Customs, Excise and Gold Tribunal - Tamil Nadu
Ramachandra Rexins (P) Ltd. vs Commissioner Of Central Excise on 22 September, 1998
Equivalent citations: 1999(63)ECC132
ORDER S.L. Peeran, Member (J)
1. This appeal arises from Order-in-Original dated 30.12.86 passed by Collector, Central Excise, Bangalore, confirming a duty demand of Rs. 25,89,724.12 under the provisions of Section 11A of CE and S Act, 1944 by invoking extended period of five years. A penalty of Rs. 5,00,000/- has also been imposed under Rule 173Q of CE Rules. 1944. Besides ordering for confiscation of Plant and machinery, however, granting redemption on payment of fine of Rs. 1,00,000/-. He has also ordered for confiscation of 5068.4 mtrs. of coated cotton fabrics. 118.38 Kgs. of chindis and 458 Kgs. of cotton waste valued at Rs. 1,53,230.06 seized at premises No. 29/2. IV Main Road, New Tharagupet, Bangalore-2 on 27.11.85, from M/s. Subramanyam & Co. under Rule 52A read with 173Q of CE Rules. However, the same were ordered to be released provisionally on execution of B-11 bond for Rs. 1.52,800/- with cash security of Rs. 76,392/-. As the party had failed to release the goods provisionally, therefore the Collector granted option to redeem on payment of redemption fine of Rs. 15000/- imposed under Section 34 of Central Excise and Salt Act, 1944. The Collector has also ordered for confiscation of 1221.01 mtrs. of coated cotton fabrics valued at Rs. 32,528.60 seized at the premises of Ms. International Traders at No. 218, A. Govindappa Naicken Street, Madras-1 on 26.11.85 under Rule 52A read with Rule 173Q of CE Rules. The goods were also ordered to be released provisionally to the said party on execution of B-l1 bond for Rs. 32.530/- with a cash credit of Rs. 16,264/-. Since the party failed to get the goods released provisionally, he has granted option to get the same redeemed on payment of fine of Rs. 3,500/-imposed under Section 34 of the Act.
2. The short facts of the case are that the appellants are manufacturers of articles falling under T.I. 19 (III) of Central Excise Tariff, namely coated cotton fabrics (also called Rexin cloth) at their factory situated at No. 253, III Stage. Bommasandra Industrial Estate, Bangalore-562145. The said unit had a registered office at 29/2, 4th Main, New Tharagupet, Bangalore-2. Intelligence was gathered by the officers of Directorate of Anti-Evasion, to the effect that M/s. Ramachandra Rexins (Pvt.) Ltd. were evading excise duty by suppressing the actual production by manipulating accounts. On the basis of the said intelligence, the factory and office premises of the company were searched on 21.2.85 and certain records which appeared to be incriminating were seized. On perusal of the documents, necessary investigations were conducted at different places to assess the quantity of goods cleared without payment of duty by the said company. The officers searched the premises of M/s. International Traders in Madras on 26.11.85 and seized a quantity of 1,221.1 Mtrs. of coated cotton fabrics valued at Rs. 32,528.60 under a mahazar, on the reasonable belief that the said goods were non-duty paid. As a follow up. the premises of M/s. Subramanyam and Company, at No. 29/2, Ground Floor, IVth Main Road, New Tharagupet, Bangalore-2 was searched on 27.11.85 and a quantity of 5.068.4 Mtrs. of coated cotton fabrics, 118.38 Kgs. of Chindis and 458 Kgs. of cotton waste, all valued at Rs. 1,53,230.06 were seized under a Mahazar. Further investigation was conducted to unearth the quantum of clandestine removal of goods by the company to different firms like M/s. International Traders. M/s. Subramanyam and Co., M/s. Meenakshi Enterprises. M/s. Ramkumar Enterprises, etc. Verification of stock of the goods at M/s. International Traders, Madras and at the Company's factory revealed that certain roll numbers assigned to the rolls, under seizure at Madras were also available on the stock of Chindis available in the factory at Bangalore. It was also found that some of the rolls found at M/s. International Traders, Madras on 26.11.85, were in fact sold by the company to a different party, i.e. M/s. Ajantha Rexin and Plastics Ltd., Ernakulam as a different variety. It appeared that M/s. International Traders have been getting several consignments from the company without accounting. The sale of such unaccounted receipts appeared to be without raising any bills and also by raising a bill in the name of a fictitious firm by name, Tamil Nadu Sales Corporation. It appeared that the value of goods sold with the invoice of Tamil Nadu Sales Corporation as disclosed by Shri A. Khandasamy, Manager of M/s. International Traders was Rs. 2.21,043.98. The approximate value of coated cotton fabrics sold without bills appeared to be Rs. 5.00.000/-' A further check of the invoices raised by M/s. International Traders. Madras, with the purchase invoices of the company revealed that M/s. International Traders appeared to have made excess sales and have sold some varieties which were not at all received by them and sold some varieties which were not at all received by them and sold some varieties more than what was received by them. The total value of goods which appeared to be sold in excess of what had been received is Rs. 7,50,600.64 for the years 1984-85 and 1985-86.
3. From the investigation, it appeared that M/s. Subramanyam and Company, Bangalore have received huge quantities of unaccounted coated cotton fabrics from the company and marketed them without raising bills/invoices. It appeared they had fabricated their records and created fictitious firms to covery up the receipts, disposals and payment made on such unaccounted cotton fabrics. It appeared that certain fictitious firms like Manohal Enterprises, Bombay, M/s. Chandran Finance Corporation, etc. have been created in the books of account of M/s. Subramanyam and Company. It also appeared that Ms. Subramanyam and Co. have received may rolls of coated cotton fabrics having repeated cotton fabrics which appeared to be cleared without payment of duty by the company. The value of clearances works out to Rs. 7,37,806.20. It appeared that the company appears to have arranged for making payments out of sale proceeds of unaccounted supplies by the company to various raw material suppliers, etc. through M/s. Subramanyam & Co. and such payments made by M/s. Subramanyam & Co. have been shown as receipts from M/s. Subramanyam & Co. by the company which amount to Rs. 12,11,927.73. It appeared that M/s. Subramanyam & Co. have made further payments out of Sale proceeds of unaccounted supplies from company amounting to Rs. 7,42.693.61 for the years 1983-84 and 84-85 and the same is shown as payments by M/s. Subramanyam and Company to the company.
