Custom, Excise & Service Tax Tribunal
Abubakar Ismail Kapadia vs Surat-I on 10 January, 2019
In The Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench At Ahmedabad
Appeal No. C/311/2009-DB
Appeal No. E/1342/2009-DB
[Arising out of OIA-RKA/110/SRT-I/2009 Dated 17.03.2009 passed by Commissioner
of Central Excise, CUSTOMS (Adjudication)-SURAT-I]
M/s Abubakar Ismail Kapadia Appellant
Vs
C.C.E.& S.T.- Surat-i Respondent
Represented by:
For Appellant: Shri Hardik Modh (Advocate) For Respondent: L. Patra (AR) CORAM:
HON'BLE MR. RAMESH NAIR, MEMBER (JUDICIAL) HON'BLE MR. RAJU, MEMBER (TECHNICAL) Date of Hearing: 11.09.2018 Date of Decision: 10.01.2019 Final Order No. A / 10069-10070 /2019 Per: Ramesh Nair The present appeals No. E/1342/2009 and C/311/2009 has been filed against Order-in-appeal No. RKA/110/SRT-I/2009 dated 17.03.2009 passed by the Commissioner (Appeals), Surat wherein he has upheld the Order-in-Original No. 19/Addl-PSK/OA/2007 dated 07.11.2007 passed by the Addl. Commissioner, Central Excise, Surat -
I. The appeal No. E/1342/2009 is against duty demand and penalty imposed upon Appellant whereas the Customs appeal No. C/311/2009 is against the confiscation of raw material used in finished goods and also of finished goods. The brief facts of the case are that the Appellant is a 100% EOU engaged in manufacture of Twisted Yarn & Fabrics falling under chapter 54 of schedule to the CETA. They had removed grey fabrics to M/s D.D. Trading Co. A-2/4, UPSIDC Indl. Area Nandgaon
2|Page C/311/2009,E/1342/2009-DB Road, Kosikalan (U.P) against CT-3 Certificate No.22 dated 07.02.2002 and under the cover of ARE-3 Nos 54 to 62 dated 18.02.2002 to 27.02.2002. The unit received the warehousing certificate in respect of six consignments out of the eight above i.e ARE-3 Nos. 54 to 60 dated 18.02.2002 and handed over the same to the Range Superintendent without having any covering letter and therefore the confirmation regarding signature of the officer and reware housing of the goods under said AR-3 was sought from the jurisdictional Range Superintendent who denied the confirmation. It was alleged that the reware housing certificates were found to be fake and the Appellants were issued show cause notice V (Ch-54)3-05/Dem/2003 dated 04.05.2005 and is part of separate proceedings. In the case pertaining to present appeals, the consignments covered by the ARE-3 Nos 61 and 62 both dated 27.02.2003 for 56,560.80 Lms valued at Rs. 10,74,655/- were diverted to M/s Khan Garments, Patnachera, Andhra Pradesh vide fresh ARE Nos. 17 & 18 both dt. 25.04.2002 and invoice nos. 22 & 23 both dt. 25.04.2002. The consignments were rejected by M/s Khan Garments and since another customer viz. M/s Asharani Garments & Fabrics Pvt. Ltd. was ready to accept the consignments and the appellant was having valid CT-3 certificate the goods were diverted to said concern. The reware housing certificates signed by the jurisdictional range superintendent of said consignee were submitted by the Appellant to their jurisdictional Range Superintendent.
2. On verification by the jurisdictional authority of Appellant from the consignee M/s Asharani Garments, it was reported that Range records of said period is not available in the Range as the same has been taken by the investigation agencies, that in one report submitted to the Deputy Commissioner of Central Excise, it was stated that in the month of May'
3|Page C/311/2009,E/1342/2009-DB 02 to July' 02, the Range Superintendent has countersigned 415 Nos of AR-3s pertaining to M/s Asharani Garments and fabrics. There is no mention of re-warehousing certificate in name of M/s Khan Garments in the month of May' 02. The Appellant were issued show cause notice No. V (Ch -54) 15- 01/D/Addl./07 dated 22.01.2007 proposing to demand duty foregone on the clearance of finished goods and also on the duty free raw materials consumed in the said show cause notice on the ground that the Appellant has failed to submit the genuine reware housing certificates within the stipulated time period and intentionally procured forged documents with deliberate intention to evade duty and by not getting re-warehousing certificates from the Range Superintendent of the consignee. Accordingly the show cause notice proposed demand of duty equal to custom duty amounting to Rs. 10,78,405/- on finished goods. It also proposed to impose penalty under Rule 25 read with section 11AC. In addition, the central excise duty of Rs. 14,96,320/- on raw materials procured by the Appellant and which were consumed in finished goods were also made along with proposal to impose equivalent amount of penalty under Rule 25 read with section 11AC. The show cause notice also proposed confiscation of the finished goods cleared and raw materials/ inputs procured without payment of duty under Rule 25 of the Central Excise Rules, 2002 for finished goods and under Section 111 (j) and 111 (o) of the Customs Act, 1962 on inputs. The demands made in the show cause notice were confirmed by the adjudicating authority.
