shri Manohar Mali, was Proprietor of Shree Ganesh Enterprises: It is seen that the appellant in his statement dated 31/01/2008 has admitted that he was the proprietor of Shree Ganesh Enterprises but claimed that he was made namesake proprietor of Shree Ganesh Enterprises by Shri Shyam Sunder Sharma. The appellant has further admitted that on eight invoices of M/s. Venkatesh Mercantile they have availed credit. Appellant has further admitted that the invoices were given to him by Shri Shyam Sunder Sharma but the goods were arranged locally. He has also admitted that the cheques issued were discounted by him but stated that the amount was given to Shri Shyam Sunder Sharma. We note that the appellant has not disputed the fact the he was the proprietor of Shree Ganesh Enterprises. The appellant has also admitted that he has taken the credit on eight invoices and no goods were received from M/s. Venkatesh Mercantile and the goods were received from some other source. It is also admitted that the cheques issued for the payments were lateron discounted and the encashed amount was initially taken by Shri Manohar Mali, and then to Shri Shyam Sunder Sharma. Even though Shri Manohar Mali has claimed that all this has been done at the instance of Shri Shyam Sunder Sharma, but being the official proprietor of M/s. Shree Ganesh Enterprises he cannot absolve himself of his responsibility, particularly when he was aware of the fraud committed.
15.1. Learned counsel for the appellants only submission was that the appellant was a namesake proprietor and his name was used for discounting of cheques. We do not find any force in the contention. There is no concept in law for namesake proprietor. Appellant was the proprietor of Shri Ganesh Enterprises wherein undisputedly credit was availed without receiving the goods from M/s. Venkatesh Mercantile. Penalty under Rule 26 has been correctly imposed. Penalty imposed is only ` 2 lakhs which is not on the higher side, keeping in view the amount of credit involved. We dismiss the appeal filed by Shri Manohar Mali.
16. Appeal No: E/702/2010: Shri Ayush Murarilal Agarwal is the proprietor of Namaste Exports was also managing two more firms i.e. Daffodils Exports owned by appellants father Shri Murarilal Agarwal and Prime Exports owned by his brother Shri Manoj Murarilal Agarwal. All the three firms were operating from the same premises and all the three firms were being looked after by the appellant Shri Ayush Murarilal Agarwal. It is seen from the investigation that all the three firms were working as merchant exporters and were also Rule 12B manufacturers. In the present case, during investigation, appellant was not even able to give name and address of the representative of Muni Group of Companies who approached the three firms. Similarly, he was not able to explain, in the absence of any packing list, etc. how he was able to repack and export the goods. Financial investigation also revealed the modus operandi similar to the case of Shri Yudhishtir Kumar Batra in para 11 above. A detailed investigation was taken up regarding the financial transactions and it was found a large number of cheques purported as payment made to Muni Group of Companies were actually not deposited into their account and large number of such cheques were discounted through shroffs Shri Shrenik Varaiya and Yatidra Jain and Shri Nilesh Jain, who, after going through the cheques confirmed that these cheques were discounted and the cash was given to the present appellant only. The details of the various cheques and how the manipulations were made is elaborated in para (viii.) of page No. 79 onwards of the impugned order. The crossed bearer cheques issued by the three firms issued in the name of Muni Group, it was found that the cheques were ultimately credited into the account of Shri Shrenik Corporation and here again it is a bill discounting firm and he has also confirmed that the amount was paid back to the appellant.
16.1. Learned counsels main contention is that they have received the goods from Muni Group and made payments to Muni Group by account payee cheques on number of occasions and crossed bearer cheques on some occasions. It was submitted that though the discounters have said that the cash has flown back to them, but the appellant has not been confronted with the said statement in the course of investigation. The appellant submitted that there was no need to open the package and prepare packing list and the goods can be exported as such. It was also submitted that out of two transporters one transporter, namely, Surat Ahmadabad Transport has indicated that the goods were delivered in their godown which proves that the goods were received from the Muni Group of Companies. He further submitted that though the other transporter Baroda Roadways, Surat, has stated that no goods were stored in his premises but this is contrary to the first statement. It was also submitted that the department has not separately indicated as to how much penalty amount is imposed against each of the three firms and the department has imposed a consolidated penalty. It was also submitted that Rule 26 cannot be invoked on Merchant Exporter.
16.2. It was also submitted that there is no doubt that the goods have been exported and were presented to the Customs authorities. Even if it is presumed that the goods have been purchased from the open market, as held by the honble Supreme Court in the case of Commissioner of Central Excise vs. Decent Dyeing Co. 1990 (45) ELT 201 (SC) the supplied goods has to be considered as duty-paid and cannot be confiscated. Similar view has been taken other courts. It was also submitted that it cannot be said that the appellant had the knowledge that the goods which have been exported are liable to confiscation. In view of this position, no penalty can be imposed.
16.3. Learned counsel submitted that vide order No. 01/M/2009/ST dated 03/02/2009 Commissioner of Central Excise, Mumbai I in an identical situation has dropped penalty under Rule 26 and the said case was submitted before the adjudicating authority and the adjudicating authority has given no comments on the said order. Further, the department has not challenged the said order and therefore, has achieved finality.
16.4. It was also submitted that Rule 25 is attracted only in four categories of persons mentioned therein i.e. producer, manufacturer, registered person of a warehouse or a registered dealer. Since the appellant is none of them, therefore, provisions of Rule 25 is not applicable and hence no penalty can be imposed under Rule 26. It was further submitted that if it is presumed that the person Muni Group has not supplied any goods to the merchant exporter, then also no penalty can be imposed under Rule 26 prior to 01/03/2007 as merchant exporter has only acted as a dealer. It was also submitted that the case laws submitted by the department are in different circumstances and cannot be relied upon. Learned counsel also submitted that since the goods are exported these are not dutiable and the maximum penalty that can be imposed under Rule 26 is ` 10,000/- and the penalty of ` 5 lakhs is unsustainable and should be set aside.
16.5. Investigations have revealed that no goods were supplied by Muni Group of Companies and the transporter details also indicate that no goods were lifted from Bhiwandi godown. It is not understood why the appellant is not able to name any person from Muni Group of Companies with whom they were dealing in spite of the fact that dealings worth crores of rupees were done through Muni Group. The analysis of financial transaction leaves no doubt that the amounts were either not paid to Muni Group of Companies directly or indirectly and finally brought back to the appellant himself. Under these circumstances, keeping in view the over all facts and circumstances of the case we are of the considered view that no goods was really purchased from Muni Group of Companies and only the invoices were purchased and some other non-duty paid goods were purchased but were shown as if these were purchased from Muni Group of Companies against the invoices and rebate has been claimed on the basis of such documents. The various legal arguments advanced by the appellant has already been dealt with in para 8 to 8.6 and are not being repeated again.
16.6. The appellant has also contended that since there is no duty on the export goods, the maximum penalty that can be imposed is only ` 10,000/-. We are not in agreement with this argument. The export goods were cleared by them on purported payment of duty. The fact that normally exporter will be able to get the duty amount as rebate of duty is a different matter. The goods exported are dutiable and duty is involved on the same. In our view, penalty up to an amount equal to the duty would be applicable.
16.7. We also note that penalty is imposed under Rule 26 and not 25, thus four categories of persons is irrelevant. Penalty under Rule 26 is applicable to any person. We have already held in para 8 to 8.6, that goods will be confiscable under Rule 25(1)(d).
16.8. Order dated 03/02/2009 passed by Commissioner, Mumbai - I which is said to be accepted by the department is not based upon the correct appreciation of law and is neither binding on this Tribunal or other Court or other Commissioner.
16.9. Learned counsels argument that goods purchased from market are also duty paid goods, the order of the Honble Apex Court is in different facts and circumstances. In the present case, if these were duty paid rebate should be claimed based upon the duty paying documents and not based upon fraudulent documents.
16.10. We therefore do not find any merits in the appeal and is therefore dismissed. Penalty imposed is also not on the higher side.
17. Appeal No: E/733/2010: Shri Ajit Singh B Choraria is the Proprietor of Shubham Silk Mills, and also Authorised Signatory of Shubham Textiles, Shubhlaxmi Textiles and Shubhlaxmi Exports. The appellant is a Rule 12B manufacturer. In the case of the present appellant, he purported to have procured grey fabrics from certain sources, got it processed from certain processors and thereafter, the appellant has issued his invoices to Muni Group of Companies in respect of the processed fabrics. The case of the Revenue is that no processed fabrics was actually supplied to Muni Group of Companies by the appellant and only invoices purportedly showing payment of duty were supplied to Muni Group of Companies and based upon such invoices, Muni Group of Companies, in turn issued invoices to various persons which enabled them to claim rebate without supplying any goods. It is seen that the appellant, though initially presented himself for investigation, but in reality did not produce the relevant documents which would indicate that the sale transaction between him and Muni Group of Companies are genuine. Later on he took the plea that all the records were destroyed in the flood. Even if some records were destroyed in flood the appellant could have produced the secondary records particularly, relating to receipt of payments or the transportation details after getting the details from the transporter, etc. However, no such record was produced. In fact, he did not even respond to summons. It was also found that all the cheques were non-account payee cheques and credited into the accounts of Allahabad Bank, Royal Cooperative Bank, Union Bank of India, Century Cooperative Bank and these accounts were that of Tulsi Creations, Aditya Enterprise operated by Shri Naimesh Desai. It was also found that most of these cheques were discounted and the payment was collected by various persons such as Madani or MD which denotes Shri Madani Ghanchi. The various cheques/transactions does not indicate hat the appellant has supplied the goods to Muni Group of Companies and received the payment. Further, the financial transactions indicate that the transactions were only on paper.
17.1. In the present case, as per the appellants own claim they have supplied the goods along with invoices to Muni Group of Companies. The case of the Revenue is that only invoices were supplied and no goods were supplied. In view of this factual position, the purported goods supplied by the appellant are liable to confiscation under Rule 25 and penalty Rule 26 is correctly imposed. Penalty imposed is also not on the higher side. Appeal filed is therefore dismissed.
18. Appeal No. E/738/2010: In this case the appellant is Shri Ajay Rameshchandra Mittal who is the proprietor of Shubhlaxmi and Sejal Overseas and he was also found to be proprietor of K.V. Corporation. It was found during investigation that, exporters basically M/s Karishma, M/s Deepika and Rainbow Silk have confirmed that ARE-Is of Muni Group were supplied to them by Shri Ajay Mittal. From the investigation it is clear that Shri Ajay Mittal was approaching arranging different persons for selling of invoices of Muni Group of Companies and in some cases even goods were procured from some other sources but with the invoices of Muni Group of Companies. Further, it appears that, fictitious transport documents were also provided by Shri Ajay Mittal to some of the buyers. Further, in the financial transaction he seems to have major role inasmuch as the money was withdrawn and then handed over. Role Shri Ajay Mittal is discussed in para (v)(a) of page 56 of the impugned order as also in para (vii) (a), (b) of page 57 and 58. From the investigation it appears that he was maintaining accounts in number of banks such as UTI, IDBI, Metro, Century and Rajkot Banks. It also appears that Shri Ajay Mittal has also used Shri Shyam Sunder Sharma for his nefarious activities. From the investigation it is very clear that the appellant was concerned with the invoices of Muni Group covering purported sale of certain goods and therefore, the same are liable to confiscation under Rule 25(1)(d) and appellant is liable to penalty under Rule 26. Submission of the learned counsel for the appellant has been on the legal side relating to applicability of Rule 26 which we have already discussed in para 8 to 8.6. In view of the said decision, the appeal filed by the appellant is dismissed. Penalty imposed is not on the higher side and is therefore upheld.
