Gujarat High Court
Ayaz A Kadar Teli - Sole Propreitor Arzoo ... vs Union Of India Thro on 28 February, 2013
Author: Akil Kureshi
Bench: Akil Kureshi
AYAZ A KADAR TELI - SOLE PROPREITOR ARZOO ENTERPRISES....Petitioner(s)V/SUNION OF INDIA THRO SECRETARY C/SCA/2071/2013 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 2071 of 2013 ================================================================ AYAZ A KADAR TELI - SOLE PROPREITOR ARZOO ENTERPRISES....Petitioner(s) Versus UNION OF INDIA THRO SECRETARY & 3....Respondent(s) ================================================================ Appearance: MR DHAVAL SHAH, ADVOCATE for the Petitioner(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 28/02/2013 ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Leave to place correct copy of the order-in-original is granted.
Petitioner has challenged order dated 23.12.2011 passed by the Government of India as Revisional Authority in following factual background:
2.1 Petitioner is engaged in export of made-ups. Petitioner filed 10 separate rebate claims on the ground that having spotted such goods, the CENVAT credit paid on such exported goods would be available and repaid to the petitioner.
Adjudicating Authority i.e. the Assistant Commissioner of Central Excise issued a show-cause notice on 03.11.2006 calling upon the petitioner to show-cause why such rebate claims should not be rejected and penalty should not be imposed under Section 11 AC of the Central Excise Act, 1944. The show-cause notice was based on the allegations that as per the petitioner, the petitioner had availed CENVAT credit for having purchased the materials from various agencies including M/s. Rado Exports. It was noted that there was large scam unearthed in Surat-I Commissionerate regarding fraudulent rebate claims where the exporters have submitted forged bogus shipping bills, ARE-1 and other documents. During investigation, it was noticed that in number of cases the manufacturers had issued duty paid invoices without any movement of goods and, in fact, no goods were sold by them. Based on such bogus duty paid documents, number of parties had claimed CENVAT credit and some of them made rebate claims on the basis of such invoices running into crores of rupees. The show-cause notice further alleged that during the course of verification of the rebate claims filed by the petitioner, it was noticed that M/s. Omega Overseas had issued CENVATABLE invoices. It was found that M/s. Omega Overseas is a manufacturer of ready made garments whereas, the goods exported by the petitioner, in the instant case, was made-ups as well as MMF (P). This would show that M/s. Omega Overseas has passed on fake CENVAT credit to facilitate the petitioner to avail the same for the purpose of rebate. Verification of the rebate claims further reveled that the invoices, on the strength of which CENVAT credit was taken, were non-existent/fake/bogus. Thus, the entire amount of CENVAT credit availed by M/s. Omega Overseas was irregular and utilization of the same for payment of duty was also irregular. It was further alleged that:
10. It appears that in the instant M/s. Omega Overseas, Junagadh, is the supplier to M/s. Arzoo Enterprises, Surat, whereas M/s. Omega Overseas is a manufacturer of ready made garments. M/s. Omega Overseas has procured MMF(P) from the exporter, M/s. Rado Exports, Surat and M/s. Rado Exports has got the exported goods manufactured from M/s. Arzoo Enterprises. From the above facts, it appears that the exported goods in the instant case i.e. made ups as well as MMF(P) belongs to M/s. Rado Exports only and the fabricated documents indicates that M/s. Rado Exports has supplied made ups and MMF(P) to Arzoo Enterprises for processing and the exporter M/s.
Rado Exports has purchased the exported goods from M/s. Arzoo Enterprises. The aforesaid fabricated story indicate only that there is no physical movement of the goods and M/s. Rado Exports, has done nothing but procured the exported goods from the fake manufacturer, and exported the same and for obtaining rebate on the goods exported, M/s. Rado Exports has fabricated the documents with the active connivance of M/s. Arzoo Enterprises and Omega Overseas, for their commission or any monitory benefit by way of claiming rebate for the export by M/s. Rado Exports. Even the address of the exporter as per ARE-1 is 210, Zuber Chambers, Salabatpura, Surat whereas as a supplier to M/s. Omega Overseas, Junagadh, the address of Rado Exports is 304, Merchant Apartment, Badekhan Chakla, Surat. Thus M/s. Rado Exports is one and the same for both the different addresses as mentioned above. Thereby they have rendered themselves liable for penalty for the omission or commission as discussed hereinabove and also rendered the rebate claim liable for rejection.
11. Whereas it appears that M/s. Arzoo Enterprises, Shop No. 6, New Motiwala Market, Vansfoda Street, Chow Bazar, Surat, knowingly and/or unkonwingly concerned in relation to receipt of goods whereon no Central Excise duty has been paid, yet the Cenvat credit thereon has been availed and utilised in relation to payment of duty on exported goods and even claimed the so called paid duty by way of claiming rebate on the exported goods and for this act or omission on their part, they have committed type of offence which has rendered them liable to penalty under Rule 13 of Cenvat Credit Rules, 2002.
Inter alia on such grounds, the above-mentioned show-cause notice was issued.
2.2 Petitioner neither replied to the show-cause notice nor appeared before the Assistant Commissioner at any time during the course of adjudication. The Assistant Commissioner thereupon passed his order-in-original dated 14.12.2007. He rejected the rebate claims and also imposed penalties on the petitioner firm. In such order he held and observed as under:
14.
Personal hearing was fixed on 05.12.07, 06.12.07 & 07.12.2007. But no one had attended the personal hearing on the mentioned dates as well as no reply in written has been received by this Office against the Show Cause Notice from the claimant. Hence the case is decided on Ex-PARTE and the records available with the file.
Findings :
15.
In the SCN at Para No. 14 & 15 it was clearly mentioned that noticee were required to give defence reply within 30 days from the receipt of SCN. However 1 found that even after lapses of 1 5 months period party had not filed / replied till date nor did they appear for Personal hearing given as above. As such I do not want to delay the adjudication proceedings and wish to decide the case EX-PARTE on the basis of material evidences available on record.
Now, the main issue to be decided by me is whether the rebate claimed by the party is admissible or otherwise.
16. I have gone through the rebate claims as mentioned in the brief facts of the above case I find that on verification of the rebate claims filed by the claimant in respect of above mentioned ARE-Is, it was noticed that M/s. Omega Overseas, Junagadh (hereinafter called as the supplier for the sake of brevity) have issued CENVATABLE invoices to the manufacturer / claimant who has taken Cenvat Credit on the basis of these invoices. It also appears that M/s. Omega Overseas is a manufacturer of ready made garments and the goods exported in the instant case is made ups as well as MMF (P) which concludes that M/s. Omega Overseas has passed on the fake cenvat credit to facilitate M/s. Arzoo Enterprises, Surat to avail the same and utilize it towards the payment of duty towards the exported goods.
17. Further I find that during the course of verification of rebate claim and genuineness of the supplier of goods, it appears that, the invoices on the strength of which the Cenvat Credit taken by the manufacturer/claimant were found non-existing/fake/bogus by way of Annexure-D verification from concerned Commissionerate, reported vide letter F.No.IV/10-02/PI/2005-06 dtd.08/08/06 by the Assistant Commissioner (AE), Central Excise, Bhavnagar, that entire amount of cenvat credit availed by M/s. Omega Overseas, Junagadh is irregular and hence its utilization towards payment of duty to all its customers is also irregular and improper. As the manufacturer/claimant had procured the goods from the so called supplier and availed the said credit for payment towards the exported goods, whose entire amount of Cenvat credit is irregular and improper and therefore the rebate claim is liable for rejection.
18. From the above I find that the manufacturer/claimant has taken wrong Cenvat credit on the basis of fake invoices issued by the supplier. As the supplier M/s. Omega Overseas, Junagadh, had issued invoices for sale of the goods without actual movement of the goods to facilitate certain unscrupulous buyers to avail rebate thereon, hence there is no question of any supply of goods and it appears that the manufacturer/claimant has taken the Cenvat credit wrongly on the basis of paper transaction without actual movement of goods and has also issued Central Excise duty payment invoices to the exporter without any physically movement of the goods. As the manufacturer/claimant has not received the goods covered by the invoice of supplier based on which a edit has been taken physically, there is no question of this being supplied to the exporter. Therefore, it appears that the Supplier have issued fake Central Excise invoices on which the manufacturer/claimant has availed Cenvat Credit and utilized the same towards payment of Central Excise duty on the purported sale to the exporter. As no movement of goods has taken place at all, the duty payment, invoices issued by the manufacturer/claimant: is also fake and no rebate can be granted against these fake invoices.
19. Further, I find that manufacturer/claimant M/s. Arzoo Enterprises, Shop No.6 Neva Motiwala Market, Vansfoda Street, Chowk Bazar, Surat has contravened the provisions of Rule 9(3) of Cenvat Credit Rules, 2004 by taking fake CENVAT Credit on the basis of suppliers invoices without any physical receipt of the goods and also issuing fake invoices to the exporter without any physical movement of goods to facilitate claim of rebate. Accordingly, M/s. Arzoo Enterprises, Shop No.6, New Motivala Market, Vansfoda Street, Chowk Bazar, Surat are liable for penalty under Cenvat Credit Rules, 15(2) of 2004 read with Section 11 AC of the Central Excise Rules, 2002 by issuing bogus/fake duty payment invoices and therefore liable for penalty under Rule 25 of the Central Excise Rules, 2002.
20. It also appears that in the instant M/s. Omega Overseas, Junagh, is the supplier to M/s. Arzoo Enterprises, Surat, whereas M/s. Omega Overseas is a manufacturer of ready made garments. M/s. Omega Overseas has procured MMF (P) from the exporter, M/s. Rado Exports, Surat and M/s. Rado Exports has got the exported goods manufactured from M/s. Arzoo Enterprises, Surat. From the above facts, it appears that the exported goods in the instant case i.e. made ups as well as MMF (P) belongs to M/s. Rado Exports only one the fabricated documents indicates that M/s. Rado Exports has supplied MMF (P) to M/s. Omega Overseas, who is a manufacturer of ready made garments, but M/s. Omega Overseas has supplied made ups and MMF (P) to Arzoo Enterprises for processing and the exporter M/s. Rado Exports has purchased the exported goods from M/s. Arzoo Enterprises, Surat. The aforesaid fabricated story indicate only that there is no physical movement of the goods and M/s. Rado Exports has done nothing but procured the exported goods from the fake manufacturer, and said to be exported the same and for obtaining rebate on the goods said to be exported, M/s. Rado Exports has fabricated the documents with the active connivance of M/s. Arzoo Enterprises, Surat and Omega Overseas, for their commission or any monetary benefit by way of claiming rebate for the export by M/s. Rado Exports. Even the address of the exporter as per ARE-1 is 210, Zuber Chambers, Salabatpura, Surat whereas as a supplier to M/s. Omega Overseas, Junagadh, the address of M/s. Rado Exports is 304, Merchant Apartment, Badekhan Chakla, Surat. Thus M/s. Rado Exports is one and the same for both the different addresses as mentioned above. Thereby they have rendered themselves liable for penalty for the omission or commission as discussed hereinabove and also rendered (tie rebate claim liable for rejection.
21. Further I find that M/s. Arzoo Enterprises, Shop No.6, New Motiwala Market, Vansfods Street; Chowk Bazar, Surat, knowingly and/or unknowingly concerned in relation to receipt of goods wheteon no Central Excise duty has been paid, yet the Cenvat credit thereon has been availed and utilised in relation to payment of duty on exported goods and even claimed the so called paid duty by way of claiming rebate on the exported and for this act or omission on their part, they have committed type of offence which has rendered them liable to penalty under Rule 15 of Cenvat Credit Rules, 2002. It reveals that all are paper transaction & not actual transaction of any goods hence rebate claim is liable for rejection of all above mentioned ARE1 s. Also M/s. Arzoo Enterprises, Surat, M/s. Omega Overseas, Junagadh and M/s. Rado Exports, Surat deserves the maximum penalty under the law.
2.3 The petitioner appealed against such order of the Adjudicating Authority and, such appeal came to be dismissed qua the petitioner. Petitioner thereupon approached the Revisional Authority. Revisional Authority dismissed such revision petition observing that:
7. On perusal of records, it is observed that applicants filed different rebate claims of duty paid on exported goods under Rule 18 of Central Excise Rules, 2002. The said claims were rejected by Adjudicating Authority on the ground that the duty on exported goods was paid out of cenvat credit taken fraudulently on the basis of invoices issued without any physical movement of the goods. The said order-in-original were upheld by Commissioner (Appeals). Now the applicant has filed these revision application against the orders of Commissioner (Appeals) on the ground stated in para (4) above.