3. It also ordered for confiscation of the finished goods and raw material consumed in finished goods and imposed redemption fine of Rs. 5,00,000/- in lieu of confiscation under section 34 and Section 125 of the Customs Act and ordered to be recovered from the Appellant in
4|Page C/311/2009,E/1342/2009-DB terms of B-17 bond furnished by them. The adjudicating authority held that the party has failed to submit genuine re-warehousing certificate within the stipulated time. The range Superintendent at Hyderabad where M/s ASHARANI Garment is located has reported that he has not re-warehoused any goods except 415 AR-3s pertaining to M/s Asharani. The Superintendent at Hyderabad has addressed letter to Range Superintendent of Appellant that from AR-3 Nos. 17 and 18, both dt. 25.04.2002 it is seen that the name of the Superintendent who has countersigned the receipt of goods was not figuring on AR-3s; that M/s Khan Garments has misused the EOU Scheme and they were imposed with duty and penalty; The officers of DRI Ahmedabad also conducted investigation against the said unit and available records of range were recovered by the investigation agencies; to verify the genuineness of the re-warehousing at this range level, there are no records/ registers available to certify the genuineness of the same. The XT-1 Diaries of the former Superintendent/ Inspector or the Station diaries are not available in spite of thorough search conducted at this end; that the party has submitted the lorry receipts but it is not understood whether the party has delivered the goods to M/s Khan Garments or to M/s Asharani Garments. Moreover it is still in dispute whether the cheque is issued by Khan Garments or Asharani Garments. It is also not established whether the cheque is given for any old transaction or in respect of receipt of goods in respect of AR3-A No. 17 & 18 in question. The adjudicating authority thus on above grounds confirmed the demands, imposed penalties and ordered for confiscation of goods.
4. The Appellant filed appeal before the Appellate Commissioner who held that That the lower authority has upheld demand on the ground that the silence of the Appellant in parallel proceedings in respect of six
5|Page C/311/2009,E/1342/2009-DB other consignments gives reasonable doubt that the Appellant did resort to fake re-warehousing certificates; in case of evasion booked against the consignee the duty and penalty exceeding more than Rs. 100 crores have been imposed. He therefore rejected the appeals. Being aggrieved the Appellant has filed the present appeals.
5. Ld. Counsel Shri Hardik Modh appearing for the appellant submits that the finding of the lower authorities is not correct. He submits that the allegations against the Appellant are merely based upon assumption and presumptions. That the Appellate Commissioner has grossly erred in proceedings initiated against the Appellant in other consignments which are altogether different proceedings. Existence of case against the consignee cannot be basis for alleging diversion of goods by Appellant. The Appellant being consignor of goods cannot be held liable for duty. Mere non indication of name of the Superintendent warehousing the goods does not per se entitles the department to discard otherwise valid re-warehousing certificates. The communication of re-warehousing certificate from the Range office of the consignee to the Range office of the consignor is an affair within the domain of the two range officers, where the Appellant or any assessee for the matter does not have any control. They produced only a copy of re-warehousing certificates as received by them from the consignee signifying receipt and re- warehousing of the goods at Consignee 100% EOU. The contention of the revenue that no re-warehousing is done is absolutely false as the verification report states "that the diaries of former superintendent and inspectors could not be found " which cannot be a ground to hold that the goods were not reware housed. On the contrary the report dated 29.07.2002 submitted by the consignee's superintendent to Deputy Commissioner States that he has countersigned 415ARs pertaining to
6|Page C/311/2009,E/1342/2009-DB Asharani on which the total quantity works out to be apprx. 135.53 lakhs meters. That the contention of the Appellate authority that the Appellant did not attend the summon, it is clear from the order that the Appellant's son had informed the department that his father i.e the Appellant has gone on Haj. The department has not brought any substantive evidence to establish fake nature of re-warehousing certificates. There is no statement recorded of any consignee or his representative nor any investigation made at the end of 100% EOU consignee. No investigation or verification report even suggest that the CT3 Certificate received from M/s Asharani was fake or fabricated in any manner whatsoever of the reware housing certificate does not bear the genuine signature of M/s Asharani or the Range Superintendent having jurisdiction over said consignee. He relies upon judgments in case of Sunshine Overseas 2011 (268) ELT 374 (TRI) and Nayana Textiles Vs. CCE 2010 (261) ELT 181. That as per Circular No. 851/9/2007 - CX dated 02.05.2007 revenue is supposed to seek documents from the Superintendent Incharge of the consignee. As per the circular in case of non receipt of re-warehousing certificate, the matter is to be reported to Assistant / Deputy Commissioner who will secure the proof of goods having reached the consignee. Therefore when the Appellant ahs produced the certificates, he cannot be held responsible for duty liability as consignor. He relies upon orders in case of National Impex 2007 (213) ELT 429 (TRI), Skyron Overseas 2010 (252) ELT 293, Crompton Greaves Ld. 2015 (329) ELT 600 (TRI), Arya Fibers Pvt. Ltd. 2009 (240) ELT 718 (TRI). He also submits that the demands are time barred.
6. Shri L. Patra Ld. Assistant Commissioner (AR) appearing for the revenue supports the findings of the lower authorities. He also relies upon the tribunal order in case of Sunstar Impex (P) Ltd. 2009 (240)
7|Page C/311/2009,E/1342/2009-DB ELT 605 (TRI) to state that in case it is liability of the consignor to see that the goods reached the consignee.
7. Heard both the sides and perused the records. We find that the appellant has produced the re-warehousing certificate from the consignee. The jurisdictional range authorities of consignee has reported that the records are not traceable as well as the diaries of the Superintendent and Inspector administering the consignee are also not traceable. That the records has been taken by the investigation wing of the department. The verification report given by the jurisdiction authority of the consignee is thus inconclusive and on that basis it cannot be assumed that the goods did not reach consignee. Further the authorities at consignee's end also informed that the Range Superintendent has countersigned 415 Nos of AR-3s pertaining to consignee M/s Asharani which infact has to be considered that the consignee were procuring goods from other EOUs also. If the re- warehousing certificate does not bear the name of the officer, the same should have been investigated. The adjudicating authority and the Appellate authority has interpreted the communication by the jurisdictional authority of consignee as evidence of non receipt of goods by M/s Asharani and held that the re-warehousing certificates submitted by the Appellant are fake. We are of the view that such approach is incorrect. Once the re-warehousing certificates have been produced by the consignor, the same has to be considered as genuine unless any evidence of non receipt of goods by the consignee is reported. Only for the reason that the diaries of the Superintendent or the Inspector having jurisdiction over the consignee M/s Asharani Garments are not available with the department or the records are with the investigative team of the department or that the reware housing certificate does not
8|Page C/311/2009,E/1342/2009-DB bear the name of the concerned Superintendent, the re-warehousing certificates cannot be considered as fake. The revenue has to show from their own records or from the investigation at the consignee's end that the goods did not reach the consignee. Since the department has made the allegation of non re-warehousing of the goods at the consignee's factory, it has to prove the same by substantial evidence and it cannot be made on assumption. It has to be shown as if the goods were not warehoused then where were the same diverted. In present case there is no evidence of diversion of goods. The Appellant has submitted the lorry receipt and the payment details to support the contention of clearance of goods to M/s Asharani Garments. It is also not the allegation that the goods were not consigned by the Appellant. The non attending of summon by the owner as he was on Haj and the same was communicated by his son cannot lead to inference that the appellant deliberately did not appear to attend the summon. Therefore in the given set of facts and in absence of any adverse evidence, it cannot be said that the goods did not reach the consignee or were not warehoused. We thus hold that the demands are not sustainable.
8. Without prejudice we also find that on the one hand the revenue has made central excise duty on goods consumed in the finished goods and on the other hand it is demanding duty on the finished goods which is wrong. Even if there is any duty demand, the same shall be restricted only upon finished goods. The raw material duty cannot be demanded as the same were consumed for intended purpose of manufacture. Our views are also based upon tribunal decision in case of Sanjari Twisters 2009 (235) ELT 116 and Dupoint Synthetics Pvt. Ltd. 2010 (259) ELT 408 (TRI).
9|Page C/311/2009,E/1342/2009-DB
9. We also find that the finished goods so cleared and the raw material so used for manufacture of finished goods were ordered to be confiscated and in lieu of confiscation the redemption fine was imposed. In view of our above findings on duty demand we hold that the same are equally applicable to confiscation of goods and we therefore set aside the confiscation. We therefore set aside the impugned order and allow both the appeals.
(Pronounced in the open court on 10.01.2019)
(Raju) (Ramesh Nair)
Member (Technical) Member (Judicial)
Seema