19. Appeal No: E/782/2010: The appellant in this case is one Shri Naresh J. Doshi, partner of Doshi Impex. The learned counsel has submitted that the present proceedings are in the nature of double jeopardy as the two invoices which are subject matter of the show cause notice are also covered in another show cause notice No. F.No. V-Adj(52,54,63)/CSCN/M-I/15-26/2008 dated 09/07/2008. We have gone through the said show cause notice. In the said show cause notice demand of `34,35,608/- has been raised against the present appellant for recovery of erroneous rebate granted to the appellant and the penalty proposed is in that context. In the present case, the main show cause notice is issued to Muni Group of Companies who have fraudulently availed CENVAT credit of more than ` 11 crores and the present appellant is only a co-noticee and penalty proposes in the context of helping Muni Group of Companies to utilise the fraudulent availment of CENVAT credit. In view of the said position the issue involved are very different while in the present case the main noticee is Muni Group of Companies and is for recovery of fraudulently availed cenvat credit while in the other show cause notice it is the appellant who is the main noticee and the second show cause notice is for recovery of fraudulent rebate. In our view, this is not a case of double jeopardy. Hence the said contention is rejected.
19.1. The said firm, M/s. Doshi Impex has availed CENVAT credit on the invoices of M/s. Apex Corporation. In his statement Shri Doshi has submitted that they have availed CENVAT credit on two invoices issued by M/s. Apex Corporation and he produced the copies of the ledger accounts, invoices, bank statements in Cosmos Bank and ER1 returns filed by them for the relevant month. It was also submitted by him that the transactions was done through one Shri Amit Agarwal, a broker who had approached their Surat office and had arranged to supply the goods and invoices at their Mumbai premises and he did not know details about transporter, Apex Corporation or Shri K.K. Gupta. It was also found during investigation that the payments made by him to Apex Corporation was in reality discounted at Surat and the name of discounting party was Shri Ashish, his employee and phone number was also of Doshi Impex. His employee Shri Ashish later on accepted that he got the cheque discounted as per the instruction of Shri Naresh Doshi. The investigation details in para 63.2 very clearly indicates the involvement of Doshi Impex even though in the statement Shri Naresh Doshi tried to deny.
19.2. Keeping in view the over all facts of the case, it is clear that the appellant knowingly involved in the fraudulent availment of CENVAT credit on the bogus documents of Muni Group of Companies without receiving any goods. The appellant is, therefore, liable to penalty under Rule 26. The penalty imposed on him is not on the higher side and is upheld. The appeal filed by Shri Naresh Doshi is dismissed.
20. Appeal No: E/797/2010: The appellant in this case is one Shri Farooq Razazk Gazi, proprietor of M/s Glory Exports. In his statement, the appellant has submitted that one Shri Tejas Desai had approached him on behalf of Muni Group of Companies and stated that he would arrange goods on 1% brokerage basis with door delivery and accordingly he had purchased the goods and he was not in a position to state whether the goods had actually arrived from Bhiwandi or somewhere else. He also submitted that they have made payments after the receipt of the goods to Shri Tejas Desai. He also submitted that CHA for the export was M/s. Royale Clefford Pvt. Ltd. and the transporter for the goods from Surat to JNPT was M/s. South Gujarat Transport Service. Investigation also revealed that the payments made by Shri Farooq R Gazi, the cheques were deposited in the IDBI, Nariman Point Branch of Muni Trade Pvt. Ltd. However, immediately after deposit of the cheques a number of cheques totaling the same amount was issued to M/s. N.K. Corporation and M/s. S.A. Corporation which are local shroffs of Surat indicating no payments to Muni Group.
20.1. From above investigation though it is clear that the invoices were received from Muni Group of Companies and the goods were somewhere else, however, it cannot be said that the appellant was aware of the fact that the goods and invoices came from different places and the goods are therefore liable to confiscation. Under the circumstances, we are of the view that the penalty under Rule 26 cannot be imposed on the appellant. In view of this position, the appeal filed by Shri Farooq Razazk Gazi is allowed.
21. Appeal No: E/879/2010: The appellant in this case is one Shri Parameshwar Arjun Pareek, proprietor of Ayush Exports and is a merchant exporter. In his initial statement he submitted that he has purchased two consignments from M/s. Venkatesh Mercantile Pvt. Ltd., a Muni Group of Company and for this purpose one Shri Tejas Desai had approached him stating that he would arrange the goods on 1% brokerage basis and accordingly he has purchased the goods through Shri Tejas Desai. He has never visited the premises of M/s. Venkatesh Mercantile Pvt. Ltd. and the goods were received by him at these premises. He is not in a position to state that the goods were actually arrived from Muni Group of Companies, Bhiwandi and he has also submitted that he has paid for the goods after receiving the same and he has exported the goods. Thereafter, arranged for transport of the goods through Lalji Mulji Transport and thereafter exported through the above said CHA.
21.1. It was also found during investigation that the DRI had also recorded the statements of Shri Parmeshwar Pareek which are detailed on page 41 of the impugned order wherein Shri Parmeshwar Pareek described the modus operandi and admitted that they have exported cheaper quality of goods under the cover of documents obtained from M/s. Venkatesh Mercantile Pvt. Ltd. to avail higher rate of rebate and DEPB. Further investigation were taken up through the banking channels, and reasons are detailed at para 58.1(ii) of page 40, para a, b, c, on page 41, para 11, 11(a) of page 72 of the impugned order, the details as to how the cheques were presented and who were the ultimate beneficiary and how the same were bought and encashed through the discounters are detailed. From these details it is very clear that no money had gone to M/s. Venkatesh Mercantile Pvt. Ltd. but were received back by Ayush Export.
21.2. Keeping in view the above facts, it is very clear that the appellant knowingly procured the cheap fabrics from somewhere else and invoices were only procured from Muni Group of Companies. The goods exported are purported to be covered by invoices of Muni Group of Companies which are liable to confiscation under Rule 25(1)(d) of the Central Excise Rules, 2002. Penalty is therefore imposable on the appellant and the penalty imposed is not on the higher side. The appeal filed by the appellant is therefore dismissed.
22. Appeal No. E/910/2010: The appellant in this case is Shri Sumit H. Juneja, proprietor, Keshav Impex and Raghukul Impex. The appellant is a merchant exporter and exported the goods on the basis of ARE1 and invoices of Muni Group without receiving any goods from Muni Group and claimed rebate. During investigation the appellant was not able to clarify the bank transactions, transport details, undue delay in clearance of export and admitted that he is not in position to say from where the goods had originated. Financial transaction also lead to the fact that though M/s. Raghukul Impex has issued cheques to Mansa Traders but these were non-account payee cheques and in reality gone into the accounts of different parties. The beneficiaries are discounters of Surat and some of the discounters thereafter were traced out. Similarly account payee cheques were issued by M/s. Keshav Impex to M/s. Apex Corporation which were deposited in the accounts of M/s. Apex Corporation. However, immediately thereafter other cheques were issued which were discounted, this indicates that the amount was not received by Apex. This indicates that there was no sale purchase transaction of the goods with Apex Corporation. It is thus clear that the goods were purchased by the appellant from somewhere else and only the invoices were purchased from Muni Group of Companies. The appellant is therefore liable to penalty under Rule 26. Penalty imposed is also not on the higher side. Therefore, the appeal filed by the appellant is dismissed.
23. Appeal No. E/929/2010: The appellant in this case is Shri Shyam Sunder A. Sharma, proprietor of M/s. Riddhi Siddhi International, M/s. Shree Laxmi Impex and M/s. Surya Exports. Investigations have revealed that the appellant have received the invoices from Muni Group of Companies without receiving any goods and he has availed CENVAT credit on the basis of such invoices. Payments were made to Muni Group of Companies through account payee cheques and after cheque discounting got the cash back. The details of the investigation are in para VII on page 57, (a), (b), (c), para VIII on page 57 and 58,para 6 on page 93, para 8 on page 128, para (g), (h) on page 129, para 50 on page 152, para XV on page 176. We have gone through the earlier mentioned investigation. Conduct of appellant during investigation speaks of itself. We do not find any genuine or proper explanation on various discrepancies found during the investigation. It also appears that the appellant was working in close coordination with Shri Ajay Mittal who was one of the main seller of the invoices of Muni Group of Companies in the above fraud. During investigation, the appellant was not able to explain anything about the transportation and storage of the goods and how such goods transportation has taken place between them. Investigation also indicated that the discounted amount was received back by the present appellant. From the investigation it is clear that the appellant was instrumental in fraud which lead to availment of CENVAT credit based on the invoices of Muni Group of Companies without purchase of any goods from Muni Group of Companies. The appellant is therefore liable to penalty under Rule 26. Keeping in view the level of fraud conducted by the present appellant the penalty imposed on him is not on the higher side. The appeal filed by the appellant is dismissed.
24. Appeal E/1621/2010: In this case, the appellant is one Shri Mahendra Agarwal who is the authorised signatory of M/s. Chandan Impex. The appellant is a merchant exporter and he has used the invoices and ARE-1 of Muni Group of Companies and claimed rebate against those exports. In his statement the appellant has clearly stated that Shri Ajitsingh Choraria had arranged ARE-1 issued by Muni Group of Companies and goods cleared from his firm M/s. Pooja Dyeing and other goods were shown as if covered by these ARE-1s for claiming rebate. Since the appellant has exported the goods based upon the invoices of Muni Group of Companies, while the goods were procured from different sources and claimed rebate on the basis of such fraudulent documents, the appellant is liable to penalty under Rule 26. Penalty imposed on him is not on the higher side. The appeal filed by the appellant is accordingly dismissed.
25. In the result we dispose of the appeals as under:
S. No. Appeal No. Appellant Final Order
1.
E/723/2010 Shri Babul Jain Appeal allowed
2. E/665/2010 Shri Prem Rautramni Joshi Appeal dismissed
3. E/674/2010 Shri Yudhishtir Kumar Batra Appeal dismissed
4. E/675/2010 Shri Atma Prakash Batra Appeal dismissed
5. E/676/2010 Shri Prakash Poddar Appeal dismissed
6. E/677/2010 Shri Rajesh Rameshwar Dayal Bansal Appeal dismissed
7. E/682/2010 Shri Manohar Mali Appeal dismissed
8. E/702/2010 Shri Ayush Murarilal Agarwal Appeal dismissed
9. E/733/2010 Shri Ajit Singh B Choraria Appeal dismissed
10. E/738/2010 Shri Ajay Rameshchandra Mittal Appeal dismissed
11. E/782/2010 Shri Naresh J. Doshi Appeal dismissed
12. E/797/2010 Shri Farooq Razazk Gazi Appeal allowed
13. E/879/2010 Shri Parameshwar Arjun Pareek Appeal dismissed
14. E/910/2010 Shri Sumit H. Juneja Appeal dismissed
15. E/929/2010 Shri Shyam Sunder A. Sharma Appeal dismissed
16. E/1621/2010 Shri Mahendra Agarwal Appeal dismissed (Pronounced in Court on 29/09/2015) (S. S. Garg) Member (Judicial) (P.K. Jain) Member (Technical) */as 62