8. Government observes that the applicants have availed Cenvat Credit based an Invoices issued by M/s. Omega Overseas, Junagarh in respect of readymade garment without actual movement of goods and also availed Cenvat Credit against invoices of fabrics of various persons which included M/s. Rado Exports (The merchant exporter), who also reported availed fraudulent Cenvat Credit and passed the same. As such, there appears to be a case of circular documentation and ultimately, the duty paid through Cenvat Credit on export goods found to be fraudulent.
9. Government notes that departments conclusion are based on properly and reasonably caused investigations/verifications. The applicants counter arguments are either self interpretations of relevant Rules/Regulations/Circulars/Citations or are verbal plea by way of maneuvering the language to plead in favour of their claimed rebates. The Government notes that what remains a fact is that due verifications rebates. The Government notes that what remains a fact is that due verifications were indeed done and the proper authorities conclusively proved that in the instant cases frauds involving fake/fictitious identities took place. Proper Alert Circulars were issued in this regard. Government does not find any contrary evidence supported by any legal document of evidential value in favour of the applicant herein.
10. Applicant had been pleading that goods were exported and duty was paid and he made the payment by cheque to the suppliers of grey facbrics so rebate cannot be denied. In this regard, it is observed that unless and until duty paid character of exported good is proved, the rebate cannot granted. Government observes that allegation of department for no physical movement of goods from M/s. Omega Enterprises to the applicants has not be conclusively controverted by the applicants.
Moreover the merchant exporter has purportedly procured the grey fabrics from non existing supplier and supplied it to M/s. Omega Overseas. So, the both were involved in fraudulent availment of Cenvat Credit and fraudulent payment of duty. Under such circumstances, duty paid character of goods is not proved.
11. Apex Court Judgement in the case of Omkar Overseas Ltd. [2003 (156) ELT 167 (SC)] is relevant to decide the issue at hand. The Hon ble Court has in unambiguous terms held that rebate should be denied in cases of fraud.
12. In Sheela Dyeing & Printing Mills (P) Ltd. [2007 (219) ELT 348 (Tri)-Mum)] the CESTAT has held that any fraud vitiates transaction. This judgement has been upheld by the Hon ble High Court of Gujarat. In a recent judgement in the case of Chintan Processors [2008 (232) ELT 663 (Tri. Ahm), the CESTAT while deciding the question of admissibility of Credit on fraudulent invoices had held as follows:
Once the supplier is proved non existent, it has to be held that goods have not been received. However, the applicant s claim that they have received goods but how they have received goods from a non-existent supplier is not known.
13. In view of the above, Government finds that duty paid character of exported goods was not proved which is a fundamental requirement for claiming rebate under Rule 18 of Central Excise Rules, 2002. As such, Government finds no infirmity in the impugned order-in-appeal and therefore upholds the same.
2.4 It is against this order that the petitioner has filed this petition.
Having heard learned counsel for the petitioners we find that the entire issue is based on appreciation of facts. In the show-cause notice, the department had set-up a clear case of fraudulent availment of CENVAT credit. In fact, the allegation, that M/s. Omega Overseas was involved in manufacture of some other items from those which were exported by the petitioner, the department clearly indicated that the petitioner was very much a party to such fraud. Notably, the petitioner never opposed any of the allegations made in the show-cause notice nor participated in the adjudication thereof. Assistant Commissioner granted opportunities, which the petitioner did not avail of. It is only thereafter that he confirmed his prima facie opinion indicated in the show-cause notice. In absence of any contrary material, we are unable to disturb any of the findings arrived at by the Adjudicating Authority. Appellate Authority as well as Revisional Authority have examined the issues at the instance of the petitioner. No infirmity is pointed out to us. In exercise of writ jurisdiction, we are not inclined to interfere. Counsel for the petitioner did argue that the documents in the nature of reports were not supplied to the petitioner, however, the petitioner did not reply to the show-cause notice nor asked for any documents. We fail to see at which stage the department could have done so.
In the result, we find no reason to interfere. Petition is dismissed.
(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) Jyoti Page 11 of 11