4. Further investigations were conducted and it appeared that another concern which appears to be formed by the company had raised invoices on the dealers of the company in respect of the goods cleared clandestinely to them. It appeared that the only job of the said concern was to raise invoices in the name of M/s. Bharath Traders, Madurai. The officers verified the total clearances made to M/s. Meenakshi Enterprises as per invoices and Gate passes of the company and verified the same with the invoices rafised by M/s. Meenakshi Enterprises, on M/s. Bharath Traders. It appeared from the said verification, that the goods sold by M/s. Meenakshi Enter-prises to M/s. Bharath Traders, Madurai were non-duty paid and the total value of such clearances is Rs. 3,78,158.15. It was also found that there were receipts in cash to the tune of Rs. 4,54,270/-, which appears to be the receipt towards clandestine removals accounted by the company under the accounting head M/s. Meenakshi Enterprises, Madurai. The total amount of such receipts towards clandestine removal works out to Rs. 8,32,428.15.
5. It also appeared that M/s. Ramkumar Enterprises is another concern situated at No. 23, 4th Main, New Tharagupet, Bangalore who have not maintained any account in respect of receipts of coated cotton fabrics from the company and appear to have despatched several consignments as per D.C. notes. It appeared that the company had used M/s. Ramkumar Enterprises for disposal of goods without payment of duty. The value as worked out appears to be Rs. 72.381.20. From the investigation, it appeared that the company had suppressed the quantity supplied by then to certain dealers under invoices. It appeared that two invoices lave been raised in respect of such consignments; one in the name of company and the other in the name of M/s. Subramanyam & Company. It appeared from the value of goods cleared clandestinely under the cover of M/s. Subramanyam & Co. is of the order of Rs. 16.401/- and this amount has been collected through M/s. Subramanyam & Co. It appeared that M/s. Subramanyam & Co., International Traders, M/s. Meenakshi Enterprises, M/s. Ramkumar Traders were mutually interested in each other's business and that the company had created the other concerns to dispose of the goods manufactured by them clandestinely by suppressing the actual value of goods. It appeared that prices declared to the department were suppressed and there was a big difference between the prices at which the firms and the proprietory concerns receive coated cotton fabrics and sold by them. On the basis of the above investigations, a show cause notice dated 22.5.86 was issued to M/s. Ramachandra Rexins (P) Ltd.. Shri N.S. Anjaiah Setty, Managing Director alleging contravention of Rules 52A, 173B, 173C, 173F, 173G and 226 of CERule 1944 and they were asked to show cause to the Collector of Central Excise, Bangalore as to why duty demand of Rs. 25,89,724.12 as detailed in Annexure at exhibit 33 of show cause notice should not be demanded under the provisions of Section 11A of Central Excise & Salt Act, 1944 with extended time limit of five years; (ii) why penalty should not be imposed under the relevant rules and (iii) also as to why plant and machinery should not be confiscated? M/s. Subramanyam & Co. were also showcaused as to why 5,068 Mtrs. of coated cotton fabrics, 118.38 Kgs. of chindis and 458 Kgs. of cotton waste valued at Rs. 1,53,230.06 seized at the premises No. 29/2, IV Main Road, New Tharagupet, Bangalore-2 on 27.11.85 should not be confiscated under Rule 52A read with Rule 173Q of Central Excise Rules, 1944.
6. M/s. International Traders, Madras was also asked to show cause to the Collector of Central Excise, Bangalore as to why 1.221.01 Mtrs. of coated cotton fabrics valued at Rs. 32,528.60 seized at the premises of M/s. International Traders, Madras on 26.11.85 under a Mahazar dated 26.11.85 should not be confiscated under Rule 52A read with Rule 173Q of CE Rules. 1944.
7. The appellants have filed their respective replies and they were heard in great detail and thereafter the impugned order was passed.
8. We have heard Shri Anand, Ld. Chartered Accountant for the appellants and Shri S. Kannan, Ld. D.R. for the Revenue. Ld. C.A. also filed written submissions. He. contended that the adjudicating authority has grossly erred in interpretting the money transactions with certain firms selling such rexins and the manufacturers as if the value of clandestine removal. Referring to the observation of the Commissioner that the amount from customer through bank is nothing but the amount in respect of unaccounted goods said to be sold through different concerns; Ld. C.A. submitted that the very fact that money were received through bank is clearly proved that there cannot be a clandestine transaction because any clandestine transaction would not have been recorded through a bank. He stated that the Collector in his order has not understood the modality of sales of the manufacture. The entire case rests upon transactions between an agent/dealer and other buyers and no nexus has been established as between the said sale of the manufacture. He submits that the appellant manufacturer having sold the goods in its normal course of business on gate passes after payment of duty found that such goods did not come up to the quality satisfaction of the buyers. These goods were returned not to the factory of the manufacture but on instructions from Ramachandra Rexins to other sales agents of the company namely Subramanyam & Co. International Traders, etc. He submits that the letter of the independent buyers who had rejected such goods were all seized by department and are available with the department presently. The agents/dealer were selling such rejected material which had come to them without gate passes and the department had misconstrued such sales as clandestine removal. He further submitted that the various lorry way bills, the gate passes, correspondence and other documents etc. which were seized by the department are still with the department would prove clearly the above facts of the case. He also contended that the transaction between Subramanyam & Co., International Traders and others were purely on principle to principle basis. They were reflected in the books of accounts and no attempt had been made by the department to co-relate the alleged non-duty paid goods in excess of the quantity with the concerned gate passes or with the transport documents of the reputed transport agencies referred to in para 8.4 of the show cause notice. Ld. C.A. submits that the department has not proved the clandestine removal. He submitted that they had asked for cross-examination of certain witnesses and particularly Shri Kandaswamy of International Traders, Madras, who had given two statements. He submitted that non-grant of permission to cross-examine the witnesses asked for is violative of principles of natural justice. He submits that there is no evidence of clandestine removal either in terms of actual quantities removed from the factory on in terms of extra utilisation of raw material which consequently meant that further production of rexins had been done and cleared from the factory. The entire allegation is based upon money transaction as between dealers and agents of the manufacturer who were actually selling the returned goods. The sale proceeds of such returned goods were accounted by the department and this has been wrongly interpreted to be clandestine removal. He submitted that no employee of the company nor director in the factory had given any statement of attempting clandestine removal of any excisable goods cleared from the factory without payment of duty. He also submitted that the Collector had ignored that between 1983-85, RT-12 return were correctly submitted by the manufacturer and assessment had been completed. The officers who were investigating in the clandestine removal have nowhere specifically dealt with clandestine removal from the factory: nowhere detailed the quantity removed from the factory with the various transport documents which have also been seized from the factory; the Collector had ignored the important aspect that the manufacturer had sold to Subramanyam & Co. on payment of duty of Rs. 20.00,000/- worth of rexins during 83-84 and Rs. 14,00,000/- of rexins during 1984-85. In arriving figures of sales by M/s. Subramanyam and Co. and the consequent return of the goods value of the manufacture, the department had not let an evidence to prove that the goods so despatched and sold by Subramanyam and Company were more than such of those quantum received on gate passes. Such specific evidence had not been let into other agents also. It was further contended that the show cause notice and the Adjudication order do not rely upon the seized records. The Collector had ignored that the books of accounts seized by the department to establish that no goods have been removed without payment of duty. This was clear from the fact that the Collector had not referred anywhere in the entire Order-in-Original about the total clearances on payment of duty. He submits that as per Annexure 33 of the show cause notice, that a sum of Rs. 14,74,750/- represents the sale proceeds and this amount was nothing but sale proceeds of non-duty paid goods. He submits that demand of duty is based on law and not on facts. He relied on a number of judgments to show that the party could not have been the right to cross-examine the witnesses as prayed by them. Ld. C.A. on a particular query from the Bench admitted that the dealers are all related to the appellant company. He submitted that during 1984-85 and 85-86, the company had orders from Transport Corporation for manufacturing rexin for the purpose of bus seat covers. Due to sizeable rejection of duty paid fabrics, the same were diverted to the dealers noted in the show cause notice for sale to retail outlets. He submits, on a particular query from the Bench, that the company was not in a position to produce evidence of rejection of these goods by Transport Corporation or even corroborative evidence to show that the goods sold by the dealers were the rejected goods. He also admitted to a particular query from the Bench that the directors had admitted in the statements to deposit the amounts and also about the offence committed. However, he submits that subsequently they had replied to the show cause notice and had asked for cross-examination of witnesses to disprove their earlier statements and such an opportunity had not been given to them, which resulted in violation of principles of natural justice. He submits that there was no corroboration of the admissions made by the appellants directors from the department side and to proceed only on the admission is not sufficient for holding that there was clandestine removal to the extent indicated in the show cause notice.
9. Ld. D.R. pointed out to the admissions made by the appellants as well as their related dealers and the detailed finding given by the Collector. He also pointed out to the Collector's findings rejecting the prayer for cross-examination and pointed out to the reasons that there was no violation of principles of natural justice. There were clear admissions of various persons that there has been clandestine removal and that the appellants have not produced an iota of evidence to show that the goods sold by the related persons were rejected by Transport Corporation. He submits that in terms of Rule 173H it was for the appellants to have shown proof of return of rejected goods and the same has not been discharged by them. He points out that the order is a considered order and hence it is required to be upheld.
10. On a careful consideration of the submissions, we notice that the Collector had passed a detailed speaking order on all aspects of the matter and it cannot be said that the order passed by the Collector is a non-speaking order. The Collector had also given reasons for not granting the cross examination of certain witnesses. The allegation against the appellants are that there have been alleged suppression of actual assessable value of goods by indulging in transactions through related persons and claimed that their sales were to independent dealers; that they have not maintained proper accounts for goods manufactured and cleared without gate passes and without payment of duty. The duty alleged to have been evaded is Rs. 25.89.724.12. The other two parties to the case are M/s. Subramanyam and Company and M/s. International Traders, Madras who have been alleged of having received non-duty paid goods from M/s. Ramachandra Rexins (P) Ltd. Having briefly stated the facts of the case, and having taken into consideration, we notice that the C.A. did not defend the appellants on the aspect pertaining to the dealers being related persons and in view of the admission made there is no need to go into its details and hence 1 hold that the relationship between the appellant and the two dealers were not on principle to principle terms, but they were related persons.
11. As regards the denial of principles of natural justice the Collector has noted that the appellants had been granted full opportunity to peruse the records and take extracts of all the documents referred to in the show cause notice. He has also noted about the acknowledgements given by the respective parties to the case. He also has noted the maximum time has been granted to the parties to peruse, take notes and submit their replies. He has noted that the appellants had admitted and confessed to the various facts discovered in the course of investigation and that there was no retraction in the case. He has also noted that the statements were taken voluntarily. The Collector has noted the entire evidence relied by the department is on the basis of seized records and the admissions made the parties themselves. Copies of these have been furnished to them and as there was no denials from the statement therefore the question of allowing cross-examination of statements on these witnesses did not arise and in this regard he relied on the judgment rendered by the Supreme Court in the case of City Corner's case as wherein the Court observed that it is now well established that observance of principle of natural justice is the requirement of law even where the statute in question does not so provide. However, it is also well established that the principles of natural justice do not necessarily conform to a fixed formula nor is it a procrustean bed into which all the proceedings must be fitted. What is fair and justice depends on the merits facts and circumstances of an individual case and the provisions of law applicable to it. Ld. Collector has also referred to various other Supreme Court judgments and has come to conslusion that the statement had been recorded which are substantially packed by records maintained by the parties and the evidence had been communicated to the parties. The parties have been given opportunities of inspecting the records and making copies of the same. But they had not produced any rebuttal evidence against the admissions made by them. And as the admissions were so clinching to the facts of the case, the question of calling the appellants themselves for cross-examination did not arise in the facts and circumstances of the case, he did not agree to cross-examination of the witnesses as asked by them.
12. On a careful consideration of the various evidences of admissions made by the directors and others in the matter and also the fact that they had voluntarily deposited the duty which would be referred to infra, we are of the considered opinion that in the present facts and circumstances of the case, non-grant of opportunity to cross-examine some of the witnesses, who admitted the offence and were not resiled is a correct view arrived by the Collector in the matter.
13. The Collector has recorded in para 16 of the order the claims relationship of the appellants with that of the persons managing the other two dealers' firm. In this aspect held that the relationship between them was not on principle to principle basis and they were related persons. On this aspect of the matter Ld. C.A. did not argue but admitted the position and in that view of the matter the findings arrived by the Collector in para 16 of the order stands proved.
14. In para 17 of the Collector's findings, it is seen that T. Sheshagiri in his statement on 14.1.86 has admitted that they had received consignments of rexins and the same were diverted to Bharath Traders; that Bharath Traders would remit the required amount on the said consignment through Bank to M/s. Ramachandra (P) Ltd., under intimation to them, that he registered a unit in the name of M/s. Meenakshi Enterprises in the Sales Tax Department; that consignments used to come by lorries which carried pesticides and were accompanied by invoices: that at times, he received consignments without invoices and for such consignments, he used to issue invoices to Bharath Traders after diverting the consignments to them; that he used to get consignments of rexin under the invoices of M/s. Subramanyam and Co. Bangalore and he used to issue invoices for such consignments also under Meenakshi Enterprises and send the same to Bharath Traders; that he used to receive invoices of Ramachandra Rexins (P) Ltd., and Subramanyam and Co., Bangalore, without receiving the consignments of rexins that he was not in a position to tally the receipts of consignments and issue to Bharath Traders: that when he contacted Shri Anjaiah Shetty, to tell him of the discrepancy, he was informed by him that there was some excise problems and asked him to bring all the records of M/s. Meenakshi Enterprises, Madurai; that he sent the records of M/s. Meenakshi Enterprises through Sri S.R.T. Suresh Babu; that the accountant Sri Suresh Babu on his return informed him that N.S. Anjaiah Shetty, Managing" Director, Ramachandra Rexins (P) Ltd., destroyed all the connected records sent through him to Bangalore and made out new records after introducing fresh invoices to tally the accounts; that he was alerted to be careful of the raid which may be conducted by the Excise department; that he kept the records in a safe place, in a wooden case and placed it along with other pesticides wooden case in their godown; that he was not aware whether Ramachandra Rexins (P) Ltd. had paid any Excise duty on the consignments sent to him; that he only obeyed the instructions of the company and requested for forgiveness in the matter.
15. Para 18 of the impugned order refers to the statement of Shri Kirubaharan, partner of M/s. Bharath Traders. He has deposed on 5.1.86 that they came into contact with the appellant company through a representative of their company and accepted the dealership for selling rexin cloth in and around Madurai on condition to pay a deposit of Rs. 25.000/- carrying no interest on the said amount; that the said amount was paid through D.D. No. 332410 dated 15.2.84 for which a receipt was given by the company; that Sri Anjaiah Shetty, had informed them that no invoices would be issued directly in the name of Bharath Traders by them, that they had branch offices at Madurai, i.e. M/s. Meenakshi Enterprises, M/s. International Traders at Madras and M/s. Subramanyam and Company in Bangalore, that all the sales will necessarily be routed through the above said branches and no formal agreement was executed between them and the company and the understanding was purely oral. He submitted that they received goods from the company and the lorry receipts consigned by the company was addressed to M/s. Meenakshi Enterprises but they were getting door delivery on such consignments at the instance of M/s. Meenakshi Enterprises; that one invoice was issued by M/s. Meenakshi Enterprises for the consignments received by them from the company; that the payments for the invoices raised by M/s. Meenakshi Enterprises were made to the company through D.D. and cheques as per the understanding and no payments were made to M/s. Meenakshi Enterprises; that for the accounting purposes, they were crediting in the name of M/s. Meenakshi Enterprises for which they were assured of proper receipts; that so far no receipts were issued by M/s. Meenakshi Enterprises for the above transactions; that in fact the entire amount indicated in the invoices ralised by M/s. Meenakshi Enterprises are paid to the company through cheques and drafts; that they have also received consignments from M/s. Subramanyam & Co., Bangalore for which payment is made separately as per the directions of the company; that they were also informed that arrangements for despatches would be made from Madras from M/s. International Traders, depending on the stock position; that they started getting goods from Madras from February, 85; that they stopped getting goods in the name of M/s. Meenakshi Enterprises alter March 85. He admitted the entries made in the records produced before him.
16. In para 19 of the order the Collector has noted the statement dated 14.1.86 of Shri S.R.T. Suresh Babu, Accountant of M/s. Ramachandra Pesticides (P) Ltd. Madurai, who has admitted that the company's head office and factory is at Bangalore and in 1984, their management started one M/s. Meenakshi Enterprises to deal with rexin; that the consignments coming from Bangalore were supplied to Bharath Traders and invoices were raised by Meenakshi Enterprises; that the cheques by Bharath Traders were given in the name of Ramachandra Rexins (P) Ltd., Bangalore; that after some time, the invoices were raised in the name of Subramanyam & Co., Bangalore; that they started receiving consignments without invoices alongwith pesticide loads; that sometimes they received invoices without any consignments: that the accounts of Meenakshi Enterprises are also not tallying as they used to receive goods without invoices and at times invoices without goods: that he was asked to go to Bangalore with all the documents connected with Meenakshi Enterprises and Sri Anjaiah Shetty asked him to destroy all the records and recast, with new replacing certain invoices and tallying the accounts; that he was also asked to keep the records in a secret place on his return to Madurai telling him that some Central Excise raid may be conducted; that he secreted the documents in a wooden case and kept it along with the pesticide cases in the godown; that he does not know whether their rexin cloth received from Bangalore had suffered Excise duty or not.
