Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs Shri V.N. Ansurkar, Advocate on 29 September, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal Nos. C/87992/13-MUM, C/87993/13-MUM C/87994/13-MUM C/87995/13-MUM C/87996/13-MUM C/88018/13-MUM C/88241/13-MUM C/88242/13-MUM C/88612/13-MUM C/88717/13-MUM C/87785/13-MUM C/87839/13-MUM C/87866/13-MUM C/87879/13-MUM C/87902/13-MUM C/87933/13-MUM C/87934/13-MUM C/87935/13-MUM C/87990/13-MUM C/88025/13-MUM C/88026/13-MUM C/88027/13-MUM C/88028/13-MUM C/88090/13-MUM C/88091/13-MUM C/88137/13-MUM C/88619/13-MUM C/88620/13-MUM C/87746/13-MUM C/87789/13-MUM C/87831/13-MUM C/87838/13-MUM C/87916/13-MUM C/87926/13-MUM C/87927/13-MUM E/87829/13-MUM E/87948/13-MUM E/87601/13-MUM E/87602/13-MUM E/87603/13-MUM E/87719/13-MUM E/87720/13-MUM E/87742/13-MUM E/87772/13-MUM E/87775/13-MUM E/87776/13-MUM E/87811/13-MUM E/87845/13-MUM E/87925/13-MUM E/88004/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM C/87961/13-MUM (Arising out of Order-in-Original No.53/2012-13 dated 10.04.2013 passed by the Commissioner of Customs (Export), Nhava Sheva) For approval and signature: Honble Mr. P.S.Pruthi, Member (Technical) Honble Mr. Ramesh Nair, Member (Judicial) ============================================================
1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : No
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
=============================================================
:Appellants
C. M. Tank
H. U. Mahyavanshi
D.M. Rana
V. D. Parmar
Shri R.B. Pardeshi with
Shri A.M. Khare and
Shri N. P. Sinha, Advocates
H. N. Shaikh
S.K. Jain
V. Srinivasan
K. N. Parmar
Shri G.B. Yadva, Advocate
Neel Kamal Verma
S. S. Chaudhary
Bhuwaneshwar Refineries Pvt. Ltd.
None
Jmd Oils Pvt. Ltd.
Adjournment Request
N S Trading Corporation
Shri Bharat Raichandani, Advocate
J. R. Agro Industries Ltd.
Shri Amit Awasti Advocate
American Almonds Corp
Shri Amit Awasti, Advocate
Oxygen & Carbide Gas P. Ltd.
Sarvashreshtha Oil Industries
Shri N.D. George
Sarvottam Vegetable Oil Refinery P. Ltd.
Kothari Brother
Shri A.K. Prabhakar, Advocate
Prachi Exports Pvt. Ltd.
Bril International
Om Prakash Rahul Kumar
Chand Prakash & Co.
Adjournment Request
Ajanta Soya Ltd.
Satyam Auto Components Ltd.
Vijay Solvex Ltd.
Knight Trading Company
Bhagwati Refineries
Gaurav International
Shri J.S. Sanghvi, Consultant
Cadbury India Limited
Shri M.P. Baxi, Advocate
Prakash Solvex
Shri J.H. Motwani, Advocate
Shivani Oil Mills
Adjournment Request
Hindalco Industries Ltd.
Shri Akhilesh Kangsia, Advocate
Kwality Dairy (I) Ltd.
Adjournment Request
Rajhans Vegetable Oil Refinery Pvt. Ltd.
None
Sudershan Chemical Inds.Ltd.
Shri C.S. Biradar, Advocate
Devanshi Impex Pvt. Ltd.
Shri J.C. Patel, Advocate with Ms.Pragya Mishra, Advocate
Viraj International
Shree Raghav Enterprises
Shri Anil Balani, Advocate
Bronze Chem Enterprise
Uniway Trading Pvt. Ltd.
Nageshwar Enterprise
M/S.Atul Limited
Shri Rakesh Shah, Employee of the Co.
Indokem Limited
Shri Akhilesh Kangsia, Advocate
Popawala & Co.
Shri J. H. Motwani, Advocate
Hero Dye Chem Industries
C.J.Shsh & Co.
Shri J.C. Patel, Advocate with Ms.Pragya Mishra, Advocate
Liladhar Parekh
Shri S.P Tavkar, Consultant
B. R. Enterprises
Shri C.S. Biradar, Advocate
Cosmos Plastics & Chemicals
Vs
Commissioner Of Customs(Export) Nhava Sheva
And
Shri V.N. Ansurkar, Advocate
:Respondent
Shri V.K. Singh Spl. Counsel
Shri Ahibaran
Addl. Commr.(A.R.)
Commissioner Of Customs(Export) Nhava Sheva
:Appellant
Shri V.K. Singh Spl. Counsel
Shri Ahibaran
Addl. Commr.(A.R.)
Vs
Clarity Intermediates & Pesticides
:Respondent
Nicholas Piramal(Aaacn4538pxm005)
Cosmos Chemical Corporation
None
Colosperse Chemical Corporation
Qualigence Chemicals
Shreeji Barriels Pvt.Ltd.
Dye-O-Tex Dystuff & Intermediates P.Ltd.
Shri Anil Balani, Advocate
Shree Sai Prassana Trading Co.
Shree Saibaba Chemical Industries
Shree Krishna Barrels Pvt. Ltd.
