Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs Unknown on 22 September, 2010
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
COURT-II
Appeal No.E/572 575/99
Arising out of OIA No.5/COMMR./AHD-I/98, dt.30.10.98
Passed by: Commissioner of Central Excise (Appeals), Ahmedabad
For approval and signature:
Honble Mrs. Archana Wadhwa, Member (Judicial)
Honble Mr. B.S.V. Murthy, Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant/s M/s. Shree Ganesh Knit (India) Ltd.
Shri Babulal Chimanlal Shah
Shri Arvindkumar Dugar
Shri Shreyaskumar Dugar
Represented by Shri Willingdon Christian, Adv
Vs.
Respondent/s CCE Ahmedabad
Represented by Shri R.S. Sangia, SDR CORAM:
MRS. ARCHANA WADHWA, MEMBER (JUDICIAL) MR. B.S.V. MURTHY, MEMBER (TECHNICAL) Date of Hearing :22.09.10 Date of Decision:
ORDER No. /WZB/AHD/2010 Per: Mrs. Archana Wadhwa:
All the four appeals are being disposed off by a common order as they arise out of the same impugned order passed by Commissioner of Central Excise, confirming demand of duty of Rs.4,06,745/- (Rupees Four Lakh Six Thousand Seven Hundred and Forty Five only) against M/s. Shree Ganesh Knit (India) Ltd. in respect of shortages detected at the time of visit of the officers along with imposition of penalty of identical amount. In addition duty of Rs.2,87,27,466/- stands confirmed against the said appellant on the findings of clandestine removal during the period August 1992 to December 1995 along with imposition of penalty of identical amount under Section 11AC of the Central Excise Act, 1944 read with Rule 173Q1 of Central Excise Rules, 1944. In addition, penalties of Rs.30,00,000/- (Rupees Thirty Lakhs only) each stands imposed upon Shri Arvindkumar Ganeshmal Dugar and Shri Shreyaskumar Ganeshmal Dugar, Managing Director and Joint Managing Director of M/s. Shree Ganesh Knit (India) Ltd. Further penalty of Rs.30,00,000/- (Rupees Thirty Lakhs only) stands imposed on Shri Babulal Chimanlal Shah, Manager and Authorised Signatory of the other company.
2. As per facts on record M/s. Shree Ganesh Knit (India) Ltd. is engaged in the manufacturing/processing of textile cotton or manmade fabrics falling under Chapter Heading 52, 54 & 55 of the Central Excise Tariff Act, 1985. As a result of intelligence received by the Revenue, their factory was visited by the officers on 01.01.97, who conducted various checks and verifications. As a result of the stock of fabrics lying in the factory was found short than the recorded balance to the extent of 1,19,631 L. Mtrs. involving duty of Rs.4,06,745/-. The said shortages were admitted to have been removed clandestinely without issuance of any central excise invoice. The appellant accordingly deposited a part amount of duty of Rs.94,000/- and agreed to pay the balance amount subsequently.
3. Further a quantity of 1,57,986 L. Mtrs. of grey manmade fabrics were found lying in excess in their grey godown as no documents for the same were produced. The said goods were detained for further verification. In addition certain incriminating documents recovered from the factory were put under seizure vide panchnama dated =.01.97.
4. Simultaneous searches were also conducted at the office premises of the said company situated in New Clock Market, Ahmedabad and certain incriminating documents were recovered.
5. Further the officers searched the residential premises of one Shri Rameshbhai Babulal Marwadi, which resulted in recovery of contract bills with M/s. Shree Ganesh Knit (India) Ltd. and other documents. On interrogation Shri Rameshbhai Babulal Marwadi deposed that he was associated with M/s. Shree Ganesh Knit (India) Ltd. for the last fifteen years and was carrying out various processes such as washing, carbonizing, drying range etc. on the synthetic types of fabrics on contract basis. He further clarified that he was getting labour charges of 3.00 paisa per L. Mtrs. of the fabrics processed on drying range and 2.00 paisa per L. Mtrs. of the fabrics carbonizing for which he was raising bills within every fifteen days to the said company. He also clarified that the bills so raised by him and recovered from his residential premises bear the signature of himself as well as the signature of Shri Dilipbhai Amrutlal Mewada, Dying Master of M/s. Shree Ganesh Knit (India) Ltd., in token of having checked and passed the said bills. The loose papers recovered from his residence are the detailed production reports showing the actual quantity of synthetic fabrics subjected to various processes such as bleach, carbonizing, dying, printing, finishing etc. on day to day machine-wise and shift-wise basis and all such production reports carry the signature of Shri Dilipbhai Amrutlal Mewada.
6. As a result of above discloser made by Shri Rameshbhai Babulal Marwadi, further investigations were recorded. Shri Bhairusingh Ajitsingh Parihar, grey supervisor of M/s. Shree Ganesh Knit (India) Ltd., in his statement recorded on 02.01.97 was shown the papers recovered from the factory and admitted that the same were written in his hand writing and contained the actual quantity of the fabrics processed as per the details mentioned therein.
Statement of Shri Dilipbhai Amrutlal Mewada, Dying and Finishing Master of the manufacturing unit was recorded on 02.01.97 who deposed that he was in-charge of washing department, the work for which was getting done on contract basis by M/s. Ramesh Washing Contractor. On being shown the contract bills raised by Shri Rameshbhai Babulal Marwadi, he admitted that his signatures are appearing on the said bills and after putting has signatures the same were forwarded to accounts department for payment purposes. He further agreed with the statement of bill-wise details of the work done by M/s. Ramesh Washing Contractor showing the various columns as bill number, date, amount of bill, amount received, amount deductible etc. and confirmed that the same have been received by the said washing contractor and put his signatures on these pages. The invoices of the said contractor were also accepted by him to be genuine which were signed by him and forwarded to accounts department. Similarly he admitted to the various other documents showing the production of the goods and payments of the same to Shri Rameshbhai Babulal Marwadi.
Statement of Shri Babulal Chimanlal Shah, authorised signatory was also recorded on 11.01.97, which is inculpatory in nature admitting carrying of various processes by M/s. Ramesh Washing Contractor and accepting the bills raised by him and settled by the company. Similarly the statement of Shri Arvindkumar Ganeshmal Dugar, Managing Director of the company was recorded on 07.02.97 that the raising of bills by M/s. Ramesh Washing Contractor, signatures of Shri Dilipbhai Amrutlal Mewada appearing on the same as Dying Master and the bills having his initial (small signatures) appearing on the same. He also agreed with the statement of Shri Rameshbhai Babulal Marwadi and Shri Dilipbhai Amrutlal Mewada.
7. During the course of further investigations statements of various persons were recorded including the statement of Shri Shreyaskumar Ganeshmal Dugar on various occasions. Statement of one Shri Vishnubhai Mohanbhai Prajapati was also recorded deposing that he is the proprietor of one M/s. Dipesh Finishing Contractor, having contract with M/s. Shree Ganesh Knit (India) Ltd. for carrying out the finishing process at the factory premises of M/s. Shree Ganesh Knit (India) Ltd. that during the period from 1992 to April 1996 he was getting a job charges of 1.25 paisa to 1.75 paisa per L. Mtr. for his contract. On being shown two bill books recovered from the residence of Shri Rameshbhai Babulal Marwadi, proprietor of M/s. Ramesh Washing Contractor, he agreed that bill book No.12 contains carbon copies of the bills raised by his firm M/s. Shree Ganesh Knit (India) Ltd. and bill book No.1 contains the duplicate carbon copies of the bills raised by his said firm as well as by M/s. Ramesh Washing Contractor to the said factory for their job charges.