17. On the basis of these two statements the Collector has analysed the entire evidences pertaining to the receipt and sale of goods without documents which have been recorded in para 20, which is as follows:
20. I have given careful consideration to the above depositions made by Sri Sheshagiri, Suresh Babu and Sri Kirubaharan. From the above statement, it is evident that M/s. Meenakshi Enterprises is an unit created by the Company for the purposes of distribution of rexins cloth manufactured by them. I find that the activities of M/s. Meenakshi Enterprises are being controlled by the company and M/s. Meenakshi Enterprises do not have a separate establishment for functioning. In fact, the staff and the office of M/s. Ramachandra Pesticides, Madurai are made Use in the functioning of the said concern. No seperate remunerations for the extra work done by the staff is paid to them. They do the work of raising invoices in the name of M/s. Meenakshi Enterprises as directed from their company at Bangalore. I also find that the prices pattern is controlled by the company. The total quantity of rexin cloth supplied to M/s. Bharath Traders depends on the supply made by the company and M/s. Meenakshi Enterprises do not have an independent say in the matter of transactions. The payments are made on the consignments to the company under intimation to M/s. Meenakshi Enterprises. I find that M/s. Meenakshi Enterprises were not in a position to tally their accounts in respect of the receipts from the company and disposal to Bharath Traders. I further find that the consignments to Bharath Traders were routed through M/s. Meenakshi Enterprises which was later on routed through M/s. International Taders, Madras and M/s. Subramanyam and Company, Bangalore. I find that the payments on such consignments were made as directed by the company. I further find from the statements of Sheshagiri and Suresh Babu that the records of M/s. Meenakshi Enterprises were destroyed at the instance of Sri. Anjaiah Shetty who apprehended that Excise raid may take place at Meenakshi Enterprises. In fact. Excise raid had already been conducted at M/s. International Traders, Madras. These facts clearly prove that M/s. Meenakshi Enterprises is a floated concern by Sri N.A. Venkatesh, one of the sons of Sri Anjaiah Shetty to sell the goods cleared by the Company. Sri Sheshagiri who is the Manager of M/s. Ramachandra Pesticides (P) Ltd, for which sri N.S. Anjaiah Shetty is the Managing Director, has managed the entire business of M/s. Meenakshi Enterprises functioning from the premises of M/s. Ramachandra Pesticides (P) Ltd., I find it is evident that the consignments of coated cotton fabrics received from the company and sold to Bharath Traders through M/s. Meenakshi Enterprises, were not accompanied by Central Excise Gatepasses to establish the duty paid nature of the goods. The onus is on the company to prove the duty paid nature of the goods supplied by them. I find the consignments of coated cotton fabrics were received along with pesticide loads and no Central Excise documents or transport document were forthcoming to establish the duty paid nature of goods sent to Bharath Traders. I further find from the confessional statement of the Manager and the Accountant of M/s. Ramachandra Pesticides (P) Ltd., that the records which were available at Madurai were fabricated ones at the instance of Sri N.S. Anjaiah Shetty. It is also admitted that the payments were made directly to the company even though the invoices were raised by M/s. Meenakshi Enterprises, Madurai and that the job of M/s. Meenakshi Enterprises was just to raise invoices in the name of Bharath Traders. These facts and circumstances clearly prove and expose the mala fide intention and activities of M/s. Ramachandra Rexins (P) Ltd., in clearing rexins manufactured and cleared by them without payment of duty. A seperate annexure has been prepared wherein the total value of invoices raised by M/s. Meenakshi Enterprises on M/s. Bharath Traders works out to Rs. 3,78,158.15. This annexure has been enclosed to the show cause notice and no proper defence has been adduced by the party in this regard. I also find that the reply submitted by them cannot be accepted in view of my findings above. Also, the description, value, quantity etc., of coated cotton fabrics invoiced by M/s. Meenakshi Enterprises when compared with the GP.1 and the invoices purported to have been made in respect of M/s. Meenakshi Enterprises, Madurai do not tally with those disclosed in the records of the comapny. It is therefore evident that the goods invoiced by M/s. Meenakshi Enterprises, to M/s. Bharath Traders are cleared without payment of duty from the factory of the company and moved along with the pesticide load. It is further evident that there are receipts in cash to the tune of Rs. 4,54.270/- which is nothing but the amounts of the receipts of clandestine removals accounted by the company under the head M/s. Meenakshi Enterprises, Madurai. The party has failed to come with proper defence to account for the said receipts nor has established the bona fide clearance of excisable goods in question, to M/s. Meenakshi Enterprises.
18. On a reading of the above findings, it is seen that the appellant has not raised any grounds to disprove the findings. The evidence is self inculpatory and their statement support the evidence on record and the conclusion arrived at is totally based on records and not on surmises or on presumptions and assumptions. The conclusions arrived at prove the removal of goods without payment of duty and the details of such clearances having been noted in the Annexures cannot be challenged as the evidence is clinching and no rebuttal evidence of sale of these goods with proper documents and payment of duty has been produced. As has been earlier noted the appellant's contention that these goods were meant for transport corporation as the rejected goods had been sent to these dealers. However, there is no such evidence produced of such rejection nor of sales nor of the diversion of the rejected goods to these dealers and to the actual sellers namely Bharath Traders. It is also seen if the goods were rejected ones, then its value was bound to have come down and the goods were ought to have been sold as rejected goods. However, it is clear on the records that M/s. Bharath Traders have not said that they have received rejected goods but they have paid full value of goods and therefore, the conclusion arrived at that the goods were received by Bharath Traders were not duty paid and that the same were clandestinely removed goods is correct finding, and we accept the above findings.
19. In para 21 of the order the Collector has recorded the statement of Shri N.A. Venkatesh, S/o Shri Anjaiah Shetty, Proprietor of M/s. International Traders. He has stated in his statement dated 27.1.86 that Shri Kandasamy used to look after the affairs like, receiving the goods, raising sales invoices, making payments etc. of M/s. International Traders, Madras; that at times consignments have been directly delivered to the customers who had placed their orders with M/s. Subramanyam and Company as per company's directions; that in fact, all the goods are not brought into the godown of M/s. International Traders, Madras and the invoices received by them from Subramanyam and Company are only for checkpost purposes: that no payment is made on these invoices and the goods covered under the said invoices are not taken into their stock and no sales bills are raised by them: that they are not receiving any coated cotton fabric from any manufacturer other than M/s. Ramachandra Rexins (P) Ltd., Bangalore: that he has not received any remunerations for the services rendered on account of sales made to M/s. Subramanyam and Company; that he is not in a position to locate the sales bills of M/s. International Traders as the same are misplaced; that he admits there was no Central Excise Gate passes for the seized variety. In his statement dated 14.5.86. in the capacity of a partner of M/s. Ramkumar Enterprises, Bangalore, he submitted that he was looking after the affairs of the said concern; that they are not raising any bills in respect of despatches and they use bills of M/s. Subramanyam and Co. while transporting, and they take only commission from Subramanyam and Co. The Collector has noted that this evidence from the records under seizure that M/s. Ramkumar Enterprises have not maintained any accounts in respect of the receipt of coated cotton fabrics but have despatched several consignments under goods consignment notes. He has also noted that Shri N.A. Venkatesh has signed in some of the goods consignment notes for M/s. Ramkumar Enterprises which are all unaccounted; the two bills relating to coated cotton fabrics sales found in the bill books of M/s. Ram Kumar Enterprises do not have corresponding purchase invoices. He has noted that the company (appellant) and M/s. Subramanyam & Co. have used M/s. Ramkumar Enterprises for disposal of unaccounted coated cotton fabrics. The details of such G C notes and bills for which there was no corresponding invoices is detailed in exhibit 26 enclosed to the show cause notice. The Collector has held that the party has failed to submit a proper reply in this regard and has further failed to prove the bonafide transactions by way of producing Central Excise documents to establish the duty paid nature of the goods in question. He has noted that mere submission of denial of confessional statements is not sufficient in defending their cause.
20. On a reading of the above findings, it is clear that the findings have been arrived at after proper verification and the Collector has rightly concluded that the appellants have not produced any evidence to counter the material documentary evidence which have been seized and verified by the investigating officers. We are therefore inclined to uphold this portion of his order as there is no serious contest to the findings arrived in this regard.
21. In para 22 of the impugned order, the Collector noted the statement dated 27.11.85 and 10.5.85 of Shri N.A. Prabhakara Gupta, S/o Sri N.S. Anjaiah Shetty, in the capacity of Executive Director of the appellant company. He stated that the company started rexin cloth business from June 83 and that the raw material for the factory was purchased by him. He admitted that M/s. Subramanyam and Co. have assisted the company by paying for the raw materials and they have not paid any interest; that the company got help from Subramanyam & Co. as they had problems with the Bank in getting money and the amount paid by Subramanyam and Co. were considered as advances towards the future supplies to be made by them: that they have no separate godown and hence they deposit their finished goods with their dealers; that some supplied were by M/s. Subramanyam & Co., on their behalf and this arrangement was done for certain varieties of cloth for certain customers; that the goods are collected by M/s. Subramanyam & Co. from their factory and only to outside dealers they are arranging for despatches; that they have fixed the material by taking into account, cost of manufacture, market condition and the prices of competitors. In his statement dated 27.11.85 he gave particulars of the system of accounting and production by the company. He submitted that the production slips are prepared for each roll of coated cotton fabrics produced by them; that the rolls numbers run in a continuous serial numbers and each packing slip prepared in duplicate gives inter alia the serial number, variety grade, colour and length/weight of the goods produced; that one such packing slip is fixed on to the roll and the other is filed for records; that an abstract of this production slips are entered in a register which is taken as a basis for accounting Excise production.
22. The Collector has noted all the submissions and has found from the verification of stock of goods that M/s. International Traders, Madras and in the company's factory that in roll numbers assigned to the rolls under seizure at Madras were also available on the stock available in the factory at Bangalore. He has noted that in fact, a chart has been given at page 3 of the show cause notice giving the details of repeat/roll numbers to which the party has failed to give any effective reply. He has noted that the appellant had admitted that there were such discrepancies in one or two cases which must not be viewed with a mala fide angle. The Collector has noted that some of the rolls found at M/s. International Traders. Madras on 26.11.85 were in fact sold by the company to a third party namely M/s. Ajantha Rexins, Ernakulam, whose details have also been furnished in the show cause notice. The Collector has noted even this fact has not been satisfactorily explained by the parties. He has noted that M/s. International Traders, Madras who were getting several consignments from the company without Central Excise Gate passes were not in a position to account for such goods. The sale of such unaccounted receipts were made good without raising any bill and also raising bill in the name of Tamil Nadu Sales Corporation. The Collector has noted that many consignments of coated cotton fabrics having repeated roll numbers were received by Subramanyam & Co. He has noted that this fact had been admitted by the said party. He has noted that on verification of the invoices raised by M/s. Subramanyam & Co. where the roll numbers were detailed were compared with the Delivery Challans of the company and in many instances repeated roll numbers were noticed on which duty was not paid. Therefore he concluded that one set of roll numbers were cleared without accounting and without payment of duty.
23. On a careful consideration, we notice that these are all factual findings arrived at after due consideration of all aspects. It is also noticed that the party has not disputed or controverted this findings, hence we uphold the same.
24. The Collector in para 24 of the impugned order has noted the statement dated 10.5.85 of Sri L. M. Kodandarama Shetty, one of the Directors o the appellant company who has stated that they sell their goods to M/s. Subramanyam & Co. Chandra Metal Products, Meenakshi Enterprises, Nandi Internationals, Suresh Traders, etc., that they are supplying goods on orders received from office and the transaction is purely oral; that they are preparing only DCs and gate passes; that the final invoices are prepared in their Head Office at Bangalore: that some of the refused goods were diverted to Subramanyam & Co., who are helping them in financing and distribution of their products; that they also took reprocessing of rejected goods. He has noted the statement dated 12.3.86 and 8.5.85 of Shri N.A. Jayaram, one of the Directors of the appellant company and also Managing Partner of Subramanyam & Co. that the company had arranged for making payments out of the sale proceeds to various raw material suppliers through Subramanyam & Co; that all payments received from M/s. Chandra Metal Products have also been shown as receipts from Chandran Finance Corporation by M/s. Subramanyam & Co. that the sales of Subramanyam & Co. were suppressed to cover up the unaccountd receipts from the company. In the capacity of Partner of M/s. Subramanyam & Co. he stated; that they were purchasing rexin cloth from M/s. Ramachandra Rexins since June 83 onwards and the total value of the cloth purchased from the company is about Rs. 18,00.000/-; that there is no agreement or contract between them and the company; that they are not preparing any Dc's or the consignment; that they are not placing orders or indents for supply of rexin cloth from M/s. Ramachandra Rexins (P) Ltd. in writing and the transaction is purely oral; that they have also supplied certain verieties of cloth on instructions of the company; that certain rejected materials are directed to them by the company for further sale: that he has some business interest in company as a Director and also as a partner in M/s. Subramanyam and Company; that M/s. Subramanyam & Co. have financed the company for the purchase of raw materials and have cleared bills for the said purchase; that they are not charging any interest from the company for the said amount.
25. The Collector in para 25 of the order has noted the statement dated 27.11.85 of Shri A. Kandaswamy. Manager of M/s. International Traders. Madras wherein he has admitted that they has received several consignments of rexins without cover of bills, invoices or gate passes from the company; that such consignments were kept in the godown of M/s. International Traders: that such consignments were sold without accounting on several occasions; that he used to hand over liquid cash to the company which were nothing but the unaccounted sales made by them; that on many occasions instead of chindi veriety of rexin they despatched good variety rexin to them and the differential amount were received by the Company; that he is not in a position to produce or explain the missing invoices. In his statement dated 22.3.86 and 3.4.86, he admitted that Tamil Nadu Sales Corporation is a firm for namesake; that Sri Prabhakara Gupta, one of the Directors of the Company, instructed him to form the above firm: that he had not invested any capital nor the firm was registered under Sales Tax or Income Tax; that no separate establishment was appointed for Tamil Nadu Sales Corporation nor any purchase of rexin made for the said firm: that on instructions of Sri Prabhakara Gupta, excess quantity of rexin received without documents from the company to International Traders were sold by him on several occasions under Tamil Nadu Sales Corporation invoices to various parties; that most of the said invoices were prepared and signed by him; that the unaccounted goods received from the company and sent to International Traders were not accounted in International Traders but were sold by him without bills; that all cheques received were deposited in the account of Tamil Nadu Sales Corporation at Indian Overseas Bank, That Amuthiappan Street Branch; that on instructions of Shri Prabhakara Gupta amounts were drawn from the said account and the amount received for rexin sold without Bills were utilised for purchasing drafts, pay orders on behalf of the company: that on several occasions, it was utilised for payment of raw material suppliers for the company and also for payment of customs duty on PVC; that Tamil Nadu Sales Corporation has got no premises of its own; that it was started in his name by Sri Prabhakara Gupta and was functioning under his instructions, in his name and under his supervision only on records; that he was also a party for evasion, since prabhakara Gupta was his employer; that on 24.3.86, Sri Prabhakara Gupta telephoned him and ordered to close the Bank account of Tamil Nadu Sales Corporation immediately and accordingly he closed the account; that rexin removed from the company without accounting and without documents to International Traders were sold by him immediately to various parties without bills and accordingly gave the details of it; that the entire sale proceeds have gone to the company in different ways; that all the rexins received from the company were shown in the lorry way bills as if they were sent from Subramanyam and Company that such rexin was sold without accounting in International Traders either without bills or with bills or Tamil Nadu Sales Corporation; that no purchase entries were made by him since no purchase of rexin was made by Tamil Nadu Sales Corporation.
26. On this aspect also we notice that evidence of Shri Kandaswamy, Manager of International Traders is clinching and clearly disclosed the modus operandi adopted by the appellants in creating fictitious firms for slling the goods and appropriating the sale proceeds for payment of raw materials and for payment of customs duty on PVC. The appellant ought to have examined the above statements on their own to controvert or his admissions. No such effort has been done. No meterial documentary evidence have been produced to rebut the admission made by Kandaswamy. In the absence of any material evidence or any retraction of these statements, it has to be concluded that the statements made are voluntary and inculpatory and the said evidence is totally acceptable one. Merely becasue the Collector has not permitted to cross-examination of Kandawamy that by itself will not take away the evidential value of kandaswamy in the absence of any rebuttal evidence or documentary evidence produced by the appellants.
27. The Commissioner therefore has rightly concluded in para 26 of his order that depositions made by different persons which had been detailed in his proceeding paragraphs clearly established that the transactions carried out by the company with the other concerns namely International Traders, Meenakshi Enterprises, Subramanyam and Company. M/s. Ramkumar Enterprises, were not bona fide and not as per the norms usually practiced under trade. The transactions were purely oral and the payments on the consignments were not between the consignor and consignee. A middle men has been brought on the record who has no hold over the transactions but has been created only to raise invoices for accounting purposes. All the transacctions of the company with the other concerns are run and actually controlled by Sri N.S. Anjaiah Shetty and members of his family. The consignments are not covered by Central Excise documents and in some cases, consignments were sent without any invoices and at times only invoices were sent without any consignment. The Collector has noted that the different concerns in question have failed to tally the receipts of goods received from the company and the despatches made thereof. He has also clearly noted that the appellant has failed to produce evidence that the goods sent by them to different dealers have been rejected goods. He has therefore held that it is hard to believe that the rejected goods could be sold at the same price and whether M/s. Subramanyam and Co. had accessories to reprocess the goods or whether the goods were brought to the factory of the company, if so, whether it was intimated to the Department. He has noted that there is no proper reply in this regard. He has held that in fact, the customers pay the amount on the goods received by them from the concerns in question to the company. Therefore he has concluded that the amounts received from customers through bank was nothing but the amount in respect of unaccounted goods said to be sold through different concerns and that the different concerns were not really independent but made to appear as independent. He has noted from the statements that M/s. Subramanyam and Co. had received huge quantities of unaccounted rexin form the company and marketed them without raising bills/invoices. The said goods have been accounted as the same is received from firms like Manohar Enterprises which is fictitious firm. He has seen from the statement dated 12.3.86 of Sri N. A. Jayaram that the payments shown to have been made to M/s. Manohar Enterprises by Subramanyam & Co. had in fact been made to the raw material supplier at the company's request, he has noted from the said statement that the purchase and entries of rexin shown in the ledger of M/s. Subrananyam & Co. were fictititous and they were only made to cover up unacounted purchases from the company. He has also noted from the letter BVR/ 83/103/X 020430 dated 6.10.83 of HMT that the companuy had received an order from M/s. HMT Limited, Bangalore for manufacture and supply of a special variety fabric, PVC coating on both sides of cotton canvas (PVC rexin cloth) 36 inches width, 1.5 mm-1.6 mm thickness Morocco designed, sea green colour, coated cotten fabrics. In this case the base material appeared to have been received from M/s. HMT Ltd. and the order had been executed through Subramanyam & Co. despite the fact that the said goods were manufactured by the company, as seen from the classification list filled by the company, the company was producing goods of thickness ranging between 0.55 mm and 1.2 mm only. The appellant company had produced 855 mtrs. of double coated rexin cloth and supplied through Subramanyam and Company without any type of accounting or declaraion for Central Excise purpose. The total value of goods involved in this transaction is Rs. 64,050/- and the Excise duty is Rule 24.399.00. The Collector has noted that M/s. Subramanyam & Co. had sold to certain parties and raised bills only for lesser quantities and the excess money received in the said transaction has been shown as receipt from the fictitious parties. He has noted from the Invoice No. 2806 for Rs. 60.850/- raised in favour of M/s. Chandra Metal Products but the same has been accounted under a fictitious firm namely M/s. Chandran Finance Corportion of Salem for Rs. 850/- by M/s. Subramanyam & Co. All payments received from M/s. Chandran Metal Products have been shown as receipts from Chandran Finance Corporation by M/s. Subramanyam & Co. The Collector has noted all these facts from the statement dated 12.3.86 of Sri N. A. Jayaram.
28. On a careful consideration of the above, we notice that the appellants have practically not adverted to any of these findings and these findings are based on records and admissions made by the appellants, therefore it cannot be held that the above findings are not sustainable, they are correct and legal in law and requires to be confirmed.
29. The Collector in para 27 of his order has noted from the records of the case, that M/s. International Traders, Subramanyam and Company, M/s. Meenakshi Enterprises, M/s. Ramkumar Enterprises, etc. were purely dealing with the sale of rexins. The quantity of rexins received by them from the company and the disposal of the same to their respective customers is evident fromthe invoices raised by the respective concerns. The amount towards the goods received by the customers from the concerns and paid to the company is evident from the cheques, D. D., etc. This is further substantiated by the statements of the customers who have stated that the amounts paid by them to the company is notiing but the amount on the goods received by them from the concerns. Therefore the Collector has concluded that these facts proved that the amounts received by the company from the customers is nothing but the sale proceeds of goods which were unaccounted by the appellant company and cleared through the marketing organisations. He has noted that the party had not produced any evidence in the form of Central Excise Gate passes co-relating the goods mentioned in the invoices. He has observed that being a licencee, they should have made an attempt to correlate the goods received by the concern and despatched to the customers. To establish the duty paid nature of the goods, the onus lies on the assessee who has cleared the goods to the buyer of the goods to prove the duty paid nature of the goods. He has noted that the appellant had failed to produce proper compliance to the evidence adduced by the department. They have only taken the stand that the onus is on the department to prove the allegations made out in the show cause notice. He has rejected their plea of non-cross-examination of witnesses and also about the documents and D. Ds. being uncorelatable on the ground that the party did not come up with any bona fide evidence to prove the duty paid nature of the goods in question. He has noted the fictitious firms created to promote business to family members. He has noted about the admissions of the customers having received the goods and about the transport documents, therefore the conclusions arrived at by the Collector on all these aspects of the matter are factual and as per record and they are required to be confirmed. There is nothing on record to draw a different conclusion than the conclusion arrived at by the Collector. The appellants have received consideration in terms of money in the form of bank drafts and cheques in the fictitious names of firms and dealers. Further, these money were utilised for the purchase of raw materials and payment of customs duty, therefore the fact that they has removed the goods for sales through their set up family dealers is an established fact. The fact also about the sale of these goods through customers to these fictitious firms and also through the three named firms is also established. It is therefore very clear that the appellants had created fictitious firms and the named dealers for clearing of goods to the named dealers and through them to the customers. The entire payments received towards value of the goods have also been accounted by the department. In an enormous case like this it was for the appellants to have produced rubuttal evidence to discharge their burden. In the absence of any such retraction from the admitted statements therefore the conclusion arrived at by the Collector with regard to the clandestine removal and sale of goods is required to upheld and confirmed. Further finding arrived at by the Collector about the concept of related person and the value arrived at for the sale in para 27 of the order is a sustainable finding and requires to be confirmed.
30. The appellants have not disputed the figures of Rs. 28,89,724.12 arrived at on the basis of 33 exhibit to the show cause notice. We have perused the statements and admissions and it is clear from the same that they are all inclupatory in nature and requires to be confirmed.
31. We notice from the impugned order that the Collector has imposed a penalty of Rs. 5,00,000/- as against a duty demand of Rs. 25,00,000/-, The said penalty is not excessive compared to the modus operandi and evasion of duty committed by the appellants and the same is required to be confirmed and the same is confirmed. As regards the redemption fine of Rs. 1,00.000/- on paint and machinery, the same is justified in the facts and circumstances of the case and the same is hence confirmed. As regards the confiscation of goods seized from the premises of M/s. Subramanyam & Company and that of International Traders, the Collector has clearly arrived at this conclusion through evidence that these two units had been dearling with goods only of the appellant's company and this goods belonged to the appellant company and therefore the goods not having discharge duty have been rightly seized and the fine imposed is appropriate and required to be confirmed and the same is accordingly confirmed. We have seen citation cited by the Ld. C.A., mostly pertain to the violation of principles of natural justice. We see that the same is not applicable to the facts of this case as sufficient opportunity has been given in the present case and there is no violation of principles of natural justice. All the conslusions arrived at by the Collector was only after proper verification of the case based on various admissions and seized documents which have established the case, hence all other judgments cited by Ld. C.A. are not applicable to the present case. Therefore, the appeal is dismissed as without substance by confirming the impugned order.
Pronounced in open Court on 29th Sept, 1998.