Custom, Excise & Service Tax Tribunal
Thane-I vs Shivarati Textiles Pvt. Ltd on 17 April, 2013
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NOS: E/3380/2003; E/1088/2005; E/283 to 290, 302 & 303/2006
C/78 to 82, 84 to 86, 107 to 109/2006 &
&
CROSS-OBJECTION NO: E/CO-371/2003
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Anil Choudhary, 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
APPEAL NOS: E/3380/2003
& CROSS-OBJECTION NO: E/CO-371/2003
[Arising out of Order-in-Appeal No. PD/67/TH-I/03 dated 28/08/2003 passed by Commissioner of Central Excise (Appeals), Mumbai IV]
Commissioner of Central Excise
Thane-I
Appellant
Vs
Shivarati Textiles Pvt. Ltd.
Respondent
APPEAL NO: E/1088/2005
[Arising out of Order-in-Appeal No. BR/67/Th.I/2004 dated 31/12/2004 passed by Commissioner of Central Excise (Appeals), Mumbai I.]
Commissioner of Central Excise
Thane-I
Appellant
Vs
Shivarati Textiles Pvt. Ltd.
Respondent
APPEAL NOS: C/78 to 82, 84 to 86, 107 to 109/2006
E/283 to 290, 302 & 303/2006
[Arising out of Order-in-Original No. 21/SK-21/2005/Thane-I dated 19/10/2005 passed by Commissioner of Central Excise, Thane-I.
Vinod Deora
Smt. Kavita A. Sharma
Suresh Kumar Deora
Govind Narayan Kakda
Deora Polytex Ltd.
Shivarati Textiles Pvt. Ltd.
Rajesh Ganeriwal
Rajesh Vashney
Narendra Surekha
Ritesh Vakil
Ramesh Jain
Anil Kumar Sharma
Ratan Batedia
Shivaratan Saraf
S.N. Indoria
Ashok Kumar Sharma
Ashok Deora
Ajay Kumar Sharma
Dinesh Saraf
Manikchand Sharma
Shivarati Textiles Pvt. Ltd.
Appellants
Vs
Commissioner of Central Excise
Thane-I
Respondent
Appearance:
Shri V.S. Nankani Advocate along with Shri Sushant Murthy, Advocate, for M/s. STPL et al.
Shri K.M. Mondal, Consultant, for the Revenue
CORAM:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Anil Choudhary, Member (Judicial)
Date of hearing: 16 & 17/04/2013
Date of decision: 08/08/2013
ORDER NO: ____________________________
Per: P.R.Chandrasekharan
The appeals of the Revenue are directed against two orders of the Commissioner (Appeals) one permitting issuance of CT-3 certificates and re-warehousing certificates to M/s. Shivarati Textiles Pvt. Ltd. (STPL for short), a 100% export-oriented unit (EOU), and the other setting aside suspension of warehousing licence. STPL is the appellant in customs appeal No. C/84/06 and excise appeal No. E/303/06, which are directed against an order of the Commissioner, dated 19.10.2005, wherein duties of customs and excise along with interest thereon were demanded from the EOU and penalties were imposed on them under the relevant provisions of the Customs Act and the Central Excise Act on the principal ground of breach of conditions of Notifications 53/97-Cus. and 1/95-CE and of the bonds executed by the EOU. The remaining appeals are against the penalties imposed on the appellants by the Commissioner in order dated 19.10.2005 ibid. which was passed in adjudication of show-cause notice dated 9.10.2003 read with corrigenda thereto.
2. The period of dispute, in so far as the appeals filed by STPL and co-noticees are concerned, is 1999-2000 to 2002-2003. In the impugned order of the Commissioner, duty of excise amounting to over Rs.17 crores was demanded from STPL (in terms of the bond executed by them) in respect of the finished goods which were manufactured (out of raw material procured duty-free) by them and found to have been diverted in the market in breach of Notification No.1/95-CE ibid., the details of these goods having been stated in Annexures 'A' to 'D' and 'P' to the show-cause notice. A separate demand of central excise duty of over Rs.13.9 crores was raised on the assessee (in terms of the bond executed by them) in respect of indigenous raw materials which were procured duty-free and found to have been diverted in the market in breach of conditions of the said notification, particulars of such raw materials having been mentioned in Annexures 'E' to 'M', 'Q', 'R' and 'T' to the show-cause notice. The learned Commissioner also demanded customs duty of over Rs.2.48 crores (in terms of the bond) on the raw materials/capital goods which were imported by STPL and found to have been diverted/misused in violation of Notification 53/97-Cus., particulars of such goods having been mentioned in Annexures 'N', N1,'O', 'S' (raw materials) and 'T1' (capital goods) to the show-cause notice. Yet another demand of central excise duty amounting to Rs.13.6 lakhs was also raised on STPL (in terms of their bond) on the ground of breach of Notification 1/95-CE in respect of the texturising machine which had been procured duty-free under the EOU scheme. Interest was demanded on all amounts of duty of excise under Section 11AB of the Central Excise Act and on the amount of customs duty under Section 28AB of the Customs Act. Penalty equal to the grand total amount of duty of excise was imposed on STPL under Section 11AC of the Central Excise Act, while penalty equal to the customs duty was imposed on them under Section 114A of the Customs Act. Further, personal penalties were imposed on the other appellants. The major penalties were imposed under the Central Excise Rules as well as Sections 112(b) & 117 of the Customs Act and these are under challenge in the respective Excise Appeals. Other penalties were imposed under Section 117 of the Customs Act for abetment and the same are under challenge in the respective Customs Appeals. The learned Commissioner also ordered confiscation of the goods seized by the officers. Accordingly, those seized under panchnama dated 16.7.2003 were confiscated under Section 111 of the Customs Act and Rule 25 of the Central Excise Rules, 2002, with option for redemption against payment of fine of Rs.65 lakhs. (However, goods weighing 24,024 kgs. (imported yarn) covered by the said panchnama were not confiscated and the same were ordered to be released to STPL). The texturising machine seized on 25.9.2003 was also confiscated likewise with option for redemption against payment of fine of Rs.15 lakhs. The plant and machinery of the EOU were also confiscated likewise with option for redemption against payment of fine of Rs.50 lakhs.
3. M/s. STPL are registered as a 100% EOU as per LOP (letter of permission) issued by the Board of Approvals, Ministry of Industry, Government of India w.e.f. 28.1.1997 for manufacture of synthetic (polyester) texturised filament yarn, dyed yarn and twisted yarn. They were granted Customs Private Bonded Warehouse licence under Section 58 of the Customs Act with permission for manufacture in the warehouse under Section 65 of the Act. This licence was renewed for a period upto 10.12.2003. STPL also obtained Central Excise registration w.e.f. 17.8.1999 for the manufacture of synthetic (polyester) texturised filament yarn (PTY for short), dyed yarn and twisted yarn, all falling under Heading 54.02 of the Schedule to the Central Excise Tariff Act. Their inputs were partially oriented yarn (POY for short), dyes, chemicals etc.
4. M/s. STPL executed a bond on 9.9.1997 for carrying out manufacturing activities in bond under Section 65 of the Customs Act for an amount of Rs. One crore. They also executed a B-17 bond on 4.7.2001 for Rs.12.5 lakhs for the purpose of warehousing and undertook to fulfil the conditions and obligations laid down under the relevant Notifications applicable to 100% EOUs.
5. The case of the Revenue against STPL is mainly that they are liable to pay duty of excise on all the raw materials procured by them duty-free from indigenous sources as well as by import under the EOU scheme inasmuch as these goods were not used for the intended purpose and STPL did not discharge export obligation in relation to such goods and even did not maintain proper account of procurement and consumption of the goods. This conduct of the party was allegedly in gross violation of the conditions of the relevant Exemption Notifications, No.1/95-CE for duty of excise and No.53/97-Cus. for duty of customs. We think that, before advancing further in this case, a brief account of the EOU scheme requires to be outlined. Paragraphs 3 and 4 of the show-cause notice contains an account of the scheme and the same is reproduced below:-
3. The EOU scheme was introduced in the year 1980 vide Ministry of Commerce resolution dated 31st December 1980. The purpose of the scheme was basically to boost exports by creating additional production capacity. It was introduced as a complementary scheme to the Free Trade Zone/Export Processing Zone (EPZ) Scheme without locational restrictions. The exporters showing willingness to set up units with long term commitment to exports under Customs bond operations have been given the freedom to locate them in places of their choice and given most of the benefits as provided to units set up in the Zones. The EOUs basically function under the administrative control of the Development Commissioner of the Export Processing Zones. The Development Commissioners of the EPZs/SEZs are the Licensing Authorities in respect of units under the EOU Scheme. On the policy front, all decisions relating to the EOUs are taken by the Board of Approvals (BOA), set up under the Ministry of Commerce. After approval of the application for setting up of EOU and issuance of Letter of Permission, the applicant is required to execute a legal undertaking with the Development Commissioner/Designated Officer concerned within the prescribed time period. The provisions of the Customs and Central Excise laws in respect of the EOUs are administered by the Commissioners of Customs and Central Excise. The availability of any benefit under Customs or Central Excise Acts or the notifications issued thereunder has, however, to be determined by the jurisdictional Commissioner of Customs or Central Excise. The EOU scheme were, governed by the provisions of Chapter 9 of the Export and Import (EXIM) Policy, 1997-2002 and Chapter 9 of the Handbook of Procedures, Volume-I (HOP). Under this scheme, the units undertaking to export their entire production of goods are allowed to be set up. Some of the benefits, inter alia, are by way of Notifications 1/95-CE, dated 4.1.1995 as amended and Notification No. 53/97-Cus dated 03.06.1997 as amended. Under these notifications a 100% EOU is broadly permitted to procure duty-free raw materials and consumables indigenous and imported for their use in their Export-Oriented Unit. However, these Notifications prescribed several conditions to be fulfilled by the beneficiaries keeping in view the objective of the Scheme and to prevent abuse. Working in Customs Bond is one of the essential prerequisite. The EOUs are required to achieve the minimum NFEP (Net Foreign Exchange Earning as a Percentage of Exports) and the minimum EP (Export Performance) as per the provisions of EXIM Policy. The facility of duty free import and procurement of duty free indigenous goods is subject to certain conditions and restrictions, laid down under the abovesaid two Notifications, including those envisaged in the relevant EXIM Policy, some of which are as follows: The goods are required to be imported into the EOU premises directly. Prior to undertaking import/local procurement duty-free, the unit is required to get their premises customs-bonded. The unit is also required to execute a B-17 bond with surety/security with jurisdictional Customs/Central Excise officers and take out a licence under Section 58 of the Customs Act, 1962. The goods, except capital goods and spares, are required to be utilized within a period of one year or within such period as may be extended by the Department. The importer is required to maintain a proper account of the import, consumption and utilization of all imported/locally procured materials and exports made and submit them periodically to the Development Commissioner/Central Excise and Customs authorities. The importer is required to achieve minimum NFEP/export performance as per the provisions of the relevant EXIM Policy. The importer is required to abide by the terms and conditions of the Letter of Permission/Letter of Intent/Industrial Licence issued to the unit. The EOUs can procure goods from DTA without payment of Central Excise duty subject to following Chapter X procedure of erstwhile Central Excise Rules, 1944 presently Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods Rules, 2001. Such procurement from DTA is against CT-3, which is issued by the Deputy/Asstt. Commissioner, Superintendent of Customs/Central Excise in charge of the EOU. Such goods are required to be brought directly from the manufacturer/warehouse into the units premises under AR3A duly signed by the jurisdictional Central Excise Officer and examined by the designated officer. After examination of such goods, one copy of AR-3A is sent by registered post to the jurisdictional Central Excise authorities of the supplier unit as a re-warehousing Certificate in token of receipt of the goods in the unit and receipt is to be recorded in the raw material receipt register Annexure 118. To avoid individual permission every time, the EOUs are issued pre-authenticated CT-3 in booklet form and against such pre-authenticated CT-3, the EOUs are allowed to procure capital goods, raw materials, consumables etc. Goods procured from DTA and found to be defective can be returned to the manufacturer under Chapter X procedure of erstwhile Central Excise Rules, 1944 presently Central Excise (Removal of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. The goods manufactured by EOUs are allowed to be cleared against ARO & Back-to-Back Inland Letter of Credit issued against Advance Licence (except Advance Licence for intermediate supply) without payment of basic and additional duty of customs subject to following the provisions of EXIM Policy & HOP Vol-1, 1997-2002 & conditions of notification 28/2001-CE dated 16.5.2001. The goods may also be cleared to a person holding an ARO issued by the Licensing Authority against a DFRC or Back-to-Back Inland Letter of Credit issued by a bank on the payment of additional duty of customs subject to following of the provisions of EXIM Policy and HOP Vol.1 1997-002 & conditions of notification No. 28/2001-CE dated 16.5.2001. Thus, in all such cases, the EOU shall invariably pay countervailing duty. Under EOU Scheme, the units are required to achieve minimum NFEP and Export Performance as stipulated in the Exim Policy. In case of failure to achieve the minimum NFEP and EP, the duty forgone under the EOU scheme along with interest is recoverable from the units. Further, the duty is recoverable from the units in case of non-receipt of imported/indigenously procured goods in the factory premises after import/procurement, loss of goods in transit, non-accountal of imported/indigenously procured goods, unauthorized DTA sale, clandestine removal etc. Duty can also be demanded in case of failure to utilize duty-free imported/indigenously procured goods including capital goods within the prescribed time limit. The duty is also recoverable on goods removed for job working/display/testing / quality testing, but not received back in the unit within the specified period of time. Apart from recovery of duty forgone, the law also provides for taking penal action where any 100% EOU is found to have indulged in any fraudulent activities e.g. clandestine removal of production into DTA without payment of duties, diversion of duty-free materials in transit to the unit after customs clearance or after receipt etc., not only the offending goods can be seized and confiscated, but even units can be penalized.
4. Thus the EOU Scheme is for giving a substantial boost to exports and for bringing foreign exchange in to the country. If any EOU is misusing the scheme and taking undue-advantage of the scheme, then it is not only against the Government Revenue but this way they are hurting the honest domestic manufacturers also by way of taking exemption and clandestinely clearing the goods in DTA without any benefit to the Nation. This also puts undue burden on the foreign exchange reserve of the Country. The EOU has the highest responsibility of ensuring that they have correctly availed the exemptions and benefits given to them by fulfilling all the conditions. The onus of proof lies on the EOU, considering the maximum benefits given and faith put in them. The EOU should give an account of each benefit given to them and that the same is correctly utilized for the purpose for which it is given.
6. The following are the registers/records to be maintained by an EOU (as listed in para 51.2 of the Order-in-Original):
(i) Daily receipts and issues of Indigenous and Imported raw materials. This shall be two-fold, one for showing receipts (with 16 columns) and the other for showing issues (with 16 columns) in form Annexure 118.
(ii) Daily Stock Account - as per Rule 100B ("Where a manufacturer is required to maintain accounts of raw materials or components parts or finished excisable goods, as the case may be, under the provisions of the Customs Act, 1962 or rules, regulations, orders or notifications made or issued thereunder, then notwithstanding anything contained elsewhere in these rules, such accounts shall be deemed to be the accounts maintained for the purposes of these rules.")
(iii) Daily Waste Register in form Annexure 119
(iv) Finished products register in form Annexure 77
(v) Rejects register in form Annexure 121
(vi) Stock Register for capital goods, Spares, Tools, etc. in form Annexure 122
(vii) Exports register in form Annexure 123
(viii) ARE3 book (Applications for removal of excisable goods from one warehouse to another) (under erstwhile Rules 156A and 158 of Central Excise Rules, 1944)
(ix) Export account of excisable goods removed for export and brought to the factory for reprocessing prior to export
(x) Register of Assessments
(xi) Monthly Return in Form RT 13 (under erstwhile Rule 100F of Central Excise Rules, 1944)
(xii) Quarterly Return under Rule 194(3) showing the nature and quantity of such goods (obtained under Chapter X procedure) used and of commodities manufactured, the manner of manufacture etc.
(xiii) Further an EOU unit operating in DTA has to maintain all the Records and Registers like RG-1, RG 16 under Central Excise Rules, 1944, PLA, RG-23A pt.I, pt II, Invoice Book, RT-12 etc like any other Central Excise Registered Unit
7. On 24.1.2003, officers of Central Excise visited the factory of M/s. STPL at Bhiwandi and required them to produce the statutory records maintained in respect of the 100% EOU. Shri Ashok Kumar Sharma, Authorised Signatory of M/s. STPL, was present but he could not make available any such documents. When called upon to give the stock of raw materials and finished goods, he could not do so. Thereupon, the officers ascertained the stock of goods, which task was completed on the next day. A panchnama was drawn on 25.1.2003 in respect of the raw materials, finished goods and in-process material, waste etc. lying in and around the factory. Shri Ashok Kumar Sharma could not satisfactorily answer the queries put to him by the officers regarding the labelling of the cartons containing the yarn. A detailed inventory of stock of the finished goods, raw material etc. was taken as follows:-
(1) Raw material POY (partially oriented yarn) - 7,690.24 kgs.
(Annexure A to panchnama)
(2) Raw material 150 Bright - 24,024 kgs.
(Annexure B to panchnama)
(3) Finished goods (dyed yarn) - 33,372.56 kgs.
(Annexure C)
(4) Finished goods (texturised yarn) - 52,849.43 kgs.
(Annexure D)
(5) Texturised yarn - 14,476.69 kgs.
(Annexure E)
(6) Texturised yarn - 6,256.07 kgs.
(Annexure E1)
(7) Work-in-progress/waste/rejects - 36,450.00 kgs.
--------------------
Total 1,85,118.99 kgs.
The above goods were detained under detention memo dated 25.1.2003. Shri Ashok Kumar Sharma gave the quantity of the work-in-progress to be 26,450 kgs. and the quantity of waste and rejects to be 10,000 kgs. totalling to 36,450 kgs.
8. Investigations were continued. A perusal of the raw material receipt register (Annexure 118) showed that there was no record of issue and utilisation of the raw materials, POY and '150 bright' yarn and no opening or closing stock of raw material was maintained. Hence the stock of POY (Annexure A) or bright yarn (Annexure B) could not be compared with any record. As Shri Ashok Kumar Sharma also could not give the stock of raw materials, the entire raw materials mentioned in Annexures A and B to the panchnama dated 25.1.2003 were seized, later on, under panchnama dated 16.7.2003 as the unaccounted goods appeared to be liable to confiscation. As Shri Ashok Kumar Sharma stated under Section 14 of the Central Excise Act that they had not manufactured/dyed any yarn of the description of goods covered by Annexure C to the panchnama dated 25.1.2003, these goods were also seized on 16.7.2003. In respect of the finished goods (texturised yarn) (Annexure D to panchnama dated 25.1.2003), a discrepancy was found by the officers upon comparison of the aforesaid stock of 52,849.73 kgs with the closing stock (84109.90 kgs)shown in the daily stock register (Annexure 77) which was submitted by M/s. STPL on 28.1.2003. Having found unexplained shortage of 31260-odd kgs of texturised yarn, the above stock covered by Annexure D to the panchnama dated 25.1.2003 was also seized on 16.7.2003. In a letter dated 6.3.2003, M/s. STPL made an attempt to reconcile the stock entered in the panchnama dated 25.1.2003 with their books of account. That letter, however, did not refer to the stock of texturised yarn mentioned in Annexures E and E1. Before the High Court in W.P. No. 984/2003 (which was filed by STPL for release of the detained goods), Shri Manikchand Sharma stated in an affidavit that the goods mentioned in Annexures E & E1 ibid were manufactured, in the EOU, out of legally procured raw material. But the investigating team found that the said goods had been procured from M/s. Simco Chemotex Pvt. Ltd., Silvassa under three invoices in January, 2003. Hence the stock covered by Annexures E & E1 ibid was also seized on 16/07/2003. On 6.2.2003, the officers had found a stock of 43 cartons of texturised yarn (1201.6 kgs) manufactured out of the work-in-progress of 25/01/2003 and detained the same also. This stock of texturised yarn was also seized on 16/07/2003. The total quantity of goods detained on 25/01/2003 and 06/02/2003 and seized on 16/07/2003 came to be 1,48,668.99 + 1201.6 = 1,49,870.59 kgs. The investigating officers conducted valuation of all the goods and the total value came to Rs.1,52,01,852.70.
9. The seized goods were allowed provisional release to M/s. STPL on 29.7.2003 as per the Hon'ble High Court's order dated 21.7.2003 in Writ Petition No.984 of 2003. However, since the party did not execute the required bond, the goods could not be released to them.
10. In a letter dated 4.3.2003 addressed to the Divisional Assistant Commissioner, M/s. STPL had admitted that they had already partially installed one texturising machine in their new building adjacent to the existing manufacturing premises. The said new building was not incorporated in the ground plan of the factory, nor any intimation of receipt of the machine was given to the Central Excise authorities. When enquiries were made with M/s. Himson Textile Engg. Ltd. who had supplied the above machine to M/s. STPL, it was revealed that one texturising machine had been supplied on 8.2.1999 and the same was installed and commissioned and that, in January 2003, a second machine was also supplied, which was installed but not commissioned. AR-3As (rewarehousing certificates) were not furnished in respect of these machines, nor even D3 intimation of receipt of the machines by the EOU was given to the Central Excise officer in-charge of the EOU. In respect of the texturising machine which was procured duty-free and installed outside the EOU premises without intimation to the department, the investigating officers found breach of conditions of Notification 1/95-CE by STPL and held the capital goods to be liable to confiscation under Section 111(o) of the Customs Act. The machine, valued at Rs.85 lakhs involving duty of Rs.13.6 lakhs, was therefore seized under panchnama dated 25.9.2003.
11. After the statement of Shri Ashok Kumar Sharma, Authorised Signatory of M/s. STPL, was recorded under Section 14 of the Central Excise Act on 25.1.2003, M/s. STPL voluntarily produced the following documents on 28.1.2003:-
I. Annexure 118 - Daily receipts and issue of indigenous and imported raw materials (Written pages 1 to 12) II. Annexure 77 - Daily stock register (written pages 1 to 10).
III. Annexure 121 - rejects register (written pages 1 to 10) IV. Annexure 119 - daily waste register (written pages 1 to 10).
V. Original Assessee copy of Central Excise Invoices 1 to 85 for the financial year 2002-03.
VI. Correspondence file containing photocopies of documents pertaining to DFRC (pages 1 to 95).
VII. File containing ARE-3A/D3 (pages 1 to 427).
VIII. File containing clearances to DFRC holders (pages 1 to 339).
12. Investigations continued in the form of recording of statements of numerous persons under Section 14 of the Central Excise Act and collection of evidence through letters from certain others. The main persons are named below categorywise:-
A. Functionaries of M/s. STPL (1) Shri Ashok Kumar Sharma, Authorised Signatory (2) Shri Manikchand Sharma, Director (3) Shri Shivaratan C. Saraf, Director (4) Shri Ajay Kumar Sharma, Authorised Signatory (5) Shri Alpesh Muchchala, Chartered Accountant & Auditor B. Suppliers of raw materials (1) Shri Naval Kishore Goenka, Director of M/s. Simco Chemotex Pvt. Ltd.
(2) Shri Chiranjilal Bubna, Authorised Signatory of M/s. Simco Chemotex Pvt. Ltd.
(3) Shri Govind Kakda, Administrative Manager / Authorised Signatory of M/s. Shrishti Impex Pvt. Ltd.
C. Transporters & Weighers of raw materials (1) Shri Surendra M. Nandoskar of M/s. Nikhil Transport Service.
(2) Shri Mohammed Haji Ismail of M/s. Maharashtra Weigh Bridge (who submitted letter dated 22.7.2003 along with copies of 11 weighment slips).
D. Job workers (1) Shri Narendrakumar Prabhudayal Surekha, Managing Director of M/s. Tuni Textile Mills Ltd.
(2) Shri Jivraj Khimjibhai Makwana, Production Manager of M/s. Tuni Textile Mills Ltd.
E. Buyers of finished goods (1) Shri Anil Kumar Sharma, Director of M/s. Sudarshan Texport Pvt. Ltd.
(2) Shri Govind Kakda, Administrative Manager / Authorised Signatory of M/s. Shrishti Impex Pvt. Ltd.
(3) Shri Ajay Kumar Sharma, Director of M/s. Kakda Impex.
(4) Shri Satish Choudhary, partner of M/s. Awin Exim Company and M/s. Ceejay Exports (5) Shri Omprakash Jhunjunwala, partner of M/s. Awin Exim Company and M/s. Ceejay Exports.
(6) Shri Ajay Kumar Sharma, Director of M/s. Yogeshvita Exim Pvt. Ltd.
(7) Shri Ritesh Vakil, Authorised Signatory of M/s. Pet Plastics Ltd.
F. Transporters of finished goods (1) Shri Haresh Dhiraj Raicha, owner of vehicle No. MH-04 S-4485 (2) Shri Biju Joseph, user of vehicle No. MH-04 S-4485.
(3) Shri Gurunath Thange, owner of vehicle No. MCU-342.
(4) Shri Padmanabhan Ganesh, Field Officer (custodian of vehicle No.MH-04 AL-4480) of M/s. Sreeram Transport Co. Ltd.
(5) M/s. Jai Momai Transport (who submitted letter dated 24.5.2003 regarding vehicle Nos. MH-04 AL-5421 and MH-04 P-1146).
(6) Shri Abdul Hameed Abdul Majeed, owner of vehicle No.MH-04 P-2232.
G. Buyers of finished goods under Hundi's (1) Shri Rajesh Ganeriwal, Director of M/s. Honest Agencies Pvt. Ltd.
(2) Shri Ramesh Jain, Director of M/s. Honest Agencies Pvt. Ltd.
(3) Shri Ramavatar Sharma, Auditor-cum-Accountant of M/s. Shree Sati Silk Mills Pvt. Ltd.
(4) Shri Anil Kumar Sharma, Director of M/s. Sudarshan Texports Pvt. Ltd.
(5) Shri Rajendra Varshney of M/s. Rajendra Textiles (6) Shri Govind Kakda of M/s. Shrishti Impex Pvt. Ltd.
(7) Shri Manish Joshi of M/s. Textile India Agencies (8) Shri Ajay Kumar Sharma, Director of M/s. Yogeshvita Exim Pvt. Ltd.