8. On the basis of the result of investigations and the statements of various persons recorded during such investigations, proceedings were initiated against the appellants by way of issuance of a show cause notice dated 30.07.97 alleging clandestine manufacture and removal of the final processed fabrics and proposing to confirm demand of duty of Rs.2,87,27,466/- (Rupees Two Crores Eighty Seven Lakhs Twenty Seven Thousand Four Hundred and Sixty Six only) against them along with confirmation of interest, confiscation of land & machinery etc. and imposition of penalty upon the said unit as also upon the other appellants in terms of the provisions of Rule 209A of the Central Excise Rules, 1944. The noticee also proposed confirmation of demand of duty of Rs.4,06,745/- in respect of shortages detected at the time of visit of the officers. The said show cause notice stands culminated into the impugned order passed by the Commissioner vide which he has confirmed the demands of duties and imposed penalties, as detailed in the first paragraph of the order.
9. Shri Willingdon Christian, learned advocate appearing for the appellant has placed written submissions on record in respect of M/s. Shree Ganesh Knit (India) Ltd., which are mainly on the ground that the entire case of the Revenue is based upon the recovery of documents from the premises of Shri Rameshbhai Babulal Marwadi, which is a third party and the allegations of clandestine removal cannot be based upon the same. Reliance in this regard placed upon various decisions of the Tribunal. He has also submitted that as Shri Rameshbhai Babulal Marwadi had access to all the documents of the appellant company, it would have been easier for him to prepare the document with the help of xerox copies. It stands further submitted in the written submissions that despite the recovery of incriminating documents from the possession of Shri Rameshbhai Babulal Marwadi, he was not made party to the show cause notice. He submits that the figures shown in the said documents are not substantiated by independent corroboration by any other source and as such confirmation of demand on the basis of the same is not justified. There is a total lack of investigation on the part of the Revenue in as much as statement of any other worker, production supervisor or any other person has not been recorded so as to prove the allegations of clandestine production and removal.
10. Though we find that the thrust of the learned advocates arguments were mainly in respect of the imposition of penalties on the Managing Director and Joint Managing Director of the company and no serious arguments were advanced during the course of hearing in respect of the appeal of M/s. Shree Ganesh Knit (India) Ltd. but we consider it fit to refer to the written submissions filed by the said appellant and the reasoning adopted by the Commissioner for confirmation of demand against them.
11. No doubt the starting point of the investigation of the Revenue was recovery of incriminating documents including bill books raised by Shri Rameshbhai Babulal Marwadi, from his residential premises. The said Shri Rameshbhai Babulal Marwadi is proprietor of one M/s. Ramesh Washing Contractor and was doing the various processing jobs for M/s. Shree Ganesh Knit (India) Ltd.. The said fact does not stand denied by the appellant. The bill books raised by the said appellant were further shown to Shri Dilipbhai Amrutlal Mewada, who was working as dying and finishing master of M/s. Shree Ganesh Knit (India) Ltd. He in his statement has admitted raising of the said bills by Shri Rameshbhai Babulal Marwadi and receipt of the same by him. He has further disclosed that such bills were duly signed by him subsequently, after checking the authenticity of the same, they were forwarded to the accounts department for payment purposes. It is seen that after the accounts department passes such bills, the same were received in the office premise of the company and the Managing Director puts his initials on the same. Thereafter payments were made to Shri Rameshbhai Babulal Marwadi. As such it cannot be said that the Revenues case is solely based upon the recovery of the documents from Shri Rameshbhai Babulal Marwadis residence. The above facts also stand admitted by Shri Babulal Chimanlal Shah, Manager and Authorised Signatory of the company.
12. The above facts stand further corroborated by recovery of the said bills from the office premises of the company located in cloth market, Ahmedabad and with the statement of the Managing Director Shri Arvindkumar Ganeshmal Dugar and Shri Shreyaskumar Ganeshmal Dugar. Not only that the bill books recovered from the premises of Shri Rameshbhai Babulal Marwadi stand also admitted by Shri Vishnubhai Mohanbhai Prajapati having admitted that bill book No.12 belongs to his company M/s. Dipesh Finishing Contractor and reflects upon the bills raised by his company for carrying out various processes like printing, bleaching, dying etc. In fact we find that the Commissioner, in his impugned order has dealt with each and every submission of the appellant in detail.
The fact of recovery of documents from the residential premises of Shri Rameshbhai Babulal Marwadi, the corroboration of the same by Shri Bhairusingh Ajitsingh Parihar, Shri Dilipbhai Amrutlal Mewada, Shri Babulal Chimanlal Shah, Shri Vishnubhai Mohanbhai Prajapati, Shri Shreyaskumar Ganeshmal Dugar, Shri Arvindkumar Ganeshmal Dugar coupled with the recovery of the original contract bills raised by M/s. Ramesh Washing Contractor from the office premises of the company along with the recovery of other documents, the bills received duly signed by Shri Babulal Chimanlal Shah in token of his having received of processing charges for which various processes were carried out by him, the appearance of signatures of Shri Dilipbhai Amrutlal Mewada on the said bills in token of his having verified the same, are required to be held as sufficient evidences for arriving at a finding of clandestine removal by the said company. In fact we note that the learned advocate appearing for the said appellant has not advanced any detailed arguments on behalf of the said appellant and there was a candid admission on their part as regards the findings of the adjudicating authority in respect of clandestine removal.
13. In view of the above discussions, we uphold the confirmation of demand of duty of Rs.2,87,27,466/- and of Rs.4,06,745/- against M/s. Shree Ganesh Knit (India) Ltd. along with confirmation of interest leviable in terms of Section 11AB of the Central Excise Act is also upheld. Their liability to penal action under Section 11AC is also upheld. As regards quantum of penalty, we discuss in the subsequent paragraphs. We further note that the adjudicating authority has confiscated land, building, plant, machinery, materials and other things used in connection with the manufacture production storage removal etc. with an option to the appellant to redeem the same on redemption fine of Rs.30 lakhs. However we find that in as much as penalty stands imposed upon the appellant, there is no justification for confiscation of the land, building, plant etc. The same is accordingly set aside.
14. As regards the imposition of penalty of Rs.30 lakhs each on Shri Arvindkumar Ganeshmal Dugar, Managing Director and Shri Shreyaskumar Ganeshmal Dugar, Joint Managing Director, it stands strongly contested before us that the demand of duty confirmed against M/s. Shree Ganesh Knit (India) Ltd. was the duty liable to be paid under the provisions of Additional Duties of Excise (Goods of Special Importance) Act, 1957. The period involved is from August 1992 to December 1995. The provisions of the said Act did not contain any penal provisions during the relevant period upto May 1994, as held by the Honble Delhi High Court in the case of Pioneer Silk Mills Vs. UOI reported in 1995 (80) ELT 507 and subsequently confirmed by the Honble Supreme Court in the case of Collector of Central Excise, Ahmedabad Vs. Orient Fabrics Pvt. Ltd. reported in 2003 (158) ELT 545 (S.C.). It was held in the said decisions that there is no provision for penalty or confiscation under the Additional Duties of Excise (Goods of Special Importance) Act, 1957. Learned advocate submits that though the above plea was raised before the adjudicating authority, he has observed that since the provisions of the said Act were amended w.e.f. May 1994 and the show cause notice was issued on 30.07.97, when the amended provisions were in force, the decision of the Delhi High Court in the case of Pioneer Silk Mills will not have any applicability to the facts of the present case. Learned advocate draws our attention to the Honble Supreme Courts judgment in the case of Orient Fabrics Pvt. Ltd. wherein it was held that as the words offences and penalties have consciously been inserted in the said Act by way of substitution of sub section 3(3) of the said Act w.e.f. May 1994, and the cause of action for imposing the penalty and directions of confiscation having arisen in that case in the year 1987, the amended provisions have no effect to the facts of that case. Such amendment brought with a view to remedy the defect contained in the un-amended provisions of Section3(3) cannot be given a retrospective effect.
15. We agree with the learned advocate on the above issue. The provisions of Additional Duties of Excise (Goods of Special Importance) Act, 1957 did not contain any provision for imposition of penalty or confiscation under the said Act during the period prior to May 1994 and as such liability for any penalty, confiscation etc. was introduced w.e.f. May 1994, we hold that the appellants were not liable to penalty till May 1994 and their liability to penalty would arise only w.e.f. May 1994 onwards till December 1995. Accordingly the penalty imposed upon M/s. Shree Ganesh Knit (India) Ltd. is also required to be re-quantified, equivalent to the duty amount evaded during the period May 1994 onwards to December 1995. The appellants Jurisdictional Central Excise Authorities would quantify the same in above terms.
16. Having held that no penal liability could arise against the appellants till May 1994, we find that their liability to penalty is required to be examined for the period May 1994 to December 1995. Learned advocate has argued that the penalties on the Managing Director and Joint Managing Director stand imposed in terms of the provisions of Rule 209A/Rule 26 of Central Excise Rules, 2002. As per the various decisions, the said rule can be invoked against a person only when there is a specific finding of his personal gain or personal knowledge in evasion of duty by the company. In the absence of any evidence that he knew or had any reasons to believe the duty was being evaded, penalty cannot be imposed on him on the sole ground of the director. He submits that there has to be a specific finding by the authorities below that any goods are liable to confiscation. In as much as in the present case no goods have been found liable to confiscation penalty under Rule 209A cannot be upheld. For the above proposition he places reliance on the Tribunals decision in the case of Atul Ltd. Vs. Commissioner of Central Excise, Valsad reported in 2005 (189) ELT 189 (Tri. Mumbai), in the case of Raj Petroleum Products Vs. CCE, Mumbai reported in 2005 (192) ELT 806 (Tri. Mumbai) as also on the Tribunals decision in the case of Mahindra Ugine Steel Co. Ltd. Vs. CCE Pune reported in 2007 (80) RLT 55.
17. For better appreciation we reproduce the provisions of Rule 209A of the Central Excise Rules.
Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or ten thousand rupees, whichever is greater.
18. As is clear from the above reading of Rule 209A, the same would get invoked if any person is charged with the dealing of the excisable goods in any manner enumerated therein with a knowledge or with a reason to believe that the goods dealt with by him are liable for confiscation. As such the essence of the said rule is that the person charged must have either the knowledge or a belief that the goods in question are liable for confiscation. The actual confiscation of the goods is not required. With the above understanding of the statutory provisions, the only thing required to be seen is as to whether Shri Arvindkumar Ganeshmal Dugar and Shri Shreyaskumar Ganeshmal Dugar had dealt with the goods cleared clandestinely by them with a knowledge or with a reason that the same were liable to confiscation.
19. Having upheld the findings of clandestine removal arrived at by the adjudicating authority against M/s. Shree Ganesh Knit (India) Ltd., we find that the evidence relied upon, includes the recovery of bills raised by M/s. Ramesh Washing Contractor and the other unit from the office premises of M/s. Shree Ganesh Knit (India) Ltd. The Managing Director Shri Arvindkumar Ganeshmal Dugar had admitted having put his initials on the same, in token of having got the work done and for the purposes of passing the bills. Similarly statement of Shri Shreyaskumar Ganeshmal Dugar is inculpatory admitting that the goods were being cleared by them. There is a clear finding by the Commissioner in his impugned order that Shri Arvindkumar Ganeshmal Dugar was in the active knowledge that the huge quantity of manmade fabrics had been manufactured and cleared clandestinely from his factory. He was involved in the daily affairs of the factory. He has admitted in his statement recorded during the course of investigation that he was looking after the factorys work from the beginning and was also present in the factory from time to time. He has corroborated the statement of various persons and has identified his initials appearing on the various bills raised by Shri Rameshbhai Babulal Marwadi. The statement of Shri Dilipbhai Amrutlal Mewada also shows that the various bills for various processing purposes were being ultimately received by Shri Arvindkumar Ganeshmal Dugar in his office and was cleared by him after putting his signatures on the same. As such it cannot be said that Shri Arvindkumar Ganeshmal Dugar was not in knowledge of the fact of clandestine removal of the processed fabrics from his factory.
20. Similarly Shri Shreyaskumar Ganeshmal Dugar was looking after the day to day work of the factory and has admitted in his statement dated 09.05.97 that the daily reports of the various processes done by the factory was being received by him and after seeing the same he was returning them. Further the statements of Shri Rameshbhai Babulal Marwadi, Shri Dilipbhai Amrutlal Mewada, Dying & Finishing Master are to the effect that the said bills etc. were being placed before Shri Shreyaskumar Ganeshmal Dugar and he was verifying all the reports including the production report prepared and submitted by Shri Dilipbhai Amrutlal Mewada. On the above basis Commissioner has come to a clear finding that he was in active knowledge and was in fact Master minding the manufacture/processing of the fabrics and removal of the same in clandestine manner. As such it is evident that he was in the active knowledge and was supervising the entire dealings with regard to the clandestine manufacture and removal. He is admittedly liable to penalty under Rule 209A of the Central Excise Rules.
21. Further on going through the decisions of the Tribunal relied upon by the learned advocate, we find that either there was no finding of fact as regards knowledge of clandestine removal on the part of the Managing Directors or the allegations of clandestine removal were dropped against the manufacturing unit itself. The ratio of the same is not applicable to the facts and circumstances of the case.
22. However having held that the said appellants were not liable to penalty till May 1994, we reduce the penalty imposed upon the said two applicants Shri Arvindkumar Ganeshmal Dugar and Shri Shreyaskumar Ganeshmal Dugar to Rs.5,00,000/- (Rupees Five Lakhs Only) each. Their appeals are disposed off accordingly.
23. As regards penalty on Shri Babulal Chimanlal Shah, it stands argued before us that he was simply a manager and authorised signatory of the company and was acting under the directions of his bosses and was not personally benefited. As such penalty imposed upon him should be set aside in toto. For the above, reliance is placed upon Carpenter Classic Exim Pvt. Ltd. Vs. CCE Bangalore reported in 2006 (200) ELT 593 (Tri. Bang.), Rammaica (India) Ltd. Vs. CCE Mumbai reported in 2006 (198) ELT 379 (Tri. Mumbai) and O.P. Agarwal Vs. CC Kandla reported in 2005 (185) ELT 387 (Tri. Del.).
24. From the impugned order we find that penalty stands imposed on Shri Babulal Chimanlal Shah by the Commissioner by observing that he was the Manager and Authorised Signatory of the manufacturing unit and he, in his statement, has admitted that the contract bills raised by M/s. Ramesh Washing Contractor were being verified by Shri Dilipbhai Amrutlal Mewada, dying and finishing master and the entries were accordingly being made either in the statutory records or in private records. No active role stands attributed to Shri Babulal Chimanlal Shah by the impugned order of the Commissioner. As such, in view of the law, laid down as above, we set aside penalty of Rs.5,00,000/- (Rupees Five Lakhs only) imposed upon him.
25. In view of the above, all the four appeals are disposed off as under:
i) Duty of Rs. Rs.2,87,27,466/- and Rs. 4,06,745/- stands confirmed against M/s. Shree Ganesh Knit (India) Ltd.
ii) Confiscation of land, building, machinery etc. stand set aside.
iii) As regards imposition of penalty on the said appellant, matter is remanded to the original adjudicating authority to quantify the demand for the period May 1994 onwards and to impose equivalent penalty on the said appellant in terms of Provisions of Section 11AC.
iv) Appeals of Shri Arvindkumar Ganeshmal Dugar and Shri Shreyaskumar Ganeshmal Dugar stand disposed off by reducing penalty to the extent of Rs.5,00,000/- (Rupees Five Lakhs only) each.
v) The appeal of Shri Babulal Chimanlal Shah allowed by setting aside penalty of Rs.5,00,000/- imposed upon him.
(Pronounced in Court on ___________________) (B.S.V. Murthy) (Archana Wadhwa) Member (Technical) Member (Judicial) jk ??
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