Larity Intermediates & Pesticides
Mini Sarvodyog Sira
Arihant Impex(Aabfa2334cxd001)
None
J.B.Overseas
Ketan Chemicals Corpn.
Pravi Organics Ltd.
Pravi Organics Ltd.
Sabal Packing
Corporate Chemicals & Intermediates,
Shree Krishna Barriels Pvt.Ltd.
Anga Specialities Pvt . Ltd.
Bharat Chemicals
Advance Packaging Pvt. Ltd.
Kalpana Enterprises(Aabfa2334cxd001)
Ashish Suphur Dyes P.Ltd.
CORAM:
Mr. P.S.Pruthi, Member (Technical)
Mr. Ramesh Nair, Member (Judicial)
Date of hearing : 29/09/2015
Date of pronouncement : 29/09/2015
ORDER NO.
Per : P.S. Pruthi
These appeals relate to fraudulent claim of export incentive schemes viz. DEPB, DEEC and rebate by six companies (hereinafter referred as companies) viz M/s Cosmos Chemicals and Intermediates, M/s Colosperse, M/s Qualigance, M/s Chevrolet, declared as manufacturer exporter and M/s Clarity Intermediate & Pesticides and M/s Corporate Chemicals Intermediates declared as merchant exporters. Departments case is that these companies have claimed to have exported various chemicals, pesticides and dyes, however in fact there was no export of the declared chemicals/dyes/pesticides and the goods declared in the shipping bills have not been exported and in their place some unknown chemicals were exported. On basis of intelligence, DRI examined 3 containers in ICD Dashrath on 26.02.2004 which were cleared from M/s Cosmos Chemicals and Intermediates, Vadodara. They were found to contain a low value liquid/waste but declared in the export documents as Fenthion Tech, a costly insecticide, with an intention to avail undue benefit of DEFB scheme. On testing the samples taken from the consignments and after recording the statement of the concerned persons, DRI seized the said 3 containers on 15.03.2004. They also found that the samples drawn by the concerned Central Excise officers supervising the factory stuffing of the said containers tested positive (i.e. found as 'Fenthion Tech'. During the course of further investigation it was found that one Mr. Asif Abdul Karim Bidiwala and Mr. Afzal Fazal Dalal floated the above firms which were used for exporting misdeclared low value chemicals. Statement of Shri Afzal Dalal recorded on 06.04.2004, inter alia, disclosed that he used to replace the samples drawn by the Central Excise Officers with his own samples in the factory premises itself, that after drawing the samples from the export consignments, the officers gave him the samples for sealing in the blank envelope duly signed by them, that it was at this juncture the samples were replaced by him with goods corresponding to the chemicals declared in the export documents, that the samples so replaced were then sealed and handed over to the Central Excise Officers, that the Central Excise Officers were however unaware of the said activities carried out by them. That, apart from mis-declaring the description of export goods, these exporters also inflated the FOB value of export goods and have claimed benefit of DEPB/DEEC against these exports. In some cases, so called manufacturer exporters have taken CENVAT credit wrongly of input goods and thereafter took rebate of wrongly taken credit after exporting some finished products
2. The case was investigated by DRI, Surat Regional Unit and after investigation, show cause notice was issued to these companies, their partners, employees as also to transferees of the DEPB license who imported goods against these licenses, firms who aided/abetted them in taking the wrong Cenvat credit (Indian suppliers/high sea sellers) and brokers who had arranged these sales as well as officers who supervised the drawl of samples of export goods in factory stuffing.
During the course of further investigation, on scrutiny of the documents relating to the consignments exported by the said companies between 03.10.2002 to 06.10.2003, it was found that the appellant officers had examined 49 consignments, drawn samples and forwarded the same for record in the concerned Range office. Statement of 13 officers who examined the past consignments during the said period were recorded wherein they inter alia stated that they followed the proper procedure of drawing samples in as much as all the selected drums were opened and one drum was selected for drawing the samples and 4 representative samples were drawn, that this was done in their presence, that the required quantity of samples drawn from the drums were put in bottles/polythene packets i.e. liquid in bottles and the powder products in poly packets, that the drums so opened were then closed and four samples were sealed by putting the samples in the thick envelopes, that thereafter the covers were sealed with brass seals of the range and wax, that the description of goods, ARE1 No., Container No., Central Excise bottle seal and shipping line bottle seal nos. were written on the envelopes and signature of authorized person/proprietor of the unit and merchant exporter where ever applicable and excise officers were appended to the envelopes. That all the particulars of ARE1, Central Excise invoices, packing list, commercial invoices were checked and verified, that thereafter stuffing of the container used to be allowed.
3. Commissioner of Customs (Export) Nhava Sheva was appointed Common Adjudicator, who vide order F. No. S/10-4305-06-Adj/DRI/SRU/INV-1/2004 dated 31.01.2013/10.04.13 adjudicated the case and ordered as follows:
(i) In the matter of export of the goods, Commissioner, confiscated the export goods under sections 113 (d) and (i) of the Customs Act,1962 with option to redeem the goods on payment of redemption fine. Commissioner also re-determined the FOB value of the export goods. He imposed penalty under Section 114 of the Customs Act, 1962 on the exporters, their partners, proprietors and Central excise officers.
(ii) In the matter relating to import of goods under DEPB Scheme from various ports, Commissioner confiscated the imported goods under Section 111(o) of the Customs Act, 1962 with option to redeem the goods. He confirmed the demand of duty jointly and severally on the original Scrip holders (i.e exporters) as also on the actual importers i.e. transferees of the DEPB license. The Commissioner also demanded interest on the duty demanded. The Commissioner also imposed penalty equal to duty demanded on the original license holders as well on the actual importers under Section 114A of the Customs Act, 1962. He also imposed penalty under Section 112 of the Act ibid on the partners/proprietor of the exporting firms.
(iii) The Commissioner demanded the erroneously sanctioned rebate along with interest from the exporters and has also imposed equal penalty under Section 11AC of the Central Excise Act, 1944. He also disallowed the pending claims of rebate and imposed penalty under Rule 26 of the Central Excise Rules, 2002 on the partner/proprietor of the manufacturing firms.
(iv) Commissioner imposed penalty under Rule 26 of the Central Excise Rules, 2002 on the indigenous suppliers and High sea sellers who supplied/sold the indigenous/imported goods on which cenvat credit was wrongly availed.
(v) Penalties were imposed under Section 114 of the Customs Act on officers for their role in not examining the export consignments and following the procedure of drawing samples properly.
4. The appeals are against the aforesaid order of the Commissioner. Appeals have been filed by
(i) Central Excise Officers List A
(ii) Importers ( transferee of the DEPB license) List B
(iii) Indigenous suppliers List C
(iv) High sea sellers- List D
(v) Broker List E
(vi) Departmental Appeal List F List A Central excise Officers (1) C/87992/13-Mum - C. M. Tank Vs CC (Export) Nhavasheva (2) C/87993/13-Mum - H. U. Mahyavanshi Vs CC (Export) Nhavasheva (3) C/87994/13-Mum - D.M. Rana Vs CC (Export) Nhavasheva (4) C/87995/13-Mum - V. D. Parmar Vs CC (Export) Nhavashev (5) C/87996/13-Mum - H. N. Shaikh CC (Export) Nhavasheva (6) C/88018/13-Mum - S.K. Jain Vs CC(Export) Nhavasheva (7) C/88241/13-Mum - V. Srinivasan Vs CC (Export) Nhavasheva (8) C/88242/13-Mum - K. N. Parmar Vs CC (Export) Nhavasheva (9) C/88612/13-Mum - Neel Kamal Verma Vs CC (Export) Nhavasheva (10). C/88717/13-Mum - S. S. Chaudhary Vs CC (Export) Nhavasheva List B - Importers (1) C/87785/13-Mum - Bhuwaneshwar Refineries Pvt. Ltd. Vs CC (Export) Nhavasheva (2) C/87839/13-Mum - Jmd Oils Pvt. Ltd. Vs CC (Export) Nhavasheva (3) C/87866/13-Mum - N S Trading Corporation Vs CC (Export) Nhavasheva (4) C/87879/13-Mum - J. R. Agro Industries Ltd. Vs CC (Export) Nhavasheva (5) C/87902/13-Mum - American Almonds Corp Vs CC (Export) Nhavasheva (6) C/87933/13-Mum - Oxygen & Carbide Gas P. Ltd. Vs CC (Export) Nhavasheva (7) C/87934/13-Mum - Sarvashreshtha Oil Industries Vs CC (Export) Nhavasheva (8) C/87935/13-Mum - Sarvottam Vegetable Oil Refinery Vs Cc (Export) Nhavasheva (9) C/87990/13-Mum - Kothari Brother Vs CC (Export) Nhavasheva (10) C/88025/13-Mum - Prachi Exports Pvt. Ltd. Cc Vs (Export) Nhavasheva (11) C/88026/13-Mum - Bril International Vs Cc (Export) Nhavasheva (12) C/88027/13-Mum - Om Prakash Rahul Kumar Vs CC (Export) Nhavasheva (13) C/88028/13-Mum - Chand Prakash & Co. Vs CC (Export) Nhavasheva (14) C/88090/13-Mum - Ajanta Soya Ltd. Vs Cc (Export) Nhavasheva (15) C/88091/13-Mum - Satyam Auto Components Ltd.Vs CC (Export) Nhavasheva (16) C/88137/13-Mum - Vijay Solvex Ltd. Vs CC (Export) Nhavasheva (17) C/88619/13-Mum - Knight Trading Company Vs CC (Export) Nhavasheva (18) C/88620/13-Mum - Bhagwati Refineries Vs CC (Export) Nhavasheva (19) C/87789/13-Mum - Cadbury India Limited Vs CC (Export) Nhavasheva (20) C/87831/13-Mum Prakash Solvex Vs CC Exp (Nhava Sheva0 (21) C/87838/13-Mum - Shivani Oil Mills Vs CC (Export) Nhavasheva (21) C/87916/13-Mum - Hindalco Industries Ltd. Vs CC (Import) Nhavasheva (22) C/87926/13-Mum - Kwality Dairy (I) Ltd. Vs CC(Export) Nhavasheva (23) C/87927/13-Mum - Rajhans Vegetable Oil Refinery Pvt. Ltd.Vs Cc (Export) Nhavasheva List C- Indigenous Suppliers (1) E/87829/13-Mum - Sudershan Chemical Inds.Ltd.Vs CC (Export) Nhavasheva (2) E/87742/13-Mum - M/S.Atul Limited Vs CC (Export) Nhavasheva (3) E/87772/13-Mum - Indokem Limited Vs CC (Export) Nhavasheva (4) E/87775/13-Mum - Popawala & Co.Vs CC (Export) Nhavasheva Also High Sea Seller (5) E/87925/13-Mum - B. R. Enterprises Vs CC (Export) Nhavasheva List D High Sea Sellers (1) C/87746/13-Mum - Gaurav International Vs CC (Export) Nhavasheva (2) E/87948/13-Mum - Devanshi Impex Pvt. Ltd. Vs CC (Export) Nhavasheva (3) E/87601/13-Mum - Viraj International Vs CC (Export) Nhavasheva (4) E/87602/13-Mum - Shree Raghav Enterprises Vs CC (Export) Nhavasheva (5). E/87603/13-Mum - Bronze Chem Enterprise Vs CC (Export) Nhavasheva (6) E/87719/13-Mum - Uniway Trading Pvt. Ltd.Vs CC (Export) Nhavasheva (7) E/87720/13-Mum - Nageshwar Enterprise Vs CC (Export) Nhavasheva (8) E/87776/13-Mum - Hero Dye Chem Industries Vs CC (Export) Nhavasheva (9) E/87811/13-Mum - C.J.Shsh & Co. Vs CC (Export) Nhavasheva (10) E/88004/13-Mum - Cosmos Plastics & Chemicals Vs CC(Export) Nhavasheva List E (1) E/87845/13-MUM - Liladhar Parekh Vs CC (Export) Nhavasheva List F Departmental Appeal (1) C/87961/13-Mum - CC (Export) Nhavasheva Vs Clarity Intermediates & Pesticides (2) C/87961/13-Mum - CC (Export) Nhavasheva Vs Nicholas Piramal (3) C/87961/13-Mum - CC (Export) Nhavasheva Vs Cosmos Chemical Corporation (4) C/87961/13-Mum - CC (Export) Nhavasheva Vs Colosperse Chemical Corporation (5) C/87961/13-Mum - CC (Export) Nhavasheva Vs Qualigence Chemicals (6) C/87961/13-Mum - CC (Export) Nhavasheva Vs Shreeji Barriels Pvt.Ltd.
(7) C/87961/13-Mum - CC (Export) Nhavasheva Vs Dye-Oex Dystuff & Intermediates P.Ltd.
(8) C/87961/13-Mum - CC (Export) Vs Nhavasheva Shree Sai Prassana Trading Co.
(9).C/87961/13-Mum - CC (Export) Nhavasheva Vs Shree Saibaba Chemical Industries (10) C/87961/13-Mum - CC (Export) Nhavasheva Vs Shree Krishna Barrels Pvt. Ltd.
(11) C/87961/13-Mum - CC (Export) Nhavasheva Vs (12) C/87961/13-Mum - CC (Export) Nhavasheva Vs Mini Sarvodyog Sira (13) C/87961/13-Mum - CC (Export) Nhavasheva Vs Arihant Impex (14) C/87961/13-Mum - CC (Export) Nhavasheva Vs J.B.Overseas (15) C/87961/13-Mum - CC (Export) Nhavasheva Vs Ketan Chemicals Corpn.
(16) C/87961/13-Mum - CC (Export) Nhavasheva Vs Pravi Organics Ltd.
(17) C/87961/13-Mum - CC (Export) Nhavasheva Vs Pravi Organics Ltd. (18) C/87961/13-Mum - CC (Export) Nhavasheva Vs Sabal Packing (19) C/87961/13-Mum - CC (Export) Nhavasheva Vs Corporate Chemicals & Intermediates, (20) C/87961/13-Mum - CC (Export) Nhavasheva Vs Shree Krishna Barriels Pvt.Ltd.
(21) C/87961/13-Mum - CC (Export) Nhavasheva Vs Anga Specialities Pvt . Ltd.
(22) C/87961/13-Mum - CC (Export) Nhavasheva Vs Bharat Chemicals (23) C/87961/13-Mum - CC (Export) Nhavasheva Vs Advance Packing Pvt. Ltd.
(24) C/87961/13-Mum - CC (Export) Nhavasheva Vs Kalpana Enterprises (25) C/87961/13-Mum - CC (Export) Nhavasheva Vs Ashish Suphur Dyes P.Ltd.
5. The exporters or their partner/proprietors who allegedly masterminded the activities are not in appeal before us.
6. Submissions on behalf of the Officers:
(i) The Ld. Counsels explained that the charge against officers is that they allowed substitution of samples which resulted in export of goods other than declared goods. They contested the charge that the officers did not carry out proper examination of the goods stuffed in the containers, did not verify the quality and value of the goods and gave factually incorrect certificates. They submitted that on re-testing of range samples, 11 out of 41 consignments tested positive. The balance 30 consignments were found to be negative. Therefore it cannot be said that the officers have not drawn samples correctly or the samples were substituted in case of past exports otherwise all samples would have tested negative.
(ii) Shri Zahid Edrus, who is not even a party to the impugned order, is the only officer who admitted that he handed over signed slips to the representative of exporters which were later on pasted on the sample bottles. The other Officers did not make any such confession.
(iii) The exporter Shri Afzal Dalal also stated that he was doing the substitution without the knowledge of the officers.
(iv) The instructions relating to drawal of samples in instruction No. 6/2002 and Chapter 7 of CBEC manual were followed by the Officers.
(v) The Officers are protected under Section 155(2) of the Customs Act read with Section 40 of the Central Excise Act as a notice was not issued to them within one month of intended proceedings. Nor was action taken against them within 3 months of expiry of accrual of the cause.
(vi) There is no finding of any extraneous or illegal consideration taken by the Officers while allowing factory stuffing.
(vii) In departmental proceedings, 6 out of 10 Officers have already been exonerated.
(viii) In similar case in proceedings against an officer Mr. Hitesh Mehta, penal action was dropped by the adjudicating authority and the order was not reviewed. The Tribunal also held in a similar case of Ruchika International 2015-TIOL-1224-CESTAT-MUM and Sunshine Overseas 2011 (263) ELT 617 that no penalty is imposable under Section 114 on the Officers.
7. Submissions on behalf of High Sea Sellers
(i) Ld. Counsels stated that penalty is imposed under Rule 26 of the Central Excise Rules 2002 for availment of Cenvat credit by the High Sea buyers without receiving the goods in their factory and without utilizing the same in the manufacture of final products. Rule 26 deals with excisable goods which are liable to confiscation under the Central Excise Act or Rules. In their case the goods which were sold by the appellant on High Seas were imported from outside India and, therefore not excisable and therefore beyond the purview of Rule 26 of the Central Excise Rules.
(ii) Their clients had no knowledge that the high sea buyers were going to wrongly avail the Cenvat Credit.
8. Submissions of Indigenous Suppliers:
(i) In the case of Mini Sarvodyog Sira it was submitted that the list of noticees to the show cause notice and Order-in-Original does not include the name of the appellant. Therefore, the demand is invalid in such cases as held by the Honble Apex Court in the case of Commissioner of Central Excise Vs. Akay Cosmetics Pvt. Ltd. 2005 (182) ELT 294 (S.C.). Although, the partys statement was recorded, they missed the opportunity of cross-examination, as he did not receive the notice, in violation of principles of natural justice. He relied on Jha Shipping Agency Vs. Union of India 2011 (264) E.L.T.321 (Cal.). Therefore Revenues appeal for imposition of penalty is liable to be dismissed.
(ii) On behalf of M/s. Sudarshan Chemicals Ltd. it is stated that the goods were cleared under cover of Central Excise invoices on payment of duty upto Bhiwandi as arranged by the party and onwards and therefore there is no violation of Central Excise law.
(iii) Ld. Advocate for M/s. Indokem Ltd. submitted that they received purchase orders from their stockist who requested them to issue invoices in the name of the company and the goods were supplied to the stockists warehouse. Mr. Bharat Shah, the stockist categorically accepted that the appellant was not involved in the transaction. The tempo owned by the appellants did not have permit to transport the goods outside Maharashtra. The tempo was used to carry the goods to the warehouse at Bhiwandi. The goods were cleared on payment of duty. Imposition of penalty under Rule 26 is not sustainable as they had no knowledge that the goods dealt with by him will not be sent by the stockist and therefore the goods are not liable to confiscation. Further, no penalty can be imposed under Rule 26 (2) for issuing excise invoice without delivering the goods as this sub-rule has been inserted w.e.f. 1.3.2007.
(iii) On behalf of M/s. Atul Ltd. it was submitted that they were not involved in the actions of the main parties. All the relevant statements and documents were provided in their reply dt. 10.1.2006 but no justification or even mention of the documents produced were dealt with by the Commissioner in his order. Even cross-examination of Mr. Jugal Kishore Jaju was denied. The Commissioner has merely recorded that It is on record that all the high seas sellers and indigenous suppliers in their statements as detailed in paras 391 (1) to 391(V) above, have admitted the fact that they received the sale amounts in drafts from the group companies and returned the same cash to them through the broker Mr. Liladhar Parekh. This fact is admitted by the broker also. That the statements were retracted by some. In absence of any evidence of threat/coercion/physical force, the statement under Section 108 of the Customs Act, 1962 is a valid piece of evidence, hence I hold that the same is reliable, cross examination of the Co-noticee is not going to serve any purpose, hence I reject any such demand. Thus principles of natural justice are violated in not allowing cross-examination.
The demand is time barred as they have not suppressed any fact. They relied on the Apex Court judgment in the case of Cosmic Dye Chemicals Vs. Collector of Central Excise 1995 (75) E.L.T. 721 (S.C.).
They had sold goods to M/s. Bhagwandas Ramchandra on payment of excise duty on principal to principal basis. The payment was received from Bhagwandas Ramchandra. The name of Qualigance Chemicals was mentioned on the invoice on instruction of Bhagwandas Ramchandra as per the prevailing commercial practice. The name of consignee was written on the invoice as Qualigance Chemicals-Surat A/c. Bhagwandas Ramchandra Mumbai. They submitted detailed documentary evidence namely all invoices, LR Copies Bank Payment advices, Purchase orders etc. According to them there is no mens rea on their part and, therefore, they should not be penalized under Rule 26 of the Central Excise Rules.
That the word person appearing in Rule 26 applies to an individual only. As they were not a party to the fraud and did not have knowledge that the goods sold by them are liable to confiscation, no penalty can be imposed. They relied on the case of Steel Tubes of India Ltd. Vs. CCE 2007 (217) E.L.T. 506 (Tri.-LB).
9. Submissions on behalf of the Broker:
(i) The Ld. Counsel submitted that a penalty of Rs.11 lakhs has been imposed for his involment in availment of credit of Rs.3.89 Crores. Out of this amount no penalty is imposable in relation to imported goods valued at Rs.1.26 crores in terms of Rule 26 of the Central Excise Rules.
(ii) As regards wrong availment of Rs.2.63 crores cenvat credit on local consignments he submitted that:
(a) Wrong availment of Rs.4,17,205/- at Sr. No. of Annexure-A 196, 197 & 198- was upheld on basis of statement of one Shri Nitin Updhyaya but the name of appellants does not figure anywhere and the deal was through another broker.
(b) Availment of credit of Rs.96,72,000/- at Sr. No. of Annexure-A 225 to 262 & 269- was a result of transaction between the four associate companies themselves and the appellant had not played any role in these deals.
(c) Availment of credit of Rs.16,11,620/- at Sr. No. of Annexure-A 1 to 6, 184 to 213, 224, 263 to 268, 272 & 273. The transactions were not through the appellant but through Shri Pappu Kesar Director of Intel Overseas.
(d) Availment of Credit of Rs.1,21,650/- at Sr. No. of Annexure -E 19- was on basis of letter of M/s. Basal Impex but this document is not a relied upon document.
(e) Regarding credit of Rs. 3,93,240/-at Sr. No. of Annexure-E 1 to 6, 8 to 11, 27 to 29- there is no allegation in show cause notice nor any finding in the order that the transactions were through appellant.
(f) Credit of Rs.12,94,563/- at Sr. No. of Annexure-I 51 to 55, 57 to 61, 64, 65- was a result of transaction among associate companies and the appellant was not involved in these deals.
(g) As regards the credit of Rs.3,04,537/- at Sr. No. of Annexure-I 1 to 9, 62, 63, 67, 68, 70 & 79 - there is no allegation in the show cause notice against the appellant.
(h) As regards credit of Rs 16,74,067 there is no allegation that the transactions were through the appellant.
(iii) If the amounts totalling Rs 1.54 crores stated in para (ii) above are not considered, the involvement of the appellant, assuming the same is considered on the basis of statements of other persons, will come to Rs. 1.09Crores only. Therefore, the plea is that the penalty of Rs.11 lakhs is harsh and not justified.
10. Submissions of Special Counsel on behalf of Revenue
(i) The Ld. Special Counsel appearing for Revenue submitted that the Commissioner of Customs (Export), Nhava Sheva has been appointed to act as Commissioner of Customs of various Custom Houses as also Commissioner of Central Excise & Customs Vadodara-I, Surat-I & Surat-II for adjudicating the matter. Therefore, the Commissioner of Customs (Export) had the power to impose penalty under Rule 26 of the Central Excise Rules.
(ii) On the contention of the Ld. Counsels, who represent High Sea Sellers, he submitted that Rule 26 only requires that the goods must be excisable goods and be subject to duty of excise. He relied upon the Apex Court judgment in the matter of Wallace Flour Mills Company Ltd. Vs. Collector of C. Ex. 1989 (44) E.L.T. 598 (S.C.). He also relied on the Honble High Court of P & H in the case of Hind Rubber Factory Vs. Union of India 1990 (48) E.L.T. 363 (P&H) to say that the phrase subject to does not mean that as goods, once they are listed in the schedule to the Central Excise Act, they should be subjected to excise duty. He also relied on the case of HPCL vs Commissioner 2012(279)ELT 367 (Tri-LB) to say that imported customs duty paid goods would come within the ambit of excisable goods.
(iii) As regards the role of High Sea Sellers and suppliers of indigenous goods, it was submitted that the concerned persons in their statements admitted to selling the imported goods only on paper to the associate companies but actually the goods were sold by them in the open market. The High sea sellers received value, Customs duty payments by demand draft and paid equivalent amount in cash to those companies. All these activities were done through Shri Liladhar Parekh, the Broker. The charge is further corroborated by statement of clearing agents, who dealt in delivery of the goods in the local market. In the case of goods claimed to have been imported by M/s. Cosmos Chemicals & Intermediates, the statement of warehouse owner where the goods were kept after clearance also shows that the same were not delivered to the associate company.
(iv) The indigenous supplier only supplied duty paying documents to the associate companies whereas the material was sold in the open market. Demand drafts were sent by group companies to the indigenous suppliers and the equivalent amount was received by cash from. These activities were conducted through Shri Liladhar Parehg as admitted by him. And as also admitted by the indigenous suppliers.
(v) In one case, M/s. Popawala retracted the statement but the same was not submitted to the department and there is no proof that statement was recorded under threat. Ld, Special Counsel relied on the case of Zaki Ishrati Vs. Commissioner of Customs & Central Excise, Kanpur 2013 (291) ELT 161 (All.) which held that a retraction not addressed to the officer before whom statement was given, cannot take away the effect of the statement.
(vi) As regards the contention made by M/s. Sudarshan Chemicals Ind. Ltd, M/s. Atul Ltd. and M/s. Indokem Limited, all indigenous suppliers, that they supplied goods to the companies through their agents as per trade practice, the Counsel submitted that instead of transporting goods to the group companies the same were delivered at Bhiwandi. The sale was not negotiated with the group companies and the indigenous suppliers were only asked by the agents to raise invoices in the name of group companies. This shows that they are a party to the illegal transactions as there is nothing to show that the goods were actually meant for group companies.
(vii) On the contention of B.R. Enterprises that they actually delivered the goods it was submitted that evidence at paras 155.1, 155.2, 155.3 of the Order shows that only invoices were to be delivered to them.
(viii) On the contention of Counsel for Shri Liladhar Parekh that they have not dealt with indigenous goods involving credit of Rs.1.54 Crores, it was submitted that only credit of Rs.96,2000/- has been taken on basis of transaction between the group companies. As regards remaining amount, role of Shri Parekh is explained in his statement.
(ix) It was submitted that the Honble P& H High Court have held that even prior to 1.3.2007 the supplier of invoices where goods have not been delivered are liable to penalty under Rule 26 of the Central Excise Rules.
11. Submissions of Ld. A.R in respect of Appeals filed by the officers.
(i) The Ld. AR submitted that the samples drawn by Central Excise Officers and subsequently recovered by DRI were tested. In the case of export of Betainone, 2 out of 13 shipments samples tested negative. Secondly, samples drawn from seized consignments in respect of Fenthion tested negative whereas test reports of samples drawn by Central Excise Officers from the same consignments showed positive result.
(ii) Shri Asif Abdul Biddiwala and Shri Afzal Dadda admitted in their statements said that they used to replace/substitute the samples of goods exported in the past. He relied on Supreme Court judgment in the case of Systems and Components Pvt Ltd. to state that what is admitted need not be proved.
(iii) The Central Excise Officers did not perform their duties properly as they drew samples from consignments and handed them over to the representative of the exporters, who in turn substituted the samples.
(iv) The Central Excise Officers in-charge of Ranges should have been aware of not receipt of raw material and non availability of infrastructure about the manufacturing status of the factories.
(v) Superintendent Shri M.G. Momin & Inspector Shri Zahid admitted that they drew the samples and handed them over to the representatives of the exporters with the signed envelopes and the samples were not sealed in their presence.
(vi) Provisions of Section 155 are not applicable as the officers failed to discharge their duties in good faith in compliance with the provisions of the Customs Act.
12. We have carefully considered the facts of the case and contentions of all sides.
Significantly the companies are not in appeal before us. It is seen from the records that they made confession to the fraudulent operations but they neither replied to the SCN nor they appeared for personal hearing. The Commissioner quite naturally came to the conclusion that they have nothing to advance their defence. He based his findings against the companies on the basis of records, confessional statements and hard evidence that they masterminded the total operations aimed at fraudulent availment of export benefits and cenvat credit.
12.1 The first issue to be decided is the confiscability of goods exported as well as goods imported and cleared by DEPB Holders and the leviability to duty on the imported goods, jointly and severally on the exporters as well as the DEPB Holder. At the time of hearing, the plea taken by the Ld. Counsels is that duty liability cannot be fixed jointly and severally on the exporters as well as the importers. We agree with this contention as the Tribunal has been constantly taking this position as in the cases of Rajesh Kumar Agarwal vs CCE 2015(321)ELT 313 (Tri-Del) and Golden Tobacco Ltd. vs CCE 2015(317) ELT 313(Tri-Del) . Therefore we order remand of these cases for fresh adjudication by the Commissioner for fixing the duty liability appropriately. Needless to say, the appellants will be afforded an opportunity of personal hearing and the principles of natural justice will be followed. We also note that it is a settled position in law that goods which are not available cannot be confiscated and redeemed. The Commissioner will no doubt consider this aspect legally. At this stage, we do not make any observation on the applicability of extended time period under Section 28 (1) of the Customs Act. However this matter shall also be considered by the Commissioner after fixing the duty liability. He should keep in mind the aspects of mens rea and the ingredients of proviso to Section 28 (1) for invoking extended time period. The matter of penalties under Section 114A in such cases will also be decided by him accordingly.
12.2. The next issue is the imposition of penalties on the High Sea Sellers. We find varying amounts of penalty imposed on the various high sea sellers depending on their role in availment of Cenvat Credit on the goods sold by them on high sea basis.
(i) At the outset, Shri J.H. Motwani Ld. Counsel questioned the power of Commissioner to impose penalty under Rule 26 of the Central Excise Rules. We find that in this case the Commissioner of Customs (Export) Nhava Sheva was appointed to act as Commissioner of various Customs Houses, ICDs through which import export took place as well as Commissioner of Central Excise & Customs, Vadodara-I, Surat-I and Surat-II to adjudicate the cases under notifications No.113/2005-Cus(NT) dt. 28.12.2005 as amended by Notification No. 100/2009- Cus (NT) dt. 20.07.2009. Therefore, the Commissioner had the power to impose penalty under Rule 26. Therefore the contention of Ld. Counsel is outrightly rejected.
(ii) The contention of the counsels is that penalty cannot be imposed on the appellants under Rule 26 as they have not dealt with excisable goods. For convenience Rule 26 is reproduced below:
Rule 26. Penalty for certain offences.-
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 two thousand repees, whichever is greater.
Further, the definition of excisable goods under Section 2(d) of the Central Excise Act is as follows:
excisable goods means goods specified in the [First Schedule and the Second Schedule] to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt;
The contention is that the goods sold on high seas were imported goods and were not manufactured in India, therefore duty was not payable under Section 3 of the Central Excise Act. The duty was payable under Section 3 of the Customs Tariff Act. Therefore the provisions of confiscation under the Central Excise Rules are not applicable to them and hence penalty under Rule 26 of the Central Excise Rules cannot be imposed. However, Ld. Special Counsel submitted that what has to be seen is whether the goods per se are specified in the first and second schedule to the Central Excise Tariff and secondly, whether goods so specified are subject to a duty of excise. In other words, the goods should only be leviable to excise duty under the category of excisable goods. But it is not necessary that there should be actual levy of excise duty. He relied on various case laws.
We have examined the issue carefully. Firstly, we find that the various case laws cited deal with Central Excise provisions only. Even the judgement in the case of HPCL (supra) was delivered in a different context and not in the context of imposition of penalty on imported goods under the Central Excise Rules as is being sought to done in the present case. Whereas what we have to examine is the situation of goods which are not yet imported under the Customs Act. Referring to the provisions of Rule 26, we find that penalty is imposable if any person deals with any excisable goods which he knows are liable to confiscation under the Act. Even if we accept the contention of Ld. Spl. Counsel it has to be satisfied first that the goods are liable to confiscation under the Central Excise Act. The relevant rule is Rule 25 which is reproduced below for ease of reference:
RULE 25.?Confiscation and penalty. (1) Subject to the provisions of section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse [or an importer who issues an invoice on which CENVAT credit can be taken] or a registered dealer,-
(a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or
(b) does not account for any excisable goods produced or manufactured or stored by him; or
(c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or
(d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse [or an importer who issues an invoice on which CENVAT credit can be taken] or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (c) or clause (d) has been committed, or [five thousand rupees], whichever is greater.
(2)?An order under sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice.
In the present case we find that the goods which are still on high seas cannot be held to be liable to confiscation in terms of Rule 25 above. It has not been shown, in terms of the above Rule that the High Sea Sellers have contravened any provisions of Central Excise Rules with intent to evade payment of Central Excise duty when the goods are still on High seas. It cannot be held that because the goods will be diverted and not used by the companies after clearance from Customs, the offence already stands committed on the sale of the goods on High seas. Therefore in our considered view the question of imposition of penalty under Rule 26 of the Central Excise provisions on goods on high seas does not arise. Having decided the legal point at hand, we do not find it necessary to go into the details of the role played by the High Sea Sellers viz-a-viz the Importers.
12.3 We now deal with the penalties imposed on the indigenous suppliers. The allegation is that only duty paying documents were sent by the suppliers to the companies whereas raw material was sold in the open market. This enabled the suppliers to avail Cenvat credit without receiving the goods. These facts have been admitted by the dealers and stockists as well as the companies who received the documents. These facts are also revealed in the statements of officials of the suppliers. Shri Stany Pias Deputy Manager Marketing of Ms Indokem Ltd stated that they sold consignments to Ms Qualigance and Ms Colosperse but sent all goods to the godown at Bhiwandi. The vehicle used by them belonged to them. Shri D S Kale Assistant Manager stated that they issued modvatable invoices for goods despatched from their godown in their own vehicle which was never used to deliver their goods to the consignees. No goods were ever delivered to the premises of the companies. The vehicle shown to be used by the first stage dealer B R Enterprises in its invoices was their vehicle and could not have been used by BR Enterprises. On the date written on the invoices, the vehicle was in their possession. Shri Jugal Kishore Consultant for Ms Indokem stated that he was asked by their Vice President Mr FC Saharan to prepare DOs for the companies. Shri Bharat Jayantilal Shah Partner of Ms Paras Sales Agency stated that brokers such as Liladhar Parekh approached him and wanted excise documents only and the material with invoices could be retained by Shah. Therefore he contacted Mr. Saharan. All the goods under the invoices were never dispatched to the factory premises and the same were sold by him in cash. Mr Rathi MD of Sudershan Chemicals admitted that the invoices were issued in the name of the companies, so were the LRs but the latter were issued upto Bhiwandi and not upto the address of the companies.
The above shows how a maze of methods and people managed to sell goods in the market but the goods never reached the companies. The facts above lead to a reasonable belief that the suppliers were aware of the methods adopted.
In the case of Ms Atul, the statement of Darhan Sheth of the Transport Company shows that they were contacted by Ms Atul for transportation of the goods to Bhiwandi whereas the invoices were in the name of the companies. This was abnormal because the place of the company, i.e. Bhestan and Bhiwandi are in opposite directions. Even a copy of the LR for Bhiwani was sent to the consignee. Therefore we find that there could not be better proof to indicate that the supplier was aware of the modus operandi of sending invoices but not the goods to the companies. The partner of Ms Bhagwandas Ramchandrs, Shri Jugal Kishore, also stated that Shri Liladhar Parekh approached him to say that Ms Qualigance approached him with the request that they wanted only the original excise duty paying documents but not the goods. Therefore the goods were sent to Bhiwandi and sold in the local market. Whereas the defence plea is that as per commercial practice they received orders of companies through brokers. We find Ms Atul supplied the goods by writing in the invoice under the column of consignee, the description such as Qualigance Chemicals Account Bhagwandas Ramchandra. The goods were ostensibly meant for Qualigance Chemicals. However, since the order was placed by the intermediary Bhagwandas Ramchandra they mentioned the word Account. The Commissioner recorded in the order that It is on record that all the high seas sellers and indigenous suppliers in their statements as detailed in paras 391 (1) to 391(V) above, have admitted the fact that they received the sale amounts in drafts from the group companies and returned the same cash to them through the broker Mr. Liladhar Parekh. This fact is admitted by the broker also. That the statements were retracted by some. In absence of any evidence of threat/coercion/physical force, the statement under Section 108 of the Customs Act, 1962 is a valid piece of evidence, hence I hold that the same is reliable, cross examination of the Co-noticee is not going to serve any purpose, hence I reject any such demand. We find that denial of cross-examination to partner of Shri Bhagwandas Ramchandