Custom, Excise & Service Tax Tribunal
Kaizen Organics Pvt Ltd vs Guwahati on 11 December, 2024
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
REGIONAL BENCH - COURT NO.2
Excise Appeal No.70828 of 2013
(Arising out of Order-in-Original No. 36/Commr/CE/GHY/12-13 dated 15-03-2013
passed by the Commissioner of Central Excise and Service tax, Guwahati)
M/s. Kaizen Organics Pvt. Ltd.
(RIICO Industrial Area, Bagru Extension-II,
Jaipur, Rajasthan)
Appellant
VERSUS
M/s. Commissioner of Central Excise & Service Tax, Guwahati
(Sethi Trust Building, Bhangagarh, Guwahati
Assam-781005)
Respondent
With Excise Appeal No.70829 of 2013 (Arising out of Order-in-Original No. 36/Commr/CE/GHY/12-13 dated 15-03-2013 passed by the Commissioner of Central Excise and Service Tax, Guwahati) Shri Vikash Kumar Bajoria (RIICO Industrial Area, Bagru Extension-II Jaipur, Rajasthan) Appellant VERSUS M/s. Commissioner of Central Excise & Service Tax, Guwahati (Sethi Trust Building, Bhangagarh, Guwahati Assam-781005) Respondent And Excise Appeal No.70830 of 2013 (Arising out of Order-in-Original No. 36/Commr/CE/GHY/12-13 dated 15-03-2013 passed by the Commissioner of Central Excise and Service tax, Guwahati) M/s. Koolmint Manufacturing Company Proprietor of Mr. Suresh Bajoria (Dag No. 1281, Industrial Estate, Gauripur, Dhubri, Assam-783331) Appellant VERSUS M/s. Commissioner of Central Excise & Service Tax, Guwahati 2 Excise Appeal Nos.70828-70830 of 2013 (Sethi Trust Building, Bhangagarh, Guwahati Assam-781005) Respondent APPEARANCE :
Shri Pulak Saha & Shri Joydeb Bhattachariya, both CA for the Appellant Shri B. K. Singh, Authorized Representative for the Respondent CORAM:
HON'BLE MR. R. MURALIDHAR, MEMBER (JUDICIAL) HON'BLE MR. RAJEEV TANDON, MEMBER (TECHNICAL) FINAL ORDER NO.77809-77811/2024 Date of Hearing : 23/09/2024 Date of Decision 11/12/2024 PER RAJEEV TANDON:
The appellants have filed the present appeal assailing the order in original number 36/Commr/CE/GHY/12-13 dated 15.03.2013 whereby the adjudicating authority has fastened duty liability of ₹9560962 on M/S Koolmint Manufacturing Company in terms of section 11 D of the Central Excise Act, besides imposing a penalty of equal amount under section 11 AC of the act ibid. The impugned order in original seeks the recovery of cenvat credit of ₹9557323 along with interest, from the appellant M/S Kaizen Organic Private Limited in terms of rule 14 of the Cenvat Credit Rules, 2004. The order also imposes penalties of varying amounts under the provisions of the statute, both on M/s Kaizen Organics Private Limited, as well as the third appellant, Shri Vikas Bajoria, the proprietor of the said firm.
2. The facts of the case are that M/s Koolmint Manufacturing Company said to be a manufacturer of methanol oil/ methanol flakes, and demantholised oil (DMO) availed exemption in terms of notification no. 32/99-CE dated 8/7/99 as amended. Acting on intelligence gathered by the department that M/S Koolmint Manufacturing Co (Koolmint for short) were paying Central Excise duty by misusing the 3 Excise Appeal Nos.70828-70830 of 2013 notification benefit supra, by not actually manufacturing the excisable goods in their factory premises and by resorting to gross over invoicing and paying duty on their own (of which they availed cash refund), allowing subsequent cash discount, were resorting to conscious and deliberate misdeclaration and misrepresentation of facts with the intention of passing irregular cenvat credit to their customer, M/S Kaizen Organics Private Limited, Jaipur; the authorities undertook extensive investigations into the matter. Thus briefly, the modus as alleged was that M/s Koolmint cleared the goods by paying entire amount of duty from the Account Current, availing no credit of duty paid either on inputs or on capital goods and claiming back the duty so paid, by way of refund in terms of notification number 32/99 CE dated 8 July 1999. As established from records, almost the entire clearances of M/s. Koolmint (nearly 99%) were said to be cleared to M/s Kaizen Organics Pvt. Ltd. (Kaizen for short), who used the said goods as input for final products manufactured by them, availing credit on the basis of invoices issued by Koolmint. The investigations further revealed that the goods were said to be sold to Kaizen on FOB/FOR basis at the factory gate, as also no transportation cost from Goripur to Jaipur, was indicated on the invoices. However, in actuality that was not the case. Investigations also revealed multiple instances of non-transportation of raw material and finished products. Further Koolmint allowed quantity discount by issuing credit notes from the month of April 2003 upto October 2004 on a monthly basis, that was not declared and in the absence of any agreement or contractual support to buttress the same.
3. In support of the primary allegation against Koolmint, it is the case of the revenue that they had limited resources and infrastructure in the factory to manufacture huge quantity of methanol, DMO and menthol flakes as recorded in the daily stock account and Central Excise invoices. The revenues apparent contention being that the appellant had fudged the figures, forged the documents, paid excise 4 Excise Appeal Nos.70828-70830 of 2013 duty from account current maintained in respect of the said transactions to justify their claim for refund of duty, besides thereby passing of irregular and ineligible Cenvat Credit to M/s. Kaizen. The notice also mentions that, though the records indicated 56523 kgs of mentha oil as received by Koolmint, proportionate quantity of finished product was not manufactured and cleared and thereby duty on such Quantity was paid without actually manufacturing the finished goods in their factory, inviting the mischief of the said notification. The notice further alleges that Koolmint had included in the assessable value the transportation cost from the place of removal that is the factory to the place of delivery, that is the buyers (Kaizen) premises. In such cases in terms of provisions of section 4 of the Central Excise Act, read with rule 5 of the Central Excise Valuation, (Determination of Price of Goods) Rules 2000, the assessable value should have been the transaction value of the goods, excluding the cost of transportation from the place of removal to the place of delivery as the invoices did not indicate transportation cost separately. Contrary to this, Siri Suresh Bajoria, Proprietor of M/S Koolmint, in his statement recorded on 25 April 2006 had admitted that the invoice price was inclusive of transportation cost and that they had paid the duty on the entire invoiced value that was inclusive of transportation cost. He further added that the transporters raised bills on cost of transportation from the factory gate to the buyers premises and that they reflected these transportation charges as expenditure in the books of accounts. By way of quantity discount, the notice alleges that a total discount of ₹2,18,61,750/- was passed on to the buyer Kaizen during the period April 2003 to October 2004, that was not deducted while computing the assessable value of the goods and paid duty on such discounts subsequently passed on that were not declared to the departmental authorities. It is the contention of the department that Koolmint exaggerated the assessable value of the products and the amount paid in excess of the duty liable/payable, therefore cannot be construed as duty of excise payable under the Central Excise Act 1944. For the said 5 Excise Appeal Nos.70828-70830 of 2013 reason, even the refund of such excess amount taken by the appellant has been held to be not admissible, in terms of the said notification 32/99 CE, and the amount of refund so taken was computed at ₹4099633. The notice therefore levels grave charges of suppression and misdeclaration in the matter, manipulating the assessable value, manipulating the fake transportation of raw material and showing these, as gone into manufacture, mainly for records; thereby resorting to book clearance and showing transportation of finished goods, playing a fraud with the department with intent to evade payment of Central Excise duty by way of seeking fraudulent refund of excess duty, that was not due. In view thereof the show cause notice was issued invoking the larger limitation period in terms of proviso to section 11A(1) of the Central Excise Act.
4. During the course of searches carried out by the department at the premises of Kaizen, the authorities also noticed unaccounted finished product viz. essential oil weighing 7200 Kgs packed in 40 drums of 80 Kgs each and valued at ₹2448000. The investigations led the authorities to conclude that proprietor of M/S Koolmint Shri Suresh Bajoria (who incidentally is not the appellant in the matter) was actually the mastermind of the entire fraudulent scheme of things and the entire modus was played out as per his directions, initiative and behest and all records were maintained by the two units as per his directions and supervision.
5. In so far as the appellant Vikas Bajoria is concerned, the notice alleges him to be responsible for manipulating the records and documents to improperly project receipt of goods from Koolmint and as he directed and oversaw the record maintenance at his factory, being the Managing Director/Proprietor of Kaizen Organics Private Limited, therefore proposes imposition of penalty for his actions. For the said appellant, the notice proposes that the scheme of business transactions was literally developed at his personal initiative in league 6 Excise Appeal Nos.70828-70830 of 2013 with his father Sri Suresh Bajoria, Proprietor of M/S Koolmint Manufacturing Company Pvt. Ltd. He is also charged of misleading the investigations by falsely stating the factual position, deliberately and knowingly paying Central Excise duty on the face value of the invoices, despite having gained significant amount of quantity discount. The notice alleges that the modus was carefully crafted with ill intents to benefit from illegal gains and alleges that all this was deliberately done very carefully, as he was a part of larger fraud perpetuated to seek undue benefit and financially enrich illegally with the idea of deceiving the Central Excise department and by making financial gains by adopting the unique modus operandi as conceived by him. The notice alleges that the records of the appellant's firm were cleverly manipulated to claim undue and illegal benefit of refund of duty and enable the buyer avail credit thereon only at his insistence and that he wilfully played fraud with clear intents to deprive the government of its legitimate dues, and unduly enrich themselves.
6. The learned consultant for the appellants outrightly dismisses the allegations levelled. He interalia submits that the appellant commenced commercial production in March 2002 manufacturing, methanol flakes, DMO, and menthol flakes. He submits that the raw materials were procured from the farmers located in the states of Uttar Pradesh and Delhi, through agents, and that the raw material attracted nil/no rate of duty and their final product was almost entirely purchased by Kaizen. He submits that they had closed their operations on and from 10 August 2006. While describing the entire process for availing exemption notification benefit under notification number 32/99-CE dated 8/07/1999 as amended, he submits that the jurisdictional officer was required to pass an order for refund upon necessary verification, and that they had been receiving the said refunds on regular basis, which orders for refund had assumed finality. It is his contention that before issuing any demand for recovery of any short payment/non-payment of duty or for alleged erroneous refund 7 Excise Appeal Nos.70828-70830 of 2013 under section 11 A of the act ibid, the department was required to consider the orders of refund for review under section 35E of the Central Excise Act. In support of his contention the learned consultant relies on the ratio of law as propounded in the following cases i. CCE, Kanpur Vs. Flock (India) Pvt. Ltd. [2000 (120) ELT 285 (SC)] ii. WEP Peripherals Vs. CCC (Appeals-II), Hyderabad [2007 (213) ELT 18 (T) iii. Doothat TE Kanoi Plantation (P) Ltd. Vs. CCE, Shillong [2001 (135) ELT 386 (T)], iv. Sree Digvijay Cement Co. Ltd. Vs. CCE [1991 (52) ELT 631 (T)] v. Overseas Engineers Vs. CCE, Rajkot [2007 (215) ELT 513 (T), vi. Voltas Ltd. Vs. CC & CE, Hyderabad [2006 (202) ELT 355 (T)
7. As for the anomalies noticed by the department in the transport related documents, the learned consultant submitted that of as many as 56 vehicles discrepancies in numbers were found only in respect of 6, as concerns the supply of the outgoing material from the factory of Koolmint to Kaizen. Likewise in respect of vehicles carrying raw materials for Koolmint while discrepancies were noticed, it is still his case that they did receive the said goods. Refuting the department's evidence gathered by way of records maintained at border check posts and reports collected, his emphasis is that in at least two cases vehicles carried in drums materials for Koolmint. While the other vehicles may have carried mixed goods. Further he submits they did carry raw material for Koolmint vehicles as confirmed by the transporting firm, Great Eastern Road Carriers.
8. On the legality and validity of the refund claims received, the learned Consultant submits that they were in effect governed by the exemption notification, which is a self-contained code, and there was no impropriety in sanction of the said refund claims. Further, for the 8 Excise Appeal Nos.70828-70830 of 2013 adjustment required in terms of quantity discount passed on, he submits that it was for the jurisdictional officer to do wherever it was warranted by adjusting the said amounts in future refunds, admissible to the manufacturer. He submits that despite this, having provisionally assessed the refunds, the jurisdictional officer never called upon to show cause as to why the refund granted earlier on provisional basis, not to be adjusted in future refunds, and for such an action on the part of jurisdictional officer, which indeed is a reaffirmation of the refund becoming final, the appellant cannot be held to ransom. It was his plea that the limitation period for so to do had since expired and the department had lost its right for seeking any recompense. He submitted that the said refund claim recorp also cannot be initiated by inviting recourse to the provisions of section 11 A as the said section had no application in respect of an exemption notification which laid down the process of recovery of an alleged erroneous refund.
9. The learned advocate further submitted that the show cause notice actually duplicated the demands for the said amount both under section 11A as well as Section 11 D of the Central Excise Act, which again is impermissible in law and therefore render the show cause notice untenable. It is his case that once an amount of duty allegedly refunded is not liable to be recovered under the provisions of Section 11A, no demand can be raised in respect of the same duty under section 11 D which deals with such amount of duty as is collected in the name of the Central Government. In support of his argument, he relies on the case of Thandava Cooperative Sugars Ltd versus CCE Visakhapatnam 2006 (205) ELT 1020 (T). It is the respondent's contention that in terms of the exemption notification and by virtue of provisions of Rule 10 of Cenvat Credit Rules, 2002 and Rule 12 of the of the Cenvat Credit Rules, 2004, they were entitled to pass on the incidence of duty to their buyers, who in turn were entitled to avail Cenvat Credit thereon. The learned consultant submits that the mechanism and operation of the exemption notification is such that 9 Excise Appeal Nos.70828-70830 of 2013 the appellant were required to first pay the duty both in cash as well as by credit and thereafter get the refund of duty paid in cash by way of cash refund and in this mechanism, the entitlement to pass the incidence of duty to a buyer is protected and such a demand would render all manufacturers availing of the exemption, liable for contravention of section 11D of the act. It is their case that such interpretation militates against the intention behind the exemption notification and therefore the demand raised by the department is vitiated. Adverting to the various statements of the proprietor of Koolmint Manufacturing Company Shri Suresh Bajoria, as referred to in the show cause notices, he submits that they do not dwell upon any fact in support of what has been stated and alluded to it's proprietor. Referring to other statements of various persons as indicated in the show cause notice, the consultant suggests that the same do not contain any material piece of admission in respect of the liability. He submits that from the various statements, it does not flow that the raw materials were not procured by Koolmint and finished goods not transported to Kaizen Organics Private Ltd. Finally, the learned Consultant submitted that the department failed in discharging the onus cast upon them and failed to overcome the burden of proof as was required to be discharged by the department. He submitted that the statements recorded by the department under section 14 of the Central Excise Act do not clearly make out a case of contravention of the provisions of the act and the department cannot raise the demand merely on the basis of surrounding circumstances seeking to rely upon secondary evidence. He contends that the department had failed to place on record any fact that may even create a presumption of evidence or a case of preponderance of probability against them, much less a sustainable demand, merely on the basis of certain incorrectly recorded vehicle numbers on invoices or to the departments reliance upon electricity consumption. It is the appellant's contention that the department's arguments are misplaced, the entire case of the revenue is unsustainable, the fact of non-manufacturing and non-transport of 10 Excise Appeal Nos.70828-70830 of 2013 goods by Koolmint and non-receipt thereof by Kaizen are not corroborated and proved and therefore the show cause notice issued to them was unwarranted and unjustified. As for Cenvat Credit availed by M/s Kaizen Organics Private Limited, the Learned Counsel submits that the law mandated availment of credit on duty paid inputs, and so there was nothing wrong in availment of the same.
10. On the aspect of limitation, the consultant submitted that the show cause notice for the period, March 2002 to December 2004 was issued on 19.10.2006 invoking the extended period in terms of proviso to section 11 A (1) of Central Excise Act and as the ingredients of the proviso were not attracted in the matter, the entire show cause notice was barred by limitation. In support of his stance, he relied on the following case laws:-
(i) Lakshmi Engineering Works Vs. CC 1989 (44) ELT 353 SC
(ii) Pushpam Pharmaceuticals Company Vs CC 1995 (78) ELT 401 SC On this aspect, the learned Counsel finally submitted that as they were filing regular returns with the jurisdictional authorities, the invocation of the longer period of limitation was bad in law. Pleading not guilty, it was therefore their case that no penalties could be imposed on them under the circumstances.
11. The Learned AR appearing for the department submits on the other hand that the question of availment of credit by M/s Kaizen Organics Private Ltd did not arise in the first place and availment of such credit and was irregular and inappropriate, in as much as Koolmint Manufacturing Company did not have the necessary infrastructure for manufacture of finished goods claimed to be used as inputs by Kaizen. In support of his contention, he points out the fact of inculpating statements of various persons, including that of proprietors of the two firms.
11Excise Appeal Nos.70828-70830 of 2013
12. The learned AR submits that the entire scheme was meticulously thought of to drive maximum financial gains by the father-son duo, that Koolmint had no resources to undertake such large scale production, as declared, that to avail maximum cash returns by virtue of the said notification, not only arbitrary and baseless Quantity discount was passed on to their buyers, who are said to have lifted the production almost in its entirely, they also did not avail any Cenvat Credit not only on whatever dutiable inputs allegedly received, but capital goods as well. The mystifying Question that begs an answer however remains i.e. would any prudent businessman/manufacturer, forego an advantage, concession, credit, incentive etc. as offered by the government to which one was entitled to as a birth right. He submits that the fact that the appellant Koolmint did not avail Cenvat Credit even on capital goods clearly points out to two things, that in the first place there were not any capital goods worth and that as the design was to defraud revenue the refund operated by way of exemption would have got lowered to the extent of duty paid through credit scheme. He submits that no right thinking person would let go off any Cenvat Credit benefit as accrued to them. He also cites the testimony of the transporters as well as information collected by the department from border check posts, to discount any material movement both of finished goods as well as raw material. Finally, the learned AR places heavy reliance on the findings of the adjudicating authority and submits that as the manufacture of finished goods was stage-managed and records populated fraudulently the intent to evade duty was self-evident. Being a clear case of suppression, mis- declaration and intent to cheat the revenue quite evident, he submits that the show cause notice is appropriately issued and not barred by limitation.
13. We have heard the two sides at great length. Pursuant to the hearing, the appellant was directed to file sample copies of ER1 returns 12 Excise Appeal Nos.70828-70830 of 2013 filed alongwith other supporting documents. They were also directed to submit sample copies of refunds received by them for the PLA payments made by them on a monthly basis. They were given time till 30th October 2024. The department was also given time to make further submissions if any. In pursuance of the said directions, M/s. Koolmint filed copies of certain Refund sanction Orders as well as ER-1 returns. M/s Kaizen in response submitted that there was a fire incident at their premises on March 15, 2008 and enclosed certain testimonials as evidence thereof alongwith a copy of their intimation letter written to the departmental authorities sent on March 17, 2008, adding that ER-1 returns for the period under appeal were all destroyed.
14. A perusal of the ER-1 returns and refund orders filed by Koolmint, points out nothing deviating from what is aforestated and the fact of sanction of the refund of the duty paid through PLA, in the ordinary course of things as envisaged in terms of notification No. 32/99-CE dated 8.07.1999. Moreover, periodical refund claims bear the same language and are not materially different, except for the claim amount or the duty paid amount and its particulars. This is to suggest the mechanical nature of the exercise undertaken while permitting the refund outgo.
15. In so far as the submissions made by Kaizen on October 29, 2024 are concerned, the appellant has encased themselves under cover of a fire incident said to be as a result of short circuit at their premises and have thus taken the plea "Due to such accidental fire, the ER-1 returns for the period under appeal were all destroyed". A fact check thereof as per appellants own plea suggests the following:
(i) As per appellant's complaint with police To, the Station House Officer, Bagru, Police Station- Bagru, Jaipur, Subject: Information regarding fire at our factory G- 17 & 18.13
Excise Appeal Nos.70828-70830 of 2013 Sir, With regard to above subject, It is to submit that a fire had taken place at our factory G-17 & 18, RIICO Ind. Area, Phase-II, Bagru on 15.3.08 between 3.30 a.m. to 4 a.m., causing loss of Plant and machinery, raw material, material in process (WIP), building, packing material etc., valuing about Rs. 10 crores. Submitted for information. Sd/- Surinder Police Proceedings:
Verified that Shri Surinder Sankhla S/o Shri Banshi Lal, caste- Sankhla (Jain), aged-35 years R/o 43, Indraprastha Colony, Ram Nagar Sodala P.S. Sodala, District- Jaipur came at the Police Station and submitted the above-mentioned report, on the basis of contents of which, case of accidental fire is found. Therefore, the report of accidental fire is registered at Roznamcha. One copy of the report is given to the applicant and is freed. Report handed over to Sh Vijay Lahar No. 783 for investigations. Report is written. Sd/ Hari Ram No. 273 On 15.3.08, report in connection with accidental fire at the factory namely Kaizen Organics Pvt. Ltd. at RIICO Area Bagru on 14/15.3.08, at about 3.30- 4 a.m. was got registered at the report No. 795, Roznamcha Aam (General Diary) by Shri Surinder Sankhla at the present Police Station. Investigations in connection with fire were conducted, prima- facie, short circuit is found the cause of fire. There seems no other reason of fire. Loss of material and building is found as there was inflammable substance in the factory, no life loss is found. Case of accidental fire is found.
Sd/- illegible Station House Officer Police Station-Bagru District-Jaipur Rural
(ii) As per appellants letter dated 17/03/2008 to Jurisdictional AC 14 Excise Appeal Nos.70828-70830 of 2013 A cursory reading of the two communications above however nowhere indicates a word about the destruction of records. Moreover, the fire reportedly was at the work place and not in the administrative block.15
Excise Appeal Nos.70828-70830 of 2013
16. Thus what is required to be considered by us in respect of Koolmint Manufacturing Company is:
-Whether the appellant actually manufactured excisable goods, and if they not so did, are they liable for appropriate action under section 11 D of the Central Excise Act, read with the provisions of rule 25 &/or rule 27 of the Central Excise Rules 2002, read with section 11 AC of the Central Excise Act, 1944. In the alternative, if the appellant did actually produce finished goods and cleared the same in terms of notification number 32/99-CE dated 8 July 1999, would Section 11 D apply to the excisable goods so produced and cleared by them, and if so, whether any duty was paid by them in excess.
17. As for the appellant Kaizen Organics Pvt. Ltd., the moot question for consideration is whether the appellant actually received the excisable goods from Koolmint at its factory on which credit was availed and whether they could be subjected to the provisions of section 11 AC read with rule 15 of the Central Excise Rules and whether larger period of limitation was justifiably invoked by the revenue.
18. We note from records that the revenue in its investigations has recorded statements of several people, including the proprietor of the said two firms, their employees as well as that of the transporters. Over a dozen persons were investigated by the revenue during the course of the investigations undertaken at several locations and with various agencies.
19. Having considered the arguments of the rival factions and examined the case records and having afforded the two sides sufficient time to tender document any evidence as well as other material in support of their case, it is now apt that the present case is examined in the context of all material that is available on record. The genesis of 16 Excise Appeal Nos.70828-70830 of 2013 the case is the action as undertaken by Koolmint while the charge for Kaizen is only as a sequel to the outcome of action by Koolmint. The revenue has contended that the appellant Koolmint had not manufactured any goods and in order to avail undue advantage of the exemption notification number 32/99-CE dated 08/07/1999 and facilitate the availment of ineligible and undue credit by their purchaser Kaizen.
20. It is the claim of the department that the entire modus was hatched by the proprietors of the two firms S/Sri Suresh Bajoria and Vikas Bajoria son of Suresh Bajoria. In support of its argument, the revenue has placed reliance on the power consumption data, while page 16 of the show cause notice brings out a table indicating the average consumption of electricity for per KG manufacture during the relevant period. It is seen therefrom that the said electricity consumption varied from 2.91 KWH to 810 KWH. There is no satisfactory explanation emanating from the evidence on record or the response of Koolmint to such a wide variation of consumption data, except for a bland statement stating that wherever the average consumption of electricity per KG was higher, it indicated the use of DG set for longer period of time. That being so, we note from records that in March 2003, the average consumption of electricity per KG was 810KWH, while the 50 KW generator was made use of for 30.10 hours and 8KW generator for 11.20 hours, likewise in January 2004, average consumption of electricity was 18744 KWH per KG, while both the 50 KW generator and 8KW generator were operational merely for 25 hours. That being the factual position, on record the argument of the appellant is not borne out to be true and is therefore clearly unsustainable and lacking merit. For the reason, the appellant's plea is unacceptable. Moreover, not only there are very significant variations but the chasm between the two is also unbridgeable and unexplainable. It is also noted from records that the process of installation of 63KVA DG set, initiated only on 13 September 2002, 17 Excise Appeal Nos.70828-70830 of 2013 when an application to the appropriate authority was extended under the provisions of the Indian Electricity Act and for which the sanction was received only on December 24, 2002 implying, thereby that the said DG set was inoperable during the material period. The premise, therefore that electricity consumption was low and refuting it by claiming consumption of electricity produced by the DG sets is not at all satisfactorily forthcoming. The appellant have not placed any other argument to refute the said contention of the department. The plea of the appellant that they used to work on electricity generated from the DG sets is a bland statement and lacks any evidence/credence in support.
21. We note that the show cause notice clearly makes meticulous recordings of the time period for which the generator was run incorporating even law timelines of 5, 10, 15 or 20 minutes. The fact that that casts a strong shadow of doubt on the veracity of these figures is that at all places these figures are recorded in odd numbers and multiples of 5. Isn't it quirky that not even on a single occasion did the DG set operate for a length of time in a multiple of an even integer. Moreover, during the course of investigations, the Manager of Koolmint Manufacturing Company, Sri Amit Kumar Agarwal had clearly stated that the DG sets were operated only when there was no electricity and were switched off once the electricity supply resumed. There is no worthwhile claim of any manufacturing activity being undertaken, out of power generated by the operation of the DG sets. Moreover, the said statement of Sri Agarwal has neither been refuted, nor retracted till date. Thus the submission by the appellant does not lend any credence to the argument made in defence by them rather goes into strengthen the department's claim casting serious aspersions on the appellants claim for manufacture of finished goods used as inputs by their family concern. This is moreso when an analysis of stated manufacture is undertaken with energy source being power 18 Excise Appeal Nos.70828-70830 of 2013 generated by DG sets vis a vis that supplied by Assam State Electricity Board.
22. For the second leg of the department's charge concerning labour employed, it is noticed from records that a maximum of 12 labourers were engaged by the appellant at any given point of time. And that was in the year 2002. Thereafter the number of labourers progressively declined and came down to a mere 3 sometimes in 2003 i.e in less than a year. The investigating authorities have also corroborated this statement of fact, from the records of the Assistant Labour Commissioner, Government of Assam. To refute the said argument of the department, the appellant has contended that they used to employ contract labour for their production activities. However there is no evidence tendered by the appellant in support thereof indicating the number of contract labour employed, payments made thereto, hours worked. No copy of records or returns, as required to be statutorily filed with the Regional Labour Commissioner when deploying such labour, have been produced by Koolmint to buttress their claim. No records of payments made by way of salary payments/ statutory deductions like GPF etc. are presented in support of the said contention. This thereby establishes that the plea made out by the appellant is false, hollow and a tall claim, simply dished out for sake of self defence lacking corroboration. In this connection, the adjudicating authority has also indicated that it was not their case that the machines were automatic, therely emphasizing the need for manpower deployment to operate and utilize the same. This clearly suggests that in effect scarce or no manufacturing acts were undertaken by the appellant. This factual piece of information, therefore, lends significant strength, value and credibility to the charge of the department that the appellant had no adequate resource or infrastructure to manufacture such large quantities of finished goods, as allegedly recorded in the books of accounts and merely entered into paper transactions to seek inadmissible pecuniary gains.
19Excise Appeal Nos.70828-70830 of 2013
23. As to the next leg of allegation concerning non-receipt of raw materials by M/s Koolmint and the thereby drawing obvious conclusions of no actual manufacture of finished goods, we notice that the same is based on the outcome of investigations undertaken by the department with various jurisdictional RTOs and that with inter-state border check posts. From the annexure T1/1, T1/2 and T1/3 of the show cause notice, we note that the Transport Officers have indicated that vehicle number UP 13 C/9356 was a heavy transport vehicle having 10 wheels with a capacity of 25000 kgs, the Registering Authority, Muzaffarnagar reported vehicle number UP 12 C 1166 as a light motor vehicle, a Contessa car, while vehicle number UB 12 B7671W as a motor cycle. Likewise, the District Transport Officer, informed the investigating authorities that vehicle number HR56 9316 was not registered at all, while the District Transport Office, Ambala reported vehicle number HR37 9325 as a Bajaj auto and vehicle number HR37 A8709 as a Vikram. Thus it is clear that sample evidence collected by way of this circumstantial piece of evidence, when the appellant has reportedly recorded 56523 kgs of raw material transported to the factory through these vehices completely negates the appellant's assertions. Mere denial of the department's charge of non-receipt of raw material in the face of such prominent evidence cannot be simply let go as a one off case or a wrong indication of the registration number. The appellant have not been able to explain and completely failed to counter the department's contention. The department's stance cannot also be brushed aside by simply resorting to stating that person concerned may have recorded wrong vehicle numbers when such piece of evidence originates from varying jurisdictions spread over different states. The authorities below have therefore, in our view rightly rejected the claim for transport of raw materials, said to have been supplied through these vehicles from Delhi to Goripur. We therefore do not find enough evidentiary value in the response to the department's allegation in the show cause notice 20 Excise Appeal Nos.70828-70830 of 2013 that 56523 kgs of raw material stated to have been received by them, was not at all received at the unit of Koolmint and therefore further consequences in law for action of bringing the imaginary goods not at all received into the cycle of production/clearance, automatically follow. The departmental authorities have further backed up this piece of charge with lack of manpower, lack of electricity consumption, thereby confirming their stance.
24. We further note that the adjudicating authority in para 5.4 of the order has observed that the goods transported from Delhi to Dubari were required to pass through Baksirhat check post at Assam-West Bengal border. The investigations initiated by the departmental officers with the Commercial Tax Department, Government of West Bengal at Baksirhat, check post revealed that out of the 38 number of trucks stated to have carried materials to the factory of Koolmint, 6 of them actually carried motor parts/motorcycle parts, electrical goods and mentha oil. The amount of mentha oil said to be carried by the said trucks is as much as 38,700 kgs. In respect of the remaining 32 vehicles, the Commercial Tax Department authorities of the Government of West Bengal have confirmed to the department that as per the records of Baksirhat check post, the said trucks carried mixed goods. However, as per the records of the appellant 194430 kgs of menthol oil has been reportedly transited through these 32 trucks. Reasons for non-acceptance of the verification report of the check posts as supplied by the department, have belied any response from the appellants. We note that the report based on the basis of records maintained at check posts cannot be simply brushed aside, and therefore there is enough merit in the department's plea that 233130 kgs (38700 kgs +194430 kgs) of raw material recorded as receipt in the factory of Koolmint was actually not physically received. For the reason obviously it could not have entered the production stream. Any reflection of proportionate quantity of finished goods manufactured therefrom is a complete humbug and purely hypothetical. The claim of 21 Excise Appeal Nos.70828-70830 of 2013 manufacture by the appellant is thus purely arbitrary, whimsical and imaginary. When there is no receipt of raw material, no finished goods can be manufactured therefrom.
25. Yet another piece of evidence that the department gathered during the course of its investigations, relate to the fact, that the vehicles whereby the claimed finished goods of Koolmint were said to have been carted for its buyer Kaizen were not the kind of vehicles/lorries which could transport the finished products packed in GI drums of 200 L capacity. It is on record that many of these Vessels were tankers to carry liquids like LPG, oil, petroleum products, chemicals and water. Goods as per description and packing as indicated in invoices like "Drums of 200 litres" obviously cannot be moved in these tankers. Even the statements of the employees of the appellant's firm recorded indicate that it would be too risky to carry their products in such modes of transport over long distances and may not have been actually feasible to so do. It is stated that it would be very risky to carry drums in two stacks in open trucks. We find there is no defence afforded by the appellant to this assertion of the department, except mainly attributing that they cannot be held liable for the fault of the transporters. We find the said assertion to be lacking objectivity and reasonableness and shorn of reality. Moreover, it is noticed from the records that the proprietor of Koolmint Sri Suresh Bajoria has categorically informed the authorities that he did not remember of having sent the finished products in trucks.
26. We have also gone through other pieces of evidence by way of assertions of the transporters, namely Great Eastern Road Carriers, Prakash Road Lines and East India Transport Agency that were investigated by the department in the matter. However, we note that their testimony is a generalised one and does not lead to any conclusive evidence in support of the arguments as raised by the appellant in its defence.
22Excise Appeal Nos.70828-70830 of 2013
27. From the aforesaid, the plethora of evidence gathered and the diversity and variety thereof, it is clear that the revenue has gathered enough circumstantial evidence as discussed in forgoing paras to assert that the appellant Koolmint Manufacturing Company, did not actually involve itself at the given premises into any manufacturing activity for the production of finished goods. It is settled law that the department is not required to prove its case of non production and fudging of records to claim undue fiscal benefits, by way of mathematical precision and mere preponderance of probability in such circumstances would suffice to nail the dot. The balance of convenience clearly flows in favour of the assertions made by the department.
28. Another arm of the Department's charge relate to valuation of the purported goods. It is an admitted position of the appellant that the purported finished goods were sold at the factory gate on FOB/FOR basis. That being the case, no transportation cost is required to be added to the assessable value. Contra this with the investigations made at Kaizen Organics Pvt. Ltd., it has been brought on record that the transportation cost was included in the invoices issued by Koolmint and was paid by Kaizen, as in terms of Assam Industrial Policy, 90% of transportation charges were reimbursed. It is therefore clear that the appellant has in order to derive illegal benefit resorted to this scheme of operation defrauding multiple agencies. The main intentions of the appellants in the facts and circumstances of the case are clearly visible and established. The entire scheme was hatched in order to get undue benefit, by misusing government policies and incentives. To cap it and in order to further enhance the illegal gains, sought to be acquired, is evident from the fact, that subsequent to the stated clearance, quantity discounts were extended and credit note raised to further palm off excess share of illegal amount collected and multiply the illegal profits. The adjudicating authority has also taken note of the 23 Excise Appeal Nos.70828-70830 of 2013 fact that there was no agreement between the seller and the buyer, with regard to any sort of quantity discount being allowed, clearly thereby establishing that the said fictitious goods were shown to be of much higher value than actually so in order to claim greater amount of cash reimbursement by way of duty concession and exemption in terms of notification 32/99-CE supra, as during the relevant period, the appellant was eligible for refund of entire duty amount paid by them in cash.
28.1 It is also of interest to mention that the appellant Vikas Bajoria's father was earlier the Director of M/S Kaizen Organics Private Limited who resigned therefrom, only at the time of setting up of the factory at Dhubri. The family interests are clearly discernible from the nexus of the family web as indicated by the adjudicating authority in para 5.7 of the order. The same reads as under:
".----- it is also on record that notice number 3 is the proprietor of noticee number 1 and noticee number 4, who is one of the directors of noticee number 2, is the son of noticee number 3 and all shareholders of noticee number 2 were the family members of notice number 3 viz his son (notice number 4), his wife, his daughter, his daughter-in-law, and his grandson."
29. The thick web of mutuality of interest is therefore quite evident between the different businesses of noticees. No formal agreement of any quantity discounts are placed on record, particularly so when almost the entire quantity (99%) said to be produced was indicated as sales to only one firm i.e. the appellant Kaizen Organics Pvt. Ltd. The transactions between the two firms Koolmint and Kaizen can therefore not be considered at arms length. There is large amount of evidence to indicate, the perpetuation of fraud with ill intents and designs aimed at hatching maximized financial gains, in the entire scheme of operations. It is thus clear that the entire scheme has been so designed to seek pecuniary benefits by way of fraudulent attempt at availing concession 24 Excise Appeal Nos.70828-70830 of 2013 extended by the government for promotion of industrial infrastructure in the Northeast region. While there is no significant and satisfactory evidence, to establish the to and fro movement of raw materials and finished goods, the availment of cash refund and Cenvat credit by the appellant amounts to extreme misuse of policy provisions in good measure. To further accentuate their undue pecuniary gains by way of illegal reflection of quantity and recourse to discounts not backed by a shred of evidence, is a clear pointer to the ill machinations and sinister design of the appellant and reinforces the common saying that greed and deceit have no ends and are a bottomless pit.
30. When it is clear, that a serious fraud has been perpetuated by the appellant's, all their pleadings with regard to extended period of limitation or in respect of applicability of section 11 D provisions or the rightful availment of Cenvat Credit crumble like a pack of cards, as it is a well accepted norm that fraud vitiates anything and everything. Under the circumstances, the judicial citations referred to by the appellants as enclosed with their written submissions, do not come in handy to support their pleadings on limitation, non imposition of penalty or recovery of due amounts under Section 11D of Central Excise Act. We are not in agreement with the appellant that there was no suppression in the matter and they had filed all due returns and maintained all records as statutorily required. The unpleasant fact about all this is that such records/returns were manipulated forged and carefully constructed, with an eye on seeking various incentives and concessions in the form of duty refund or cenvat credit and did not portray true manufacturing activity, production and clearance of finished of goods, receipt of raw material by both Koolmint and Kaizen, that would have entitled them to avail of various fiscal benefits in law. Under the circumstances, we are of the view that the case laws of Lakshmi Engineering Works V. Collector of C. Ex. (1989 (44) ELT 353 SC) or that of Pushpam Pharmaceuticals Company V. Collector of Central Excise, Bombay (1995 (78) ELT 401 (SC)] actually go into 25 Excise Appeal Nos.70828-70830 of 2013 strengthen the charge of the department on account of grave irregularities, suppression and manipulation of various factual aspects by the appellants; all bringing out to the fore, the intent for evasion of duty on their part. We also find other case laws cited, as of no bearing in view of what's narrated in earlier paras. Consequentially case laws to support non-imposition of penalty on the appellants are rendered irrelevant and inapplicable to the present matter.
31. A question that arises for consideration however is and as contended by the appellants, that they had filed all their returns/reports timely and regularly and therefore the department was disentitled from building up a case of suppression/misstatement to invoke the larger period of limitation. In this context, it would be prudent to point out that in view of the schemed manipulation and deceit and that too of a very high order, no amount of legitimacy can be accorded to such reports and returns filed. The fact that the basic foundation of such database was set up on the edifice of fraud and deception, treachery and deception renders such reports/returns as ab initio void and a nullity in law. No shelter can be claimed under the guise of having tendered such returns to the department. For its contumacious conduct the appellant despite filing of such returns shall indeed be liable to all consequences in law including that of imposition of penalties. On the principle that fraud vitiates everything and in view of the matter, no illegality surfaces out of the department's action in the matter and the department was completely justified in invoking extended period of limitation.
32. It may also be noted that the moment the appellant learnt of the fact that their sinister designs had come to light and the department had got whiff of their nefarious designs and fraud being perpetuated, the appellants wound up their activities, closed shop and discontinued their operations in entirety. As is too well known that fraud vitiates every solemn act and goes to the root of the matter and attempts, if 26 Excise Appeal Nos.70828-70830 of 2013 any, at making over a new leaf cannot obliterate the consequences of such an inimical action. A forgery, as held by the apex court in the case of New India Assurance Co., Shimla V. Kamla and Others (2021 (4) SCC 342), cannot acquire legal validity by any process of sanctification, including even an action initiated by the appropriate statutory authority. Therefore, the returns/refund claims etc. as may have been filed by the appellant from time to time with the authorities would remain forever null and void.
33. Though, the Proprietor of Kaizen, Shri Vikash Kumar Bajoria has been found to be deeply involved in the entire game plan of cheating and financially swindling the revenue, for sake of argument even if it is accepted that they were not aware of the misdeeds of Koolmint and had bonafidely availed of Cenvat Credit on alleged supplies received from them, we are of the view that Kaizen could not have availed of any Cenvat Credit, for the reasons:-
(a) non physical receipts of material
(b) merely on the basis of paper invoices and the fact of such documentation in itself, as held before, to be arising out of forgery and manipulation.
Argument concerning lack of knowledge, is thus irrelevant in the matter.
34. As a case in point, it may be worth while to refer to the hon'ble apex court's decision in the case of Commr. of Customs, Kandla Vs. Essar Oil (2204 (172) ELT 433 SC), where all attempts were made by the assessee, and even in cahoots with certain revenue officials, to cover up for their fraudulent course of action, the apex court had taken a strong view in the matter, setting aside the Tribunal's order and holding the guilty liable to punitive action. It is too well known to repeat that "fraud unravels all". Furthermore, no considerations of equity would obviously lie and work in favour of someone who plays fraud or seeks to eat the fruits of a fraudulent act committed by the 27 Excise Appeal Nos.70828-70830 of 2013 other person. No sympathy can thus be claimed by the appellants as they were outrightly defrauding the Revenue.
35. A well known latin maxim and fundamental to common English law, more commonly deployed and made use of in criminal jurisprudence-
"Actus non facit reum misi mens sit rea"
implying that an act would not make a person guilty unless the mind is also guilty, is distinctly evident and well established in the present matter. The present case is one of the classic examples thereof and aptly goes in to support the maxim, highlighting both commissioning of an illegal act as well as existence of a guilty mind.
36. The guilty mind of the appellant also comes to fore from the fact that pursuant to the initiation of investigations carried out by the department, the appellant closed and stopped their operations in the North East for untold and unexplained reasons. The fact for which no reasons are forthcoming, for such a course of action can undisputedly be concluded as to be on account of the mischievous, malafide-laden game plan of the appellant. Having been exposed, they were no longer in a position to carry on their unscrupulous deeds and continue to play a fraud an government exchequer. This fact hammers the final nail into the unholy play hatched by the appellant.
37. Under the circumstances, the plea of the appellant that the refund orders sanctioned were final and not having been appealed against consequently being immune to any recovery is also bereft of any sound legal basis. Once a fraud has been perpetuated and revenue deliberately defrauded, by misdeclaration and suppression of the factual information, the intention to evade revenue is evidently established. Under the circumstances in view of the legal 28 Excise Appeal Nos.70828-70830 of 2013 pronouncements and the rulings of the Apex court, such technicalities as made out by the appellant would hold no sway in the matter.
38. As for the various pleadings made by the appellant and case law support drawn by them for non-imposition of penalty, we may add that strictly speaking such pleadings make no justiciable sense in the facts of the matter. In the case of Akbar Badruddin Jiwani v. CC (1990 (47) ELT 161 SC) the hon'ble apex court had held penalty to be ordinarily imposable in cases where the party had acted in deliberate defiance of law or was guilty of a contumacious or dishonest conduct. To similar ratio in law were the pronouncements of the apex court in the case of Hindustan Steel v. State of Orissa (1978 (2) ELT J 159 SC. Even the Tribunal's ruling in the case of Sumeet Industries V. Commissioner of Central Excise Surat (2004 (164) ELT 335 T) would objectively support the levy of penalty on the appellants in the matter on account of their contumacious and dishonest conduct and the conscious disregard and deliberate defiance of their obligation in law and misdeeds carried out as established by fraudulent acts in the matter.
39. Before concluding, we would like to state that the present case is a sordid saga of manipulated and forged records of production, clearance, duty payment. Aspects relating to consumption of electricity, transportation of raw materials, manufacture of excisable, goods and their transportation rests on a horrendous framework of suppression, misstatement and deceit of gigantic proportions promoting fraud intended to secure pecuniary benefits by mis-use of the north-east industrial policy. We have no hesitation in stating unequivocally that the appellant is certainly guilty of all charges that have been made out against them. The false and manipulated receipt and dispatch entries, cannot plug-in and come to the rescue of the appellants. Such record keeping is ab initio null and void. It stems from falsehood and forgery. There is no merit in the appellant's plea as 29 Excise Appeal Nos.70828-70830 of 2013 regards the proposition of Section 11 D of the Central Excise Act as it is established from records that the amount of ₹9560962 was collected by the appellant Koolmint under the guise of Central Excise duty and therefore the provisions of section 11 D ibid are squarely applicable. The said amounts are undoubtedly recoverable under the provisions of section 11 A (1) proviso of the Central Excise Act as ingredients thereto are certainly attracted and the show cause notice cannot be faulted upon on grounds of limitation. In view of what has been stated in forgoing paras it automatically flows that the goods said to be manufactured were not manufactured, there being no requisite infrastructure to undertake said manufacture, the appellant could not have collected any duty in terms of section 3 of the Central Excise Act and the amount so collected is clearly recoverable from the appellant.
40. In view of our findings above, we do not find any infirmity, or any illegality in the order passed by the learned Commissioner, The impugned order is required to be maintained. We therefore dismiss the appeals filed by the appellants.
(Pronounced in the open court on 11/12/2024) Sd/-
(R. Muralidhar) Member (Judicial) Sd/-
(Rajeev Tandon) Member (Technical) Pooja