13. As part of the investigations, statutory documents and private records were recovered from M/s. STPL. Statutory documents included AR-3A's/ARE3's, CT3 certificates, bond register (Annexure 118), statutory invoices issued by the suppliers etc. Private records collected by the investigating officers included the purchase registers of M/s. STPL. Certain documents indicating payment of price of the raw materials by M/s. STPL to suppliers were collected from their bankers. It was found that a major part of the purchase of raw material by M/s. STPL was from M/s. Simco Chemotex Pvt. Ltd. and that 140 consignments of yarn were so procured. The investigators also found rewarehousing certificates in respect of these consignments and those certificates which were suspected for forged signatures of the Central Excise officers were got examined by forensic expert, whereupon it was found that the rewarehousing certificates relating to 72 out of the above 140 consignments were bearing forged signatures of the Central Excise officers concerned. Similarly forensic examination of rewarehousing certificates relating to the consignments of raw materials supplied to STPL by other suppliers namely M/s Shree Shyam Impex, Suresh Synthetics, Sanghi Polyesters and Yanghir Synthetics was also conducted and many of these documents were found to contain forged signatures of the Central Excise officers. Such forensic reports of the Government Examiner of Questioned Documents (Hyderabad) are also part of the relied-upon documents. Letters of the Central Excise officers concerned, who confirmed that the signatures shown as theirs on the warehousing certificates were forged, were also obtained by the investigators and these were also relied upon in the show-cause notice. On the basis of the documentary evidence coupled with the statements recorded under Section 14 of the Central Excise Act, the show-cause notice demanded duty on the raw materials procured duty-free by M/s STPL during the period of dispute as per their purchase registers, AR-3A's/ARE3's, sale invoices collected from suppliers etc.
14. Documents relating to clearance of finished goods were also recovered by the investigators and these were also relied upon in the show-cause notice for demand of duty on such goods for the period of dispute. These documents included STPL's audited balance-sheet for the year 1999-2000, sales ledger of STPL for the years 2000-01 & 2001-02 and 85 excise invoices of STPL for the year 02-03. Some of the above clearances of finished goods were found to be against Advance Release Orders (AROs) produced by holders of Advance Licences or Duty Free Replenishment Certificates (DFRCs). Some clearances were found to have been effected against payment from Exchange Earner's Foreign Currency (EEFC) account. The related documents covering these transactions were also relied upon in the show-cause notice. Apart from such clearances, documentary evidence was gathered to cover a different kind of clearance of finished goods, effected by way of Hundi transactions, and such evidence included the Hundi's and the connected invoices and delivery challans. It appeared to the department from these documents that finished goods were also cleared by M/s STPL in the Hundi mode for the period upto September 2000. On the basis of all the documentary evidence aforementioned, the show-cause notice demanded duty on finished goods from M/s STPL.
15. M/s STPL submitted a series of letters to the adjudicating authority in reply to the show-cause notice, viz. letters dated 29.1.04, 29.7.04, 7.12.04, 11.12.04 and 9.3.05. Along with letter dated 07/12/2004, they filed a statement showing 86 clearances as deemed exports for 2000-01. 26 of these were shown as clearances against ARO/DFRC, 31 against CT3 and the rest (29) shown as clearances in terms of Development Commissioner's permission dated 08/12/2000. Copies of certain Foreign Inward Remittance Certificates were also produced, all of which were issued in December 2001 by Bank of India. Their next letter dated 7.12.04 (apparently submitted on 11/12/2004) was accompanied by copies of certain permission letters of Development Commissioner, invoices, CT3's and AR-3A's for the years 1999-2000 and 2000-01 along with copies of certain invoices for 2001-02. Copies of registers viz. Annexure 77, Annexure 118, Annexure 119 and Annexure 121 for 2001-02 and 2002-03 were also submitted on 11/12/2004. In the last letter dated 09/03/2005, M/s. STPL through counsel made further submissions to the effect that the department had not discharged the burden of proving clandestine clearance of any goods by them. In an earlier letter dated 20/07/2004, STPL had requested the Commissioner to permit cross-examination of a large number of persons. Their advocate repeated this request through letter dated 29/07/2004. M/s. STPL appear to have subsequently short-listed the persons to be cross-examined vide their letter dated 07/12/2004 wherein they particularly named a few persons and pressed for their cross-examination. The plea was reiterated by STPL in their next letter submitted on 11/12/2004.
16. The allegations of the department were denied by STPL who submitted that they discharged their export obligation in respect of the raw materials procured duty-free and did not violate any conditions of Notifications 53/97-Cus and 1/95-CE. Co-noticees, associated one way or other with STPL, adopted the pleadings of the company and challenged the proposed penalties in their respective replies to the show-cause notice. Other co-noticees submitted independent replies challenging the proposed penalties. In adjudication of the case, the learned Commissioner, after personal hearing, passed the impugned order.
17. An application of STPL for issue of CT3 certificate and also a request of theirs for rewarehousing certificates in respect of six D3 intimations had been kept in abeyance by the Deputy Commissioner in view of ongoing investigations into suspected diversion of non-duty-paid inputs by STPL. Pursuant to an order of the Honble High Court, these applications were disposed of by the Deputy Commissioner who rejected both the applications after hearing the party. In a subsequent appeal filed by STPL, the Commissioner (Appeals) allowed the applications. Hence the departments appeal No. E/3380/03 before us. The respondents counter styled as cross-objection is also on record.
18. In adjudication of a show-cause notice which was issued to STPL for cancelling their warehousing licence, the Deputy Commissioner passed an order suspending the licence under Section 58(3) of the Customs Act, but, in an appeal filed by the EOU, the Commissioner (Appeals) granted relief to the party, which is now under challenge in the departments appeal No. E/1088/05.
19. Shri V.S. Nankani, advocate represented the appellants before us in appeals C/79 & 84/06 and appeals E/302 & 303/06, E/283 to 287/06 and E/289 & 290/06 (11 appeals). He also represented the respondent (STPL) in the two appeals of the Revenue. There was no representation for the remaining appellants despite notice, nor any request of theirs for adjournment. Shri K.M. Mondal, consultant presented the Revenue's case. Both sides also filed synopses and offered clarifications as required by the Bench.
20. Appeal No. E/3380/03 20.1 The learned consultant for the Revenue (appellant) submitted that CT3 certificates should be issued to EOUs with clean track record only. STPL did not have a clean track record. The learned Commissioner, in adjudication of show-cause notice dated 9.10.2003, found that the respondent (STPL) violated the conditions of Notifications 53/97-Cus. and 1/95-CE by diverting the raw materials procured duty-free by import and from indigenous sources and by not discharging export obligation. In this scenario, according to the learned consultant, the learned Commissioner (Appeals) ought not to have ordered for issuance of CT3 and rewarehousing certificates to the EOU. In this connection, the learned consultant relied on the Board's circular No.66/2002-Cus. dated 8.10.2002, wherein it had been instructed that procurement certificate and CT3 be issued only to EOUs having clean track record. The learned counsel for the respondent submitted that, as long as STPL remained an EOU, they were entitled to CT3 and rewarehousing certificates. It was submitted that there was no prohibition in law against issuance of such certificates to an EOU in any circumstance whatsoever.
20.2 After considering the submissions, we are of the view that the lower appellate authority took the right decision. There are enough safeguards in law against any irregularity or misfeasance of an EOU. However, there is no provision of law authorising the department to refuse CT3 or rewarehousing certificate to an EOU as long as the unit remains an EOU. The circular referred to by the learned consultant did not recommend blanket refusal of CT3 or rewarehousing certificate to an EOU. The circular only favoured the issue of these certificates to an EOU having clean track record. When the impugned order was passed, any show-cause notice was yet to be issued to STPL to penalise them for any irregularity or illegality and, therefore, it will not be correct to say that, at that point of time, STPL did not have clean track record. Therefore, nothing contained in the above circular can be reasonably relied upon by the Revenue to justify refusal of CT3 and rewarehousing certificates to the EOU. This apart, the refusal of rewarehousing certificate on the technical ground of delay of D3 intimation is also not justifiable as it would only serve to defeat the very object of the EOU scheme. We, therefore, uphold the appellate Commissioner's order for issuance of CT3 and rewarehousing certificates to STPL. The Revenue's appeal is dismissed. The "cross objection" filed by the respondent is also disposed of for the record.
21. Appeal No. E/1088/05 21.1 In the relevant show-cause notice dated 9.9.1997 issued to STPL, it was alleged that they had violated the provisions of Notifications 1/95-CE and 53/97-Cus. and, therefore, their warehousing licence was liable to be cancelled under Section 58(2) of the Customs Act. STPL, in their reply, contested these allegations. In adjudication, the Deputy Commissioner observed that it would be premature to cancel the licence under Section 58(2) but he chose to suspend it under Section 58(3) of the Act considering the allegations levelled against the party in show-cause notice dated 9.10.2003. The appellate authority set aside the order of the lower authority in an appeal filed by STPL, after finding that the lower authority had not independently arrived at any finding which warranted cancellation or suspension of licence. The appellate authority also took note of the facts that (a) its earlier order-in-appeal dated 28.8.2003 for issuance of CT3 and rewarehousing certificates to the EOU had not been carried into effect, (b) the stay application filed by the department before this Tribunal against the said order-in-appeal had been dismissed and (c) the show-cause notice dated 9.10.2003 was yet to be adjudicated upon by the Commissioner of Central Excise. The present appeal of the department is against the appellate Commissioner's order. The learned consultant for the appellant, referring to the provisions of Section 58 of the Customs Act, submitted that the Deputy Commissioner had power to suspend the warehousing licence, pending enquiry against the licensee and, therefore, the Deputy Commissioner's order could not be faulted in the facts of this case. The learned counsel for the respondent (STPL) submitted that the enquiry contemplated under Section 58 was one to be undertaken for purposes of sub-section (2) of the said Section and not the kind of enquiry which culminated in show-cause notice dated 9.10.2003.
21.2 We have considered the submissions. Section 58 of the Act reads as under:-
"Section 58. Licensing of private warehouses. - (1) At any warehousing station, the Assistant Commissioner of Customs or Deputy Commissioner of Customs may license private warehouses wherein dutiable goods imported by or on behalf of the licensee, or any other imported goods in respect of which facilities for deposit in a public warehouse are not available, may be deposited.
(2) The Assistant Commissioner of Customs or Deputy Commissioner of Customs may cancel a licence granted under sub-section (1) -
(a) by giving one month's notice in writing to the licensee; or
(b) if the licensee has contravened any provision of this Act or the rules or regulations or committed breach of any of the conditions of the licence:
Provided that before any licence is cancelled under clause (b), the licensee shall be given a reasonable opportunity of being heard.
(3) Pending an enquiry whether a licence granted under sub-section (1) should be cancelled under clause (b) of sub-section (2), the Assistant Commissioner of Customs or Deputy Commissioner of Customs may suspend the licence."
As rightly submitted by the learned counsel, any licence issued under sub-section (1) to an EOU could be cancelled under sub-section (2) only after the enquiry contemplated thereunder. Pending such enquiry, the licence could be suspended under sub-section (3). In the present case, even the appellant has not claimed that any such enquiry by the Deputy Commissioner was pending under sub-section (2) of Section 58 when he suspended the warehousing licence under sub-section (3). It is evident from the records that the licence was suspended on the strength of certain allegations raised in show-cause notice dated 9.10.2003, which was not a show-cause notice issued under sub-section (2) of Section 58. As rightly found by the lower appellate authority, the suspension of licence by the Deputy Commissioner was in gross violation of the provisions of Section 58(3) of the Act. The appellate Commissioner's decision is, therefore, affirmed and this appeal of the Revenue is dismissed.
22. Appeals, No. C/84/06 & No. E/303/06 22.1 Both the appeals are by M/s. STPL against the order passed by the Commissioner in adjudication of show-cause notice dated 9.10.2003. The customs appeal is against -
(i) demand of customs duty of Rs.2,48,63,445/- confirmed under Section 28(2) of the Customs Act in respect of imported raw materials covered by Annexures N, N1, O, S and T1 to the show-cause notice;
(ii) demand of interest on the above duty amount under Section 28AB of the Act;
(iii) imposition of fine in lieu of confiscation of inputs, finished goods and capital goods and plant & machinery under Section 111(d), (j) and (o) of the Act;
(iv) imposition of penalty equal to duty under Section 114A of the Act.
The excise appeal is against -
(i) demand of central excise duty of Rs.17,00,38,285/- under Section 11A(2) of the Central Excise Act on finished goods covered by Annexures A, B, C, D and P to the show-cause notice;
(ii) demand of central excise duty of Rs.13,94,84,652/- under Section 11A(2) of the Act on indigenous raw materials covered by Annexures E to M, Q, R and T to the show-cause notice;
(iii) demand of central excise duty of Rs.13,60,000/- under Section 11A(2) of the Act on texturising machine seized under panchnama dated 25.9.2003;
(iv) demand of interest on the above duty amounts under Section 11AB of the Act;
(v) imposition of fine in lieu of confiscation of inputs, finished goods and capital goods and plant & machinery under Rule 25 of the Central Excise Rules 2002;
(vi) imposition of penalty equal to duty under Section 11AC of the Act.
22.2 The common issues arising in these appeals are -
(a) whether the adjudicating authority denied natural justice to the appellant by not supplying relied-upon documents and by not allowing cross-examination of certain persons;
(b) whether the adjudicating authority's finding that M/s. STPL as EOU did not maintain statutory registers and records properly during the period of dispute is correct.
23. Whether natural justice denied:
(a) In a letter dated 27.11.2003, the appellant had complained to the Commissioner that they were yet to receive certain documents relied upon in the show-cause notice. They furnished a list of such documents and requested the Commissioner to supply authenticated copies thereof. They also reserved their right to inspect the original records. In these appeals, they say that copies of only part of the voluminous records withdrawn by the department were supplied. This grievance has been raised before us through counsel too. On a perusal of the records, we find that the necessary documents were supplied and the appellant conceded this fact through counsel before the Commissioner as evident from para (6) of the advocate's letter dated 9.3.2005 submitted to the Commissioner. We quote:
" In fact, my client received papers necessary for their defence, only after number of hearings" We also find that the appellant has not contested the following observations noted in para (51.4) of the impugned order regarding inspection of records:
"On 6/3/2003 and 7.3.2003, Shri Manikchand Sharma, Director of M/s. STPL was given inspection of all the records withdrawn by the Department or furnished to the Department with a view to enable them to produce the records not available with the Department but required by the Department for investigation. M/s. STPL was directed vide letter dated 7.3.2003 to submit certain records and documents as detailed therein. However, M/s. STPL vide their letter dated 8.3.2003, denied to have taken any inspection. Hence, once again the inspection was given to the Director, Shri Manikchand Sharma on 10.3.2003 and he has put his remark on their letter dated 8.3.2003 of having inspected the records."
Therefore, today, the appellant cannot be heard to say that they were not given all necessary documents or not allowed to inspect the records.
(b) In a letter dated 20.7.2004, the appellant had requested the Commissioner for permission to cross-examine as many as 68 persons named in the letter. Subsequently, in letter dated 7.12.2004, they short-listed the persons to be cross-examined, and pressed for cross-examination of only some of the 68, namely, (1) Satish Choudhary, partner of Awin Exim Company and Ceejay Exports (2) Om Prakash Jhunjhunwala, partner of Awin Exim Company and Ceejay Exports (3) Govt. Examiner of Questioned Documents (4) Ashok Kumar Sharma, authorised signatory of STPL (5) Rajesh Ganeriwal, director of Honest Agencies Pvt. Ltd.
(6) Alpesh Mucchala, C.A. of STPL (7) Rajendra Kumar Varshney, proprietor of Rajendra Textiles (8) Navalkishore S. Goenka, director of Simco Chemotex Pvt. Ltd.
(9) Anil Kumar Sharma, director of Sudarshan Texport Pvt. Ltd.
(10) Development Commissioner, SEEPZ.
Before the adjudicating authority, the appellant's counsel wanted to cross-examine the following persons:-
(i) Drivers/transporters of vehicles for transporting goods under invoices Nos. 1 to 85, viz. Haresh Raicha, Gurunath Thange, Padmanabh Ganesh of M/s. Shriram Transport Finance Company, and Viju Joseph.
(ii) Government Examiner of Questioned Documents.
(iii) Satish Choudhary and Om Prakash Jhunjhunwala.
(iv) Authorised Signatories whose signatures were identified by S.C. Saraf, viz. Ajay Kumar Sharma, Ashok Kumar Sharma and S.N. Indoria.
(v) Ashok Kumar Sharma.
(vi) Rajesh Ganeriwal.
(vii) Alpesh Muchhala.
(viii) Development Commissioner, Investigating Officer and other officers.
In the impugned order, it was found that no case had been made out by STPL for cross-examination of the above persons. The learned Commissioner stated the following reasons [vide para (54.3) of his order] in support of the finding:-
"a) Persons at i) Noticees have not categorically stated in defence that they did use the vehicle as per the registration numbers indicated in the invoices but have suggested that there might be a possibility of use of false number plates. They have adopted the stand that they are not concerned with the transporters since delivery is given and material received at the factory gate. There is no dispute or denial of the statements and evidence tendered to the Department by these Transporters and drivers. Cross examination of these is therefore not required in the facts of the case.
b) Persons at ii) to vii) above are co-noticees who on account of their links and relationships have acted at the behest of M/s. STPL, Manikchand Sharma and S.C. Saraf. It has not been indicated as to what they are expected to testify and on what precise issues. Satish Chaudhary and Om Prakash Jhunjhunwala have not furnished any reply to the notice or participated in the personal hearing while the others are close associates and/or relatives acting in concert with them and have adopted the reply filed by M/s. STPL. They were also their authorised persons and relatives who could be expected to have been available to STPL for obtaining their testimony evidence and records. Neither STPL nor any one of them has raised any credible issue that the statements given by these persons are incorrectly recorded or taken under coercion or inducement or that the set of facts is different. Accordingly in the facts of the case the case for their cross examination has not been made out.
c) Requests have been made for cross examination of RTO, Examiner of Documents, Range officer of STPL, but without indicating the part of testimony which is disputed or is ambiguous needing clarification. RTO has merely given the facts in respect of the registration number of vehicles. This is not disputed, there is only a suggestion that fake number plates could have been used but their main stand is that they receive and deliver goods at their factory and hence they do not interact with transporters. In this context there is no need for examination of RTO. The request for cross examination of Government Examiner of Questioned Documents (GEOQD) does not indicate as to what is expected to be deposed by him. His opinion is clear. STPL in their reply dated 29.1.04 had clearly accepted that they had received the entire quantity of materials shown in the SCN as sent by their suppliers on CT3 and had denied the charge of diversion reportedly made on the basis of 'alleged forged signatures' and claimed that 'in many cases the officers refused to sign the AR3s in our presence on their visit to our factory. They were collecting the AR3s and carried to their office. Therefore the forgery if any of the officers signature on AR3, now recovered from sources known to the department . cannot be laid as a responsibility of the present Noticees or their employees'. In their final reply they have shifted their stand to deny receipts in respect of most of the tainted AR3s but have still accepted receipts in respect of some AR3 e.g. Sanghi, Simco & HPCL. Thus whether signatures on some AR3s are forged is not material to the issue of receipt of the materials under CT3. In the circumstances no case is made out for the cross examination of GEOQD and the Range Officers in charge STPL."
In the present appeals, the above findings of the Commissioner have not been contested on any specific ground. M/s. STPL have merely averred: "The appellants say that there are various inconsistencies, contradictions and adverse statements made by the suppliers, buyers and other parties and to bring home the true facts, they have been insisting for cross-examine the specified persons." M/s. STPL have also asserted that they are "fully justified in asking for cross-examination and the Ld. Commissioner has erred in denying the same". But, in these appeals, they have not even attempted to explain as to how they are justified and the learned Commissioner erred. Be that as it may, the stand of the appellant as urged by their counsel is that they should be allowed to cross-examine at least the following persons:-
(i) Ritesh Vakil, authorised signatory of Pet Plastics Ltd.
(ii) Satish Chaudhary
(iii) Om Prakash Jhunjhunwala
(iv) Navalkishore S. Goenka
(v) Govt. Examiner of Questioned Documents.
In respect of the persons named at (i) to (iii), the sketchy reason stated by the learned advocate is that they "need to be confronted with the other evidence on record". The person named at (iv) is sought to be cross-examined to disprove his claim that he had received rewarehousing certificates with forged signatures from STPL. The government official named at (v) is sought to be cross-examined vis-`-vis his forensic report. The learned counsel has also argued that the denial of opportunity to cross-examine the aforenamed persons amounted to denial of natural justice. In this connection, he relied on the following decisions:-
(a) 2000 (122) ELT 641 (SC) - Swadeshi Polytex Ltd.
(b) 2002 (143) ELT 25 (SC) - Arya Abhushan Bhandar
(c) 2000 (118) ELT 59 (T) - Standard Industries
(d) 1999 (30) RLT 506 (T) - Ritu Minerals & others
(e) 1996 (85) ELT 288 (T) - Jugal Kishore Soni
(f) 1996 (83) ELT 87 (T) - Ankleshwar Paper Board Mills The learned consultant for the Revenue has submitted - (a) that the learned Commissioner stated cogent reasons for declining cross-examination; (b) that, in the facts and circumstances of this case, cross-examination of witnesses is totally unnecessary inasmuch as the demands of duty etc. are based on examination of records and documents recovered from the premises of STPL and their suppliers, customers etc. and not solely based on the statements of witnesses; (c) that cross-examination cannot be claimed as of right in adjudicatory proceedings under the Customs Act or the Central Excise Act. The learned consultant has also relied on the following decisions:-
(1) Kanungo & Co. vs. CC, Calcutta & Ors. 1983 (13) ELT 1486 (SC) (2) Tapan Kumar Biswas vs. UOI & Ors. 1996 (63) ECR 546 (Cal.) (3) Surjeet Singh Chhabra vs. UOI 1997 (89) ELT 646 (SC) (4) Fortune Impex vs. CC, Calcutta 2001 (138) ELT 556 (Tri.-Kolkata) We find that, in the matter of cross-examination, the appellant failed to make out a case before the lower authority and, before this Tribunal, they didn't contest the relevant findings of the lower authority. However, at the bar, it has been contended that at least five persons should have been allowed to be cross-examined for purposes stated by the counsel. One of these persons is Ritesh Vakil, whose cross-examination was not sought by STPL in their reply (dated 7.12.2004) to the show-cause notice or by their counsel before the adjudicating authority. While short-listing the persons to be cross-examined, STPL chose to give up Ritesh Vakil's cross-examination. The present plea for his cross-examination is capricious and bereft of bona fides. This apart, no specific purpose has been stated for his cross-examination. According to the learned counsel, Ritesh Vakil needs "to be confronted with 'the other evidence' on record". The same has been professed about the 2nd & 3rd witnesses named by the learned counsel, namely, Satish Chaudhary and Omprakash Jhunjhunwala, also. This case involves voluminous record of multifarious evidence. Which part/piece/aspect of evidence are these persons concerned with? No explanation is forthcoming. Two of these persons Ritesh Vakil and Satish Chaudhary are STPL's co-noticees too. In the similar case of Fortune Impex (vide supra), a coordinate bench of this Tribunal rejected the assessee's plea for cross-examination of co-noticees and other witnesses, upon finding that no specific reasons had been stated in support of the plea. In that case, the Tribunal relied on the Hon'ble Supreme Court's decision in Surjeet Singh Chhabra's case (supra) and the Calcutta High Court's decision in Tapan Kumar Biswas' case (supra). In the present case, the Revenue is also supported by the ruling given by the apex court in Kanungo & Co.'s case (supra), wherein their Lordships had dealt with a Sea Customs case and held as follows:-
"We may first deal with the question of breach of natural justice. On the material on record, in our opinion, there has been no such breach. In the show cause notice issued on August 21, 1961, all the materials on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation. The complaint of the appellant now is that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced to enable it to cross-examine them. In our opinion, the principles of natural justice do no require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to be cross-examined by them on the statements made before the Customs Authorities. Accordingly we hold that there is no force in the third contention of the appellant." (underling supplied).
(c ) We have considered the decisions cited by the appellant also. In the case of Arya Abhushan Bhandar, the Hon'ble Supreme Court found breach of natural justice in not allowing cross-examination of panchas who were material witnesses as they were witnesses to the search which was conducted both in the appellant's house and in their shop despite the search warrant being limited to the shop. In Swadeshi Polytex case, the court found that the Collector of Central Excise had relied on the statements of certain persons to justify levy of duty on a fibrous commodity which was allegedly used by such persons for spinning yarn. The court accepted the assessee's plea for cross-examination of such witnesses to determine whether the said commodity was non-excisable waste or excisable fibre. In the case of Standard Industries also, statements of some persons were relied on by the Collector to classify the assessee's product as plastic-coated/laminated cotton fabric, and, therefore, this Tribunal held that the Collector had denied natural justice to the assessee by not allowing cross-examination of such witnesses. In all the above and other cases cited by the appellant, the parties had sought cross-examination of material witnesses on solid grounds but the plea was either ignored or rejected without valid reasons by the adjudicating authority unlike in the present case.
(d) For all the reasons (including the fact that the reasons recorded by the learned Commissioner for rejecting STPL's request for cross-examination were not contested in these appeals) stated hereinbefore, we hold that, in this case, there is no denial of natural justice to the appellant by the adjudicating authority in the matter of cross-examination. N.S. Goenka was not one of the persons whom STPL's counsel wanted to cross-examine before the adjudicating authority and hence there can be no grievance against the said authority in relation to Goenka. STPL's counsel, however, has cited him before us as a witness to be cross-examined for the purpose of disproving his statement that he (Goenka) had received rewarehousing certificates (RWC's) with forged signatures from STPL. It appears from the records that the copies of RWC's recovered from the premises of Goenka's company bore the signatures of STPL's authorised signatories, which were identified by STPL's director, Shivratan C. Saraf in his statement under Section 14 of the Central Excise Act. The forged signatures were of the Central Excise officers at STPL's end and the officers themselves have confirmed this. Forensic examination of the documents also yielded results confirming forgery of the signatures. In this scenario, as rightly submitted by the learned consultant, there is no need of cross-examination of N.S. Goenka. The last witness cited before us by the learned counsel for cross-examination is "Government Examiner of Questioned Documents". The learned Commissioner considered the same plea and rejected the same for cogent and valid reasons, which have not been assailed in these appeals. Therefore, in this case, there is no violation of natural justice by way of denial of cross-examination.
24. Whether statutory registers and records maintained properly by the appellant 24.1 As rightly observed by the Commissioner, the system of physical control over EOUs was replaced by record-based control vide Notification No. 44/98-Cus (NT) dated 2.7.1998. Clarifying the new procedure, the Board vide Circular No. 88/98-Cus dated 2.12.1998 advised all EOUs that, as physical control was being abolished, greater stress was to be given on proper maintenance of prescribed records/accounts and that non-maintenance of such records/accounts would be seriously viewed. The Board further clarified thus:
". all movements from and to the Units like clearance of raw materials / components to the job-workers' premises, clearance to other EOUs, export and sale into DTA can be made by the manufacturer himself subject to his recording of each transaction in the records prescribed by the Board / Commissioners or their private records approved by the Commissioners."
Accordingly, the appellant was liable to maintain the registers and records listed in para (6) of this order.
24.2 The adjudicating authority found - (a) that no records were found during the search of the office / factory premises of STPL by Central Excise Officers on 24.1.2003, nor any records produced when demanded; (b) that only the below-mentioned records were produced (belatedly) on 28/01/2003:
(i) Annexure 118 - Daily receipts and issue of indigenous and imported raw materials (written pages 1 to 12) (the last entry dated 14.1.2003);
(ii) Annexure 77 - Daily stock register (written pages 1 to 10);
(iii) Annexure 121 - Rejects register (written pages 1 to 10);
(iv) Annexure 119 - Daily waste register (written pages 1 to 10);
(v) Original Assessee copy of Central Excise invoices 1 to 85 for the financial year 2002-03.
(vi) Correspondence file containing photocopies of documents pertaining to DFRC (pages 1 to 95);
(vii) File containing ARE-3A/D3 pages 1 to 427;
(viii) File containing clearances to DFRC holders (pages 1 to 339).
(c) that no other records were produced by STPL in spite of repeated requests of the department by letters dated 7.3.2003, 2.5.2003 and 9.5.2003 and in spite of the High Court's order dated 29.4.2003 asking them to produce records before the department's investigators; (d) that no records were produced by STPL's Directors or Authorised Signatories though summonses were repeatedly issued to them for production of records; (e) that even those who, while giving statements under Section 14 of the Central Excise Act, had undertaken to produce certain records, did not do so; (f) that the department's request to reconstruct the records (which were said to have been lost) from their customer's/suppliers' copies; (g) that they did not even produce the sales/purchase ledger for 1999-2000 and prior period, which were not mentioned in "police complaint of lost records"; (h) that, though STPL by letter dated 30/07/2004 submitted tabulated statements showing particulars of invoices, ARE3's, CT3's, bond register and D3's for certain periods, the relevant registers containing the entries were not produced; (i) that the raw material register (Annexure 118) (Bond Register) for 2001-02 produced by the appellant had no "issue section" and contained entries only from 10.4.2001 to 29.10.2001 (entries from No. 56 dated 3.11.2001 to No. 95 dated 30.3.2002 not available in the register); (j) that the Bond register for 2002-03 produced by them also did not have "issue section" and contained entries from 6.4.2002 to 14.1.2003 only (entries from No. 53 dated 20.1.2003 to No. 56 dated 29.1.2003 not available in the register); it showed unauthenticated over-writings and insertions also; (k) that the daily stock register (Annexure 77) for 2001-2002 showed entries for Dyed PTY only and no pages were allocated for other types of yarns (finished goods); the last entry was on 20.10.2001 and post-October transactions were not entered (invoices from No. 37 dated 22.1.2001 to No. 182 dated 30.3.2002 not recorded in the register); (l) that Annexure 77/118 registers for November 2001 - March 2002 were not maintained and hence not produced; (m) that the daily wastage register (Annexure 119) was not maintained on a daily basis during 2001-2002 and 2002-2003 and the rejects register (Annexure 121) was also not maintained likewise during 2002-03; (n) that the exports register (Annexure 123) for 2002 - 2003 was not produced; (o) that the registers produced by STPL were not got authenticated (i.e., countersigned by the Bond Officer); (p) that, though Shri Manikchand Sharma, Director of STPL, in his statement dated 22.8.2003 claimed that all the records except those which were lost and those which were already produced had been taken over by the department, he failed to prove the claim by producing any panchnama or other document in the nature of department's acknowledgment; and (q) that neither in reply to the show-cause notice nor in the course of its adjudication did the appellant produce any of the records which were not produced before the investigating officers. The learned Commissioner further noted that STPL failed to establish correlation of the stock found in the Unit on 24.1.2003 to the entries in the relevant registers viz. Annexures 118, 77, etc. He particularly noted that the book balance of raw material was not correlated with the entries in the relevant register and the receipts under CT3's.
24.3 The appellant has not set up any reasoned contest against the above findings of the adjudicating authority, either in the memoranda of appeals or in the written submissions. Their averment (in memo of appeal) that "they had maintained proper records up to January 2003 in this regard, except that the records for the period September 1999 to September 2001 were misplaced/stolen" has not been substantiated.
24.4 Considering the difficulties encountered by EOUs in obtaining CT-3 certificates from the jurisdictional Central Excise authorities, CBEC had issued Circular No.24/91-CX.8 dated 1.7.1991 providing for pre-authenticated CT-3 booklets to be supplied to EOUs and also providing as under:-
". CT-3 form will henceforth have 3 parts instead of present 2 parts for the following purposes namely -
Part I: to be sent to the DTA supplier and be retained by the Central Excise officer in charge of DTA supplier.
Part II: to be sent by the 100% EOU to the Range Superintendent within 24 hours of making a requisition to DTA supplier. The unit would also be required to send material receipt intimation within 24 hours to Excise in charge to enable verification of AR-3A forms and issue of re-warehousing certificates.
Part III: to be retained by the EOU for its record and verification."
The lower authority found that most of the CT-3 certificates used by the appellant for procurement of POY/PTY (raw materials) from various suppliers had not been accounted for. The written submissions filed by the Consultant for the Revenue say that there was no accountal of 105 out of 165 CT-3 certificates used by STPL, whose liability it was to maintain part-III of every CT-3 certificate for verification in terms of the above circular. Again, the appellant has failed to rebut the Commissioner's finding.
24.5 The appellant has submitted that they could not produce any records of the period September 1999 to September 2001 as the same had been stolen. The complaint filed with the police in 2001 is said to be pending. The department repeatedly called upon them to reconstruct such records from the records of their suppliers, customers etc., but apparently no action was taken in this regard by STPL. It is also pertinent to note, in this context, that, whenever queries were put to Manikchand Sharma (Director) and Ashok Kumar Sharma (Authorised Signatory) by Central Excise officers regarding non-maintenance or non-production of records, they mostly gave elusive answers and blamed the department in their statements under Section 14 of the Central Excise Act.
24.6 For all the reasons stated hereinbefore, we hold that the appellant as EOU did not properly maintain statutory registers/records during the period of dispute.
25. Whether, in the event of the appellant having to pay duty on the finished goods, proviso to sub-section (1) of Section 3 of the Central Excise Act is applicable 25.1 The appellant has claimed that, during the period of dispute, their finished goods were cleared under CT-3s or against AROs / DFRCs and payment in foreign currency and that all such clearances were made under cover of Central Excise invoices. They have also claimed that their CE Range office received the duly signed rewarehousing certificates. They have, therefore, contended that they were not liable to pay duty on the finished goods. Without prejudice to this contention, the appellant has also submitted, in these appeals, that, if the stand taken by the Revenue that the clearances of finished goods were unauthorised, i.e. without obtaining the Development Commissioner's permission, is to be accepted, such clearances would be liable to duty under the main provisions of Section 3(1) of the Act and not under the proviso to Section 3(1). In this connection, the appellant has relied on the Hon'ble Supreme Court's decision in SIV Industries Ltd. vs. Commissioner 2000 (117) ELT 281 (SC) and also a few decisions of this Tribunal and a circular issued by CBEC.
25.2 The learned special consultant for the Revenue could successfully distinguish the case of SIV Industries Ltd. and show that the proviso to Section 3(1) of the Act was still applicable to STPL in respect of the finished goods cleared by them during the period of dispute. He relied on two Larger Bench decisions of this Tribunal, viz. Himalaya International Ltd. vs. Commissioner 2003 (154) ELT 580 (Tri.-LB) and Jaipur Golden Transport Co. Pvt. Ltd. vs. Commissioner 2007 (215) ELT 503 (Tri.-LB). We find that, in both these cases considered by the Larger Bench, SIV Industries case (supra) was distinguished on valid grounds and it was held that the goods produced/manufactured by a 100% EOU and sold in DTA in excess of the permission granted by the Development Commissioner remained within the ambit of the proviso to Section 3(1) of the Central Excise Act for the purpose of payment of duty of excise. In the case of Himalaya International Ltd., the Larger Bench had also occasion to consider the Board's circular (No. 618/9/2002-CX dated 13.2.2002) relied on by the present appellant. It noted that the circular had been issued on the basis of the Supreme Court's decision in SIV Industries case but regardless of the fact that the Supreme Court was not dealing with a case involving clearance of finished goods to DTA by 100% EOU in excess of the permission granted by the Development Commissioner. The Larger Bench further noted that the issue that had come up for consideration by the Supreme Court in SIV Industries case was one relating to the rate of duty applicable to 100% EOU on its stock of finished goods produced prior to its debonding. In the present case, STPL was never debonded and remains to be a 100% EOU and, therefore, the view taken by the Tribunal's Larger Bench in Himalaya International case and reaffirmed in Jaipur Golden Transport Co. case has to be followed. In the result, even in respect of any finished goods which might have been cleared to DTA by the appellant as 100% EOU without obtaining the Development Commissioner's permission during the period of dispute, they are liable to pay duty in terms of the proviso to Section 3(1) of the Central Excise Act. The view taken by the Commissioner to this effect in para 60.1 of the impugned order is perfectly valid. The learned Commissioner has also rejected STPL's plea for the benefit of exemption under Notification 125/84-CE. We find no reason to interfere inasmuch as a similar plea for exemption under the said Notification was rejected by the Larger Bench in the case of Jaipur Golden Transport Co. Pvt. Ltd. (supra). It is also noteworthy that the learned counsel for the appellant seemed to accept the Larger Bench decisions as he did not press the above ground of the appeal. In the result, the issue is held against the appellant and in favour of the Revenue.
26. Whether the demand of CE duty on finished goods covered by Annexures A to D and P to the show-cause notice is recoverable from the appellant.
26.1 The appellants contention is that they had sold the finished goods to the following buyers against foreign exchange, namely, 1) Pet Plastics Ltd.; 2) Sudarshan Texport Pvt. Ltd.; 3) Ceejay Exports; and 4) Awin Exim. The goods were sold against ARO/DFRC to Sudarshan Texport Pvt. Ltd. and payments were received in respect of sales. Though the buyers have denied the sales, since payment has been received in foreign exchange, the denials are only afterthoughts and contrary to documentary evidence. The appellant also relies on the decision of the honble apex court in the case of Virlon Textiles Mills Ltd. [2007 (211) ELT 353] and the decision of the larger bench in Juned Bilal Memon vs. Commissioner [2008 (221) ELT 45]. Since the appellant has procured indigenous inputs, the benefit of notification No.8/97-CE should have been extended which has not been done.
26.2 The Revenue has contended that all the alleged recipients of the goods have denied having received the goods and relies on the statements of Shri. Anil Kumar Sharma, Director of Sudarshan Texport, Satish Choudhary and Omprakash Jhunjhunwalla, Partners of Ceejay Exports and Awin Exim Co. and Ritesh Vakil of Pet Plastics. It has also been pointed out by the Revenue that M/s Sudarshan Texport did not have any EEFC account at all to remit foreign exchange and they purchased demand drafts in foreign exchange out of the funds provided by the appellants and thus the entire contention of sale proceeds having been received in foreign exchange is a myth. It is also contended that no copy of ARO/DFRC was produced by the appellant to prove that the transactions were deemed exports.
26.3 We have considered the submissions. As regards the demand of excise duty on finished goods, there are strong evidences on record to show that they have been diverted to the DTA without payment of appropriate duty:-
(i) For the year 1999-2000, the appellant did not submit any record of clearances on the ground that they had been stolen. Therefore the clearance figures had to be taken from their audited balance sheet for the purpose of computation of duty demand.
(ii) As regards the year 2000-01, the finished goods were shown to have been cleared to M/s Sudarshan Export, Santogen Textile Mills and Shristi Impex. However it is an admitted position that these goods were never received by any of these parties. During the recording of statement on 22-08-2003, Shri. Manikchand Sharma, Director of STPL and also Director of Santogen Textile Mills was asked to produce transport details and acknowledgements of receipts from the consignees, but he failed to do so. He took the plea that the records had been withdrawn by the Department, but no such records were withdrawn by the Department. Sri. S.C. Saraf, another Director of STPL in his statement dated 7-8-03 had, inter alia, stated that they did not have any transport bill or copy of any receipted LR from the consignees to prove that their goods were delivered to the customers under their invoices. Shri. Anil Kumar Sharma, Director of Sudarshan Texport in his statement dated 23-6-03 had admitted that they had never received any goods from the appellant STPL and only paper transactions were made. The appellant has also failed to furnish any documents for transport of the consignments . They have also not furnished any CT3s, re-warehousing certificates, or how the goods were transported to the consignees which also point to the fact that these were false transactions. While Santogen Textiles refused to co-operate with the investigation, Shrishti Impex have not produced the re-warehousing certificates in respect of many consignments.
(iii) For the year 2001-02, the goods were shown to have been cleared to M/s Sudarshan Texport, Kakda Impex, Awin Exim and Ceejay Exports. However the investigations have revealed that the goods had never been transported and received by them. Shri. Anil Kumar Sharma, Director of Sudarshan Texport, in his statements dated 26-1-03 and 23-6-03 has admitted that the goods cleared against ARO/Foreign Exchange were not received by them. Further Sudarshan Export did not have any EEFC account. When asked about the transfer of foreign exchange by his firm to the appellant, Sri. Anil Kumar Sharma has explained that Shri. Shivratan G. Saraf , Director of STPL had given him payments in cheques in Indian Rupees which was deposited by him in the account of Sudarshn Texport Pvt. Ltd. in Bank of India, Andheri (W) branch and that the cheques so given were not from the account of STPL but from various other parties and Sudarshan Texport did not have any business with these parties and thereafter he used to apply for issuance of demand draft in US $ in the name of STPL. As per the records of the appellant, the goods supplied to Ceejay Exports and Awin Exim were manufactured by Tuni Textiles on job-work basis out of 21 consignments of POY totaling 181058.13 kgs. sent to M/s Tuni Textiles for manufacture of texturised yarn on job-work basis. Vehicles purported to have been used for transportation from STPL to Tuni Textiles were found, on verification from RTOs office, to be motor cars, scooters, auto-rickshaws and tankers. Further Sri. Narendrakumar Prabhudayal Surekha, Managing Director of M/s Tuni Textiles also confirmed in his statements that they had not received any POY for job-work and had not sent any processed material to STPL. The so-called processed material purported to have been made out of POY cleared to Tuni Textiles were shown in the records to have been cleared to M/s Awin Exim Company under various invoices. Sri. Satish Choudhary and Sri. Om Prakash Jhunjhunwalla, Partners of Awin Exim had also confirmed that they had not received any such goods from STPL. Similarly, Shri Satish Choudhary, partner of Ceejay Exports and M/s Awin Exim has also admitted non-receipt of goods from the appellant. Thus the so-called deemed exports were sham transactions. Further the appellant was unable to produce copies of Advance Licence, DFRC and ARO against which the clearances were made. Shri. Govind Kakda of Kakda Impex in his statement dated 6-4-2004 has also admitted that he indulged in only paper transactions.
(iv) For the year 2002-03, the goods were shown to have been cleared against ARO/DFRC to M/s Sudarshan Texport and Pet Plastics Ltd. Sudarshan Texport did not have any EEFC account to remit any foreign exchange. Similarly, Sri. Ritesh Vakil of Pet Plastics in his statement dated 1-2-2003 has also admitted that they did not receive any goods from STPL. Verification with RTO at Mumbai and Thane also revealed that vehicles shown on the clearance invoices were dumpers, tankers, scrapped vehicles which could not have been used for such transportation.
(v) As regards clearance of yarn through hundi transactions, the transactions shown in the hundi were those of fabrics whereas the real transaction was that of yarn. In the books of accounts, sale of yarn has been shown as sale of fabrics. The values shown in the invoices are maintained in the Books of Accounts by changing the quantity and rate to match. For these sales, purchases are shown in the books of accounts from parties, namely, M/s Global Agencies, Yogesvita Exim, Santogen Textile, Textile India Agencies, Rajendra Textiles, Shristi Impex and Deora Polytex. However, Shri Joshi of Textile India, Shri Varshney of Rajendra Textiles in their statements confirmed that such transactions did not take place. In the documents submitted to the bank Global Agencies, dispatch of goods is shown in Vehicle No. MH04T4263 and by M/s Yogesvita Exim in vehicle No. MTT7111and MH 023346. As per RTO reports, these vehicles were found to be scooters or autorickshaws incapable of transporting yarn. Manipulation in Books of Accounts have been also confirmed by their Auditor Shri. Muchchaala in his statement dated 19-5-2003. Besides these evidences, it has also been admitted by the appellant in their reply dated 7-12-2004 wherein they have inter alia stated that if there was no transaction of any fabrics at all, then the only transaction was the sale of dyed yarn which is the true and correct position and the same was correctly submitted to the bank.
26.4 In the light of these evidences by way of statements of the supposed recipients of the goods, non-submission of documents relevant to the transactions, non-existence of EEFC accounts to undertake foreign exchange transactions, usage of vehicles which are incapable of transporting the goods involved as verified from the RTO, it is very clear that the appellants have diverted the finished goods manufactured to the DTA without discharge of appropriate excise duty. Further, since the appellant is an EOU, they have to fulfill export obligations and achieve positive NFE (net foreign exchange earnings) and prescribed value addition as stipulated in the LOP. The appellant has not adduced any evidence whatsoever in this regard. Therefore, the demand of central excise duty on the quantity and value of goods shown in annexures A to D and P of the show cause notice is sustainable in law and has to be upheld.
26.5 However, the question is what is the rate of duty that should apply. The contention of the appellant is that they would be eligible for the benefit of notification No. 8/97-CE in as much as the finished goods have been manufactured out of indigenously procured yarn as per the allegation in the show cause notice. There is merit in this contention in the light of the following decisions of the honble Supreme Court and a Larger Bench of this Tribunal as discussed below.
26.6 The Supreme Court in CCE, Surat vs. Favourite Industries reported in 2012 (278) ELT 145 (SC) ruled that the benefit of exemption under Notification No.8 /97-CE is available where raw materials supplied by another 100% EOU are used by a 100% EOU and that such raw materials or goods belonging to 100% EOU would constitute raw materials or goods produced or manufactured in India.
26.7 A larger Bench of this Tribunal in the case of CCE vs. Ghodela Impex [2013-TIOL-1060-CESTAT-AHM-LB] following the said decision of the apex court ruled that the expression "produced or manufactured" in a 100% EOU from raw materials produced or manufactured in India (the expression employed in Notification No.8/97-CE), would also include raw materials procured from another 100% EOU where the goods have been manufactured.
26.8 There is no dispute that in the present case, the finished goods (PFY) manufactured and cleared to DTA by the appellant is from the raw materials (POY) domestically procured. Therefore, the benefit of notification No.8/97-CE cannot be denied to the appellant. If the central excise duty is re-worked by considering the benefit under the aforesaid notification, the duty liability works out to Rs. 8,17,60,795/- as given in Annexure A to this order. Accordingly we uphold the confirmation of central excise duty demand on the finished products manufactured and cleared by the appellant during 99-2000 to 2002-2003 and diverted to the DTA without discharging the appropriate duty liability to the extent of Rs. 8,17,60,795/- in terms of the provisions of section 11A of the Central Excise Act, 1944 as against the demand of Rs.17,00,38,285/- confirmed in the impugned order. Needless to say, the appellant shall also be liable to pay interest on the above duty liability at the appropriate rates as per the provisions of section 11AB of the said Central Excise Act.
27. Whether the demand of CE duty on indigenous raw materials covered by Annexures E to M, Q & R and customs duty on imported raw materials covered by Annexures N, O, N1 & S to the show-cause notice recoverable from the appellant.
27.1 The show-cause notice demands a duty of over Rs.3.66 crores on PTY (raw material) as detailed in Annexure E, from the appellant under the proviso to sub-section (1) of Section 11A of the Central Excise Act read with Notification 1/95-CE and in terms of the bond executed by the EOU. The raw material was procured by STPL from M/s. Simco Chemotex Pvt. Ltd. (100% EOU) in 140 consignments over the period 1999-2000 to 2002-2003. The show-cause notice alleged that 790991.96 kgs. of PTY valued at Rs.4,80,58,404/- were procured by STPL from Simco in 140 consignments without payment of duty in terms of Notification 1/95-CE. On the basis of STPL's purchase register and the documents procured from Simco, the amount of duty was worked out to be Rs.3,66,15,026.88. Upon scrutiny of the records, the adjudicating authority found that all the CT-3s barring one, against which the raw material had been procured by STPL, and all the ARE-3s obtained from Simco were available. The ARE-3s contained the signatures of STPL's representatives and the transactions were found to have been entered in their purchase register. The signatures on the ARE-3s were identified by Shri Shivratan Saraf, director of STPL, in his statement dated 7.8.2003 as those of S.N. Indoria, Ashok Kumar Sharma and Ajay Kumar Sharma, authorised representatives of STPL, NS. Goenka, director of Simco and Chiranjilal Bubna, authorised signatory of Simco, confirmed, in their respective statements, that the goods had been despatched without payment of duty under CT-3s to STPL and further that, in most of the cases, they had received the rewarehousing certificates (RWCs) on the ARE-3s. The adjudicating authority found no evidence from STPL to dispute issue of CT-3s, receipt of the raw material mentioned in the ARE-3s of Simco. The learned Commissioner further found that, out of 140 RWCs (copies of ARE-3s sent from STPL's CE Range office, as proof of rewarehousing of the goods supplied by Simco, to the CE Range office at Simco's end), the signatures of the CE officers in 71 RWCs were forged. Such forgery was reported by the Government Examiner of Questioned Documents who had subjected the above ARE-3s to forensic examination. The Commissioner further found that STPL had not given D-3 intimation to their CE Range officer and had not made entries in Annexure 118 register (bond register) in respect of the raw materials received under the ARE-3s from Simco. In this connection, STPL claimed that they had commercial relations with Simco from 1999-2000 and had been receiving materials both for EOU purposes and for trading purposes. They claimed that all receipts of raw material for EOU purpose had been accounted. The learned Commissioner rejected this plea on a few valid grounds, viz. (a) If STPL had received duty-paid raw material from Simco for trading purposes, they should have produced the relevant invoices. Moreover, the commercial invoices recovered from Simco were found to tally with excise invoices which showed clearance without payment of duty by availing exemption under Notification 1/95-CE. (b) STPL did not claim that they had indeed paid duty on any of the consignments of yarn received from Simco. (c) There was no reference to any trading in yarn in the balance sheet for the relevant period. (d) STPL could not explain how their representatives signed on the ARE-3s if the consignments covered by these documents were duty-paid. (e) The CT-3s issued to Simco covered a large quantity (550000 kgs.) of raw material which was much more than the admitted quantity (121616.26 kgs.) and hence would include the quantities which were claimed to have been received for trading purpose.
27.2 N.S. Goenka and Chiranjilal Bubna, of Simco, in their respective statements dated 20.5.2003 and 19.6.2003, stated that the transportation of the goods from their premises to STPL had been arranged through transporters in Silvassa.
27.3 The show-cause notice has demanded a duty of over Rs.3.30 crores on PTY as detailed in Annexure F. This demand of duty pertains to 137 consignments of the raw material received by the appellant from M/s. Sree Shyam Impex. Shivratan Saraf, director of STPL, in his statement dated 7.8.2003, confirmed the purchase of these goods from M/s. Sree Shyam Impex. He also identified the signatures on the relevant ARE-3s as those of S.N. Indoria, Ajay Kumar Sharma and Ashok Kumar Sharma, authorised signatories of STPL. Ajay Kumar Sharma also identified his signature. It was also found by the Commissioner, on the basis of the forensic examination report of the Government Examiner, that the signatures of Central Excise officers were forged on RWCs in respect of 67 out of the 137 consignments. No entries were found in Annexure 118 register in respect of the goods procured from M/s. Sree Shyam Impex. Except for 3 invoices, all other purchases from M/s. Sree Shyam Impex were, however, reflected in the purchase ledger of STPL for 2001-02. On the basis of his findings, the learned Commissioner confirmed the demand of duty.
27.4 The show-cause notice demanded duty of over Rs.82 lakhs as detailed in Annexure G in respect of the raw material procured by the appellant from M/s. Sanghi Polyesters (100% EOU) against CT-3s. Shivratan Saraf, in his statement dated 7.8.2003, accepted the purchases from M/s. Sanghi Polyesters. The adjudicating authority found that the signatures of CE officers were forged on the RWCs relating to 21 out of 24 consignments of raw material procured from Sanghi Polyesters. The demand of duty was confirmed.
27.5 The SCN demanded duty of over Rs.1.56 crores as detailed in Annexure H in respect of 48 consignments of PTY procured from M/s. Suresh Synthetics (100% EOU) against CT-3s. The adjudicating authority found that the signatures of CE officers on 18 RWCs were forged. He also noted that S.N. Indoria's signatures on RWCs were identified by Manikchand Sharma and confirmed in his statement dated 22.8.2003. The demand was confirmed.
27.6 The SCN demanded duty of Rs.4,52,666.01 as detailed in Annexure I in respect of PTY procured from M/s. Yangir Synthetics Ltd. (100% EOU) against CT-3s. STPL's bank-statement indicated payment to M/s. Yangir Synthetics. STPL, in their reply dated 11.12.2004 to the SCN, admitted the procurements from M/s. Yangir Synthetics. However, the signatures of CE officers on the relevant RWCs were found to be forged. The demand was confirmed.
27.7 The SCN demanded duty of Rs. 8,42,643.98 as detailed in Annexure J in respect of 190 kiloliters of furnace oil procured from M/s. Hindustan Petroleum Corporation Ltd. (HPCL) against CT-3s. STPL, in their reply dated 11.12.2004, admitted the procurements from HPCL. The adjudicating authority found that the CE officers' signatures on the RWCs were forged in respect of 12 out of the 19 consignments of furnace oil procured from HPCL. The demand was confirmed.
27.8 The SCN demanded duty of Rs.7,98,058.93 as detailed in Annexure K in respect of PTY procured from M/s. Parsrampuria International (100% EOU) against CT-3s, on the ground that the finished goods manufactured out of the raw material had not been exported, but diverted in local market in violation of the conditions of Notification 1/95-CE dated 4.1.1995 as amended. On the basis of STPL's books of accounts and Annexure 118 register for the year 2001-02, the adjudicating authority found that STPL had paid for the goods supplied by M/s. Parsrampuria International. It, therefore, held that the raw material had been duly received by the appellant. The demand of duty was confirmed.
27.9 The SCN demanded duty of over Rs.2.90 crores as detailed in Annexure L in respect of the raw materials (POY/PTY) procured under CT-3 from M/s. Indorama Synthetics (I) Ltd., on the ground that the finished goods manufactured out of the raw materials had been diverted in local market in contravention of the conditions of Notification 1/95-CE ibid. The raw materials were admittedly received by the appellant and, therefore, the demand was confirmed.
27.10 The SCN demanded duty of over Rs.48 lakhs as detailed in Annexure M in respect of raw material (POY) procured under CT-3 from M/s. Modern Petrofils, on the ground that the finished goods manufactured out of this raw material had been diverted in local market in contravention of the conditions of Notification 1/95-CE ibid. The raw material was admittedly received by STPL and, therefore, the demand of duty was confirmed against them.
27.11 The SCN demanded duty of Rs.9,98,815.70 as detailed in Annexure Q in respect of PTY procured under CT-3 from M/s. Virlon Textiles Mill Ltd. (100% EOU), on the same ground as above. The adjudicating authority found that the goods were received by STPL and duly re-warehoused. The demand of duty was, therefore, confirmed.
27.12 The SCN demanded duty of over Rs.72 lakhs as detailed in Annexure R in respect of PTY procured under CT-3 from M/s. Shrishti Impex (100% EOU), on the same ground as above. The adjudicating authority found that, during the period 2000-01 and 2001-02, STPL had received 21 consignments of PTY from M/s. Shrishti Impex, but no D3 intimation or RWC was given. The demand was confirmed.
27.13 The SCN demanded duty of Rs.17,18,616.90 as detailed in Annexure T in respect of machinery indigenously procured under CT-3, on the ground that the same had not been used for the intended purpose in terms of Notification 1/95-CE. This demand was also confirmed.
27.14 The learned counsel for the appellant challenged the above demands of duty on the following grounds:-
(a) There is no evidence of transportation of the raw materials from the suppliers to the appellant. Even though there are some entries in Annexure 118 register (raw material receipt register), evidence of transportation from the suppliers' premises to the appellant's factory is imperative where the receipts are disputed by the appellant.
(b) Although enquiries were made with the RTO, no enquiry was made with the transporters.
(c) There is no evidence of payments by STPL in respect of all the goods in question (Annexures E to M, Q and R). N.S. Goenka, director of Simco, admitted in his statement dated 20.5.2003 that he had not received any payments from STPL in respect of any sale of yarn during 1999-2000, 2000-2001 and 2001-2002.
(d) Where RWCs are not available, duty cannot be demanded from the appellant. For instance, RWCs were not available in respect of 12 consignments, 47 consignments and 13 consignments of raw materials which were allegedly supplied by Simco, Shyam Impex and Suresh Synthetics respectively. No duty can be demanded in respect of such goods.
(e) Duty cannot be demanded where forged signatures were found on RWCs or where RWCs were not obtained from the jurisdictional CE officer. The allegation of forgery cannot be based on duplicate copy obtained from the consignor unless the same is compared with the original copy which is supposed to be directly sent by one CE officer to another. In the case of Simco and Parsrampuria International, the documents bearing the alleged forged signatures were obtained from the consignor.
(f) The oral evidence given by Shivratan Saraf to the effect that the RWCs had been signed by the authorised signatories - Ashok Kumar Sharma, Ajay Kumar Sharma and S.N. Indoria - cannot be accepted for the reasons that no statement of S.N. Indoria had been recorded, that no direct question was put to Ajay Kumar Sharma regarding his signatures on the RWCs and that Ashok Kumar Sharma never admitted the signatures on the RWCs.
(g) In the absence of primary evidence, i.e. original RWCs, photocopies are not reliable. The Commissioner's finding that the purchase ledger of STPL is the basis of the allegation of diversion of duty-free inputs cannot be sustained in the absence of correlation between entries in the purchase ledger and those in the invoices/ARE-3s mentioned in Annexures E to M, Q and R.
(h) The statement of N.S. Goenka that he received RWCs with forged signatures from the appellant cannot be relied upon as he was not allowed to be cross-examined.
27.15 The learned consultant for the Revenue argued in respect of the findings of the Commissioner. He submitted that the duty-free raw materials received by the appellant were mostly diverted as such and particularly used in the manufacture of finished goods which were also diverted to the domestic market without payment of duty. He argued that the appellant was liable to discharge duty liability not only on the raw materials diverted as such but also on the raw materials used in the manufacture of finished goods which were also diverted without payment of duty.
27.16 We find that, in respect of the raw materials mentioned in Annexures E, F, G, H, I and J, it was alleged that these materials were diverted without being used in the manufacture of final products for export. The adjudicating authority found that these materials were not duly accounted in statutory records. It also found that no record of issue of these materials for processing by the appellant or of the resultant final products. These findings were recorded on the basis of statements of the directors and/or authorised signatories of STPL, raw material suppliers etc. and documents produced by, or recovered from, STPL as also documents recovered from material suppliers. The amounts of duty were quantified, in some cases, on the basis of entries in STPL's purchase register and, in other cases, on the basis of invoices and ARE-3s. The appellant has contended inter alia that no correlation was established between purchase-register entries and invoice/ARE-3 entries. The appellant has also contended that from Annexures A to D, the total sales of manufactured finished goods is 1909805 kgs and the quantity of duty free inputs consumed in the manufacture of finished goods after 1% wastage comes to 1928993 kgs. and therefore, duty can not be demanded on this quantity as there will be duplication of demand.
27.17 We have considered the submissions made by both the sides. There is merit in the appellants argument that if duty is demanded both on finished goods as well as raw materials, there will be duplication of duty demand. After considering the explanations given by the appellant in their reply to the show cause notice, the permissible wastages as per SION norms, the adjudicating authority in para 58.3 of the impugned order has arrived at a shortage of 13,94,870.73 kgs in respect of indigenous raw materials procured by the appellant after taking into account the opening balance of stock in 1999-2000, the procurement of the raw materials and clearance of the processed yarn during the years 1999-2000 to 2002-03 and the closing stock of 185118.99 kgs.(as found on actual stock taking), based on the available records. This shortage has been arrived at after providing for a clearance of finished goods of 2921968 kgs. (1940856 kgs.+ 981112 kgs. of yarn cleared under Hundis in the guise of fabrics). In this calculation, the contention of the appellant that duty cannot be demanded on 2921968 kgs. of inputs (yarn) has already been taken into account. No acceptable explanation has been adduced by the appellant for this shortage. It is also on record that the appellant had forged a total of 71 re-warehousing certificates in respect of purchases from Simco Chemotex (Annexure E to the SCN) during 99-00 to 02-03 involving a quantity of 395432 kgs. of raw material and a duty of Rs. 1,83,76,285/-. In addition 67 re-warehousing certificates for 2001-02 in respect of purchases from Shyam Impex have also been found to be forged and quantity and duty involved is 376967 kgs and Rs. 1,64,13,511/- (Annexure F to the SCN). Further in respect of purchases from Sanghi Polyester during 1999-2000, 21 re-warehousing certificates have been found to be forged and the quantity and duty involved are 173946 kgs. and Rs. 72,03,817/- respectively (Annexure G to the show cause notice). Again in respect of purchases from Suresh Synthetics during 1999-2000, 18 re-warehousing certificates were found to be forged and quantity and duty involved are 104217 kgs. and Rs.47,40,533/- Thus in all 177 re-warehousing certificates have been found to be forged involving a quantity of 10,50,112 kgs. and duty of Rs.4,67,34,146/-. During the impugned period, the appellant has not maintained any of the statutorily prescribed records for the purchase and use of the materials for the specified purpose. In the absence of any valid documentary evidence adduced by the appellant, the only conclusion that can be drawn is that the appellant has diverted these materials. If the appellant had actually used the materials, there was no need to indulge in forgery of re-warehousing certificates. Since the materials have been procured duty free under notification No. 1/95-CE, it is for the appellant to lead evidence to prove that they are eligible for duty exemption on raw materials. The Revenue has adduced sufficient evidence to prove diversion of raw materials by the appellant and the onus of proof shifts to the appellant to show actual utilization of the raw materials procured for the manufacture and subsequent sale of finished goods (PFY) in accordance with law.
27.18 There is also corroboration to the above evidence adduced by the Revenue. The total quantity of procurement of yarn in kgs. during the period from 1999 to 2003 as per the available records pieced together in Annexures E to R of the show cause notice is 39,97,279 kgs. The total quantity of clearance of finished goods as evident from Annexures A to D and P is 28,89,574 kgs. Allowing for the permissible wastage of 1%, the total raw material required for the manufacture of the finished product works out to 29,18,470 kgs. The difference between the two, that is, procurement of raw materials and clearance of finished goods is 10,78,809 kgs. which very closely matches with the quantity involved in 177 nos. of forged re-warehousing certificates of 10,50,112 kgs. The difference between the two figures, if any, is very marginal. Thus there is incontrovertible evidence that 10,50,112 kgs of raw materials have been diverted and the duty involved on this quantity is Rs.4,67,34,146/- and this duty is demandable from the appellant in terms of the provisions of notification No.1/95-CE read with the conditions of the bond executed by the appellant with the department. For details of duty calculation, please see Annexure - B to this order. Accordingly we uphold the central excise duty demand of Rs. 4,67,34,146/- on diverted raw materials under the legal provisions cited supra.
27.19 As regards the duty demand under Annexure J of the show cause notice, it pertains to procurement of Furnace Oil duty free during March, 99 to December, 2001, under 19 CT3 certificates from M/s. HPCL for a total quantity of 190 Kilolitres involving a duty of Rs. 8,42,643.98. However, Re-warehousing certificates in respect of 12 of these consignments were found to be forged. Further, payment in respect of purchases of furnace oil by M/s STPL was found to have been made by M/s Sudarshan Texport Pvt. Ltd. The quantity and duty involved in respect of these 12 forged re-warehousing certificates are 120 KLs and Rs.4,74,008/-. In their reply dated 11-12-2004 to the SCN, STPL have admitted to the procurement of 190 KLs of furnace oil. However no accounts have been maintained with regard to their receipt, consumption or disposal. In the absence of such documentary evidence, the quantities covered by 12 forged re-warehousing certificates can be reasonably assumed to have been diverted and consequently duty liability would be attracted. Therefore, the duty demand of Rs.4,74,008/- is liable to be confirmed against the appellant under the provisions of notification No.1/95-CE and in terms of the bond executed by them in this regard.
27.20 In respect of the duty demands covered under Annexures I, K to R of the show cause notice, there is no clear evidence forthcoming with regard to the diversion and hence, duty demands covered in these annexures cannot be confirmed.
27.21 STPL has also imported yarns and other materials through Mumbai customs duty free involving a customs duty of Rs.1,78,40454 and through Nhava Sheva Port involving a customs duty of Rs. 41,83,195.11 (Annexures N, N1 & O of the show cause notice). The appellant has not accounted for these imports in their books of accounts nor have they entered their receipts in Annexure 118 Register. In the absence of any satisfactory explanation on the part of the appellant about the disposal of these goods, the only conclusion that can be drawn is that the appellant has diverted these goods also without using the same in the manufacture of texturised /dyed PFY and therefore, the duty demands are sustainable and is recoverable as per the provisions of notification No.53/97-Cus and in terms of the bond executed by the appellant and we hold accordingly. In addition to the above, the appellant has also imported/procured duty free dyes and chemicals through Mumbai Customs and from a Private bonded warehouse. The quantity and duty involved are 28500 kgs involving duty amount of Rs.21,64,094.20 respectively. Annexure S of the show cause notice refers. While the appellant has admitted to these procurements, they have not accounted for the same in the statutory records nor any explanation is forthcoming with respect to their disposal. Therefore, the adjudicating authority is right in concluding that these also have been diverted. Therefore, we confirm the customs duty demands of Rs.1,78,40,454/-, Rs.41,83,195.11 and Rs. 21,64,094.20 under the provisions of notification No. 53/97-Cus and in terms of the bond executed by the appellant.
27.22 While coming to the above conclusion, we also rely on the following decisions of the honble Bombay High Court and the honble Apex Court. The honble High Court of Bombay, in the case of Phoenix Mills Ltd. vs. UOI [2004 (168) ELT 310 (Bom)] held that There is an essential distinction between burden of proof and onus of proof. The burden of proof lies upon the person who has to prove a fact and it never shifts, but the onus of proof shifts. Onus means the duty of adducing evidence. 27.23 In Collector of Customs, Madras & Others Vs D. Bhoormull [ 2002-TIOL-253-SC-CUS], the honble apex court held as follows:-
30. It cannot be disputed that in proceedings for imposing penalties under clause (8) of Section 167, to which Section 178A does not apply, the burden of proving that the goods are smuggled goods, is on the Department. This is a fundamental rule relating to proof in all criminal or quasi-criminal proceedings, where there is no statutory provision to the contrary. But in appreciating its scope and the nature of the onus cast by it, we must pay due regard to other kindred principles, no less fundamental, or universal application. One of them is that the prosecution or the Department is not required to prove its case with mathematical precision to a demonstrable degree; for, in all human affairs absolute certainty is a myth, and as Prof. Brett felicitously puts it-"all exactness is a fake". El Dorado of absolute Proof being unattainable, the law, accepts for it, probability as a working substitute in this work-a-day world. The law does not require the prosecution to prove the impossible. All that it requires is the establishment of such a degree of probability that a prudent man may, on its basis, believe in the existence of the fact in issue. Thus legal proof is not necessarily perfect proof often it is nothing more than a prudent mans estimate as to the probabilities of the case.
31. The other cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered to use the words of Lord Mansfield in Blatch v. Archar (1774) 1 Cowp. 63 at p. 65 According to the Proof which it was in the power of one side to prove and in the power of the other to have contradicted. Since it is exceedingly difficult, if not absolutely impossible for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it is not obliged to prove them as part of its primary burden.
32. Smuggling is clandestine conveying of goods to avoid legal duties. Secrecy and stealth being its covering guards, it is impossible for the Preventive Department to unravel every link of the process. Many facts relating to this illicit business remain in the special or peculiar knowledge of the person concerned in it. On the principle underlying Section 106, Evidence Act, the burden to establish those facts is cast on the person concerned : and if he fails to establish or explain those facts, an adverse inference of facts may arise against him, which coupled with the presumptive evidence adduced by the prosecution or the Department would rebut the initial presumption of innocence in favour of that person, and in the result prove him guilty. As pointed out by Best in `Law if Evidence (12th Edn. Article 320, page 291), the presumption of innocence is, no doubt, presumptio juris : but every days practice shows that it may be successfully encountered by the presumption of guilt arising from the recent (unexplained) possession of stolen property, though the latter is only a presumption of fact. Thus the burden on the prosecution or the Department may be considerably lightened even by such presumption of fact arising in their favour. However, this does not mean that the special or peculiar knowledge of the person proceeded against will relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of that fact in issue. It will only alleviate that burden to discharge which very slight evidence may suffice. Though this decision has been rendered in the context of smuggling under the Customs Act, the ratio of the decision applies equally well in a clandestine clearance case on the central excise side.
27.24 In the case of A.N.Guha & Co. vs. Collector [1996(86) ELT 333], this Tribunal held that it is not necessary for the department to establish a fact with mathematical precision. Once the presumption as to the existence of a fact is raised against the assessee that the raw materials have not been received and re-warehoused in the factory of the appellant, it is reasonable to say that the said goods were not received in the factory. In the case of R.V.E. Venkatachala Gounder vs. Arulmigu Viswesaraswami & V.P. (order dated 08/10/2003 in Civil Appeal No.10585 of 1996) the hon'ble apex Court held as follows:
Whether a civil or a criminal case, the anvil for testing of proved', disproved' and not proved', as defined in Section 3 of the Indian Evidence Act, 1872 is one and the same. A fact is said to be proved' when, if considering the matters before it, the Court either believes it to exist, or considers its existence so probable that a prudent man ought, under the circumstances of a particular case, to act upon the supposition that it exists. It is the evaluation of the result drawn by applicability of the rule, which makes the difference. "The probative effects of evidence in civil and criminal cases are not however always the same and it has been laid down that a fact may be regarded as proved for purposes of a civil suit, though the evidence may not be considered sufficient for a conviction in a criminal case. BEST says : There is a strong and marked difference as to the effect of evidence in civil and criminal proceedings. In the former a mere preponderance of probability, due regard being had to the burden of proof, is a sufficient basis of decision: but in the latter, especially when the offence charged amounts to treason or felony, a much higher degree of assurance is required. (BEST, S.95). While civil cases may be proved by a mere preponderance of evidence, in criminal cases the prosecution must prove the charge beyond reasonable doubt." (see Sarkar on Evidence, 15 th Edition, pp. 58-59) In the words of Denning LJ (Bater Vs. B,1950,2 All ER 458,459) It is true that by our law there is a higher standard of proof in criminal cases then in civil cases, but this is subject to the qualification that there is no absolute standard in either case. In criminal cases the charge must be proved beyond reasonable doubt, but there may be degrees of proof within that standard. So also in civil cases there may be degrees of probability.' Agreeing with this statement of law, Hodson, LJ said Just as in civil cases the balance of probability may be more readily fitted in one case than in another, so in criminal cases proof beyond reasonable doubt may more readily be attained in some cases than in others.' (Bornal V. Neuberger P. Ltd., 1956 3 All ET 970,977).
27.25 The concepts of "reasonable doubt" and "pre-ponderence of probability" have been lucidly explained by the hon'ble apex Court in the case of State of Rajasthan vs. Mohan Lal [2009(237) ELT 435 (S.C.)] as follows:-
36. Doubts would be called reasonable if they are free from a zest for abstact speculation. Law can not afford any favourite other than truth. To constitute reasonable doubt, it must be free from overemotional response. Doubts must be actual and substantial doubts as to the guilt of the accused persons arising from the evidence, or from the lack of it, as opposed to mere vague apprehensions. A reasonable doubt is not an imaginary, trivial or a merely possible doubt, but a fair doubt based upon reason and common sense. It must grown out of the evidence in the case.
37. The concepts of probability, and the degrees of it, cannot obviously be expressed in terms of units to be mathematically enumerated as to how many of such units constitute proof beyond reasonable doubt. There is an unmistakable subjective element in the evaluation of the degrees of probability and the quantum of proof. Forensic probability must, in the last analysis, rest on robust common sense and ultimately, on the trained intuitions of the Judge.
".
27.26 From the case laws cited above, the department need not prove the case with mathematical accuracy. So long as the department has established the case with such a degree of preponderance the existence of a fact, it is sufficient. In the instant case, the burden to establish eligibility to exemption is on the appellant-assessee and if they fail to establish or explain the facts established by the department, and adverse inference arises against them coupled with the presumptive evidence adduced by the department.
28. Whether excise duty on locally procured machinery and customs duty on imported machinery as detailed in Annexures T and T1 recoverable?
Duty demands of Rs.17,18,616.90 in respect of indigenously procured capital goods and Rs. 6,75,702/- in respect of imported capital goods have been confirmed against the appellant on the ground that these were procured duty free under notification No.1/95-CE and 53/97-Cus for use in the manufacture and export of polyester texturised/dyed yarn. However, no goods have been exported and therefore, the provisions of these notifications have been violated, making the goods liable to confiscation under the provisions of central excise and customs acts. Since it is a fact that the appellant has neither fulfilled the export obligations nor the value addition norms and the net foreign exchange earnings stipulated in the relevant notifications, the appellants have failed to fulfill the conditions for availment of exemption. Therefore, these duty demands are sustainable in law and we hold accordingly.
29. Are the main appellant and co-appellants liable to penalty and if so to what extent and the goods seized liable to confiscation and consequent imposition of redemption fine?
29.1 In the present case the charge against the appellant is that they indulged in fraud and forgery by forging re-warehousing certificates as regards receipt of duty-free raw materials, finished goods were diverted to DTA without discharge of appropriate duty by creating paper transactions without actual delivery of goods and faking foreign exchange remittances, non-accountal of raw materials and their consumption and manufacture of finished goods in the statutorily prescribed accounts/registers and similar means and duped the exchequer of its legitimate excise and customs duties. Therefore, the provisions of mandatory penalties under section 11AC of the Central Excise Act, 1944 and section 114A of the Customs Act, 1962, on the main appellant, M/s Shivarati Textiles Private Limited are clearly attracted. Similarly on the co-appellants, penalties are imposable for aiding and abetting the evasion of central excise duties by lending their names and being party to fake paper transactions or otherwise and therefore, penalties under Rule 209A of the erstwhile Central Excise Rules and Rule 26 of the Central Excise Rules, 2002 are clearly attracted.
29.2 The honble Apex Court explained the concept of fraud in Commissioner vs. Aafloat Textiles (India) Ltd. [2009-TIOL-42-SC-CUS] as follows:-
9. "fraud" means an intention to deceive; whether it is from any expectation of advantage to the party himself or from the ill will towards the other is immaterial. The expression "fraud" involves two elements, deceit and injury to the person deceived. Injury is something other than economic loss, that is, deprivation of property, whether movable or immovable or of money and it will include and any harm whatever caused to any person in body, mind, reputation or such others. In short, it is a non-economic or non-pecuniary loss. A benefit or advantage to the deceiver, will almost always call loss or detriment to the deceived. Even in those rare cases where there is a benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied. (See Dr. Vimla v. Delhi Administration (1963 Supp. 2 SCR 585) and Indian Bank v. Satyam Febres (India) Pvt. Ltd. (1996 (5) SCC 550).
10. A "fraud" is an act of deliberate deception with the design of securing something by taking unfair advantage of another. It is a deception in order to gain by another's loss. It is a cheating intended to get an advantage. (See S.P. Changalvaraya Naidu v. Jagannath (1994 (1) SCC 1).
11. "Fraud" as is well known vitiates every solemn act. Fraud and justice never dwell together. Fraud is a conduct either by letter or words, which includes the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equitable doctrine including res judicata. (See Ram Chandra Singh v. Savitri Devi and Ors. (2003 (8) SCC 319). 29.3 The Hon'ble apex court in Shankar Raju vs. UOI [2011 (27) ELT 492 (SC)] observed thus:
Where Legislature clearly declares the intent in the scheme of a language of a statute,, it is the duty of the Court to give full effect to the same without scanning its wisdom or policy and without engrafting, adding or implying anything which is not congenial or consistent with such express intent of legislature. Hardship or inconvenience cannot alter the meaning employed by the legislature, if such meaning is clear on the face of the statute. If the statutory provisions do not go far enough to relieve the hardship of the member, the remedy lies with the Legislature and not in the hands of the Court. In the present case, there is no doubt that the appellant has played a huge fraud on the exchequer by completely mis-using the 100% EOU scheme. The appellant did not maintain any statutorily prescribed registers/accounts for the receipt and consumption of raw materials or the manufacture of finished goods and its disposal. Maintenance of statutory records were mandatory for availing the duty exemption. Documents were forged to show receipt of goods but they were diverted. Thus the appellant knowingly and deliberately indulged in huge amount of duty evasion. No leniency, whatsoever, is merited in such cases as it would send a wrong signal that law can be defied and penal consequences can be avoided. Accordingly we hold that the main appellant M/s. Shivarati Textiles Private Ltd. is liable to a penalty of Rs. 13,06,87,566/- (equal to the excise duty demand confirmed against the appellant) under section 11AC of the Central Excise Act, 1944 and Rs. 2,48,63,445/- under section 114A of the Customs Act, 1962.
29.4 As regards the penalties imposed on the co-appellants, the adjudicating authority has discussed in detail in para 65.1 of the impugned order the role played by each and every one of the co-appellants in perpetuating fraud and duty evasion by the main appellant. He has discussed at length how the co-appellants aided and abetted in the commission of the fraud. We are in agreement with his findings and therefore, we uphold the penalties imposed on the co-appellants under the provisions of Rule 209A of erstwhile Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2002 read with Section 112(b) and 117 of the Customs Act under clauses (e) and (f) of para 66.1 of the impugned order on the 9 and 16 co-appellants specified therein.
29.5 As regards the confiscation of the goods seized under panchnama dated 16th July, 2003, valued at Rs.1,36,98,318/-, while upholding their confiscation under the various provisions of Central Excise & Customs Act or the Central Excise Rules, 2002, we reduce the redemption fine from Rs. 65 lakhs to Rs. 15 lakhs. Similarly in respect of the texturising machine seized valued at Rs.85 lakhs, while upholding its confiscation, we reduce the fine imposed from Rs.15 lakhs to Rs. 8.5 lakhs. Similarly in respect of goods specified in Annexure T & T1 valued at Rs.1,41,62,850/- while upholding their confiscation, we reduce the fine to Rs. 15 lakhs. But for the modification in fine, the confiscation and consequent redemption is upheld.
30. To sum up, we uphold a central excise duty demand of Rs. 13,06,87,566/- under the provisions of section 11A of the Central Excise Act, 1944 read with the provisions of Notification 1/95-CE and in terms of the provisions of the bond executed by the appellant and a customs duty demand of Rs. 2,48,63,445/- under the provisions of Notification No. 53/97-Cus and in terms of the bond executed by the appellant M/s Shivarati Textiles Pvt. Ltd. along with interest thereon under section 11AB of the Central Excise Act, 1944 and 28AB of the Customs Act, 1962. We also uphold the imposition of penalty of Rs. 13,06,87,566/- under section 11AC of the Central Excise Act, 1944 and Rs. 2,48,63,445/- under the provisions of section 114A of the Customs Act, 1962. We also uphold the penalties imposed on the co-appellants in terms of Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2002 and sections 112(b) and 117 of the Customs Act, 1962. We also uphold the confiscation of raw materials seized under the panchnama dated 16-7-2003, indigenously procured and imported capital goods. However the redemption fines are reduced as discussed in para 29.4 above. The appeals are disposed of in the above terms.
(Pronounced in Court on 08/08/2013) (Anil Choudhary) Member (Judicial) (P.R.Chandrasekharan) Member (Technical) */as ANNEXURE A CHART SHOWING CALCULATION OF DUTY ON FINISHED GOODS (PROCESSED YARN) AFTER ALLOWING THE BENEFIT OF NOTIFICATION NO. 8/97-CE DATED 01/03/1997 Sr. No. Period Annexure of SCN Quantity Value in ` Central Excise Duty in ` Total Duty payable in ` BED SED ADDL TT CESS
1. 1999-00 A 65596 2116167 24% 507880 6% 126970 4.5% 95228 0.05% 1059 731137/-
2. 2000-01 B 395984 28277564 16% 4524410 10% 2827756 4.8% 1357323 0.05% 14138 8723627
3. 2001-02 C 974429 71201883 16% 11392301 16% 11392301 4.8% 3417690 0.05% 35601 26237893
4. 2002-03 D 473797 36476266 16% 5836203 16% 5836203 4.8% 1750860 0.05% 18238 13441504
5. 1999-00 P 979768 53544657 24% 12853118 6% 3213279 4.5% 2409960 0.05% 26777 18503134 2000-01 P 38327003 16% 6132320 16% 6132320 4.8% 1839696 0.05% 19164 14123500 Grand Total 2889574 229953540 41246232 29528829 10870757 114977 81760795 ANNEXURE B CHART SHOWING CALCULATION OF CENTRAL EXCISE DUTY ON DIVERTED RAW MATERIAL (YARN) UNDER FORGED ARE-3 Sr. No. Period Annexure Name of the Party Number of Forged Documents (ARE3A) Quantity in kgs.
Value in ` Duty in `
1. 1999-2000 E Simco Chemotex 13 61671 3539312 3196289
2. 2000-2001 E Simco Chemotex 4 16653 1043147 866546
3. 2001-2002 E Simco Chemotex 37 217145 13996206 10019716
4. 2002-2003 E Simco Chemotex 17 99963 5997773 4293734
5. 2000-2001 F Shyam Impex 67 376967 23186593 16413511
6. 1999-2000 G Sanghi Polyester 21 173496 8102534 7203817
7. 1999-2000 H Suresh Synthetics 18 104217 5331942 4740533 Grand Total 1050112 61197507 46734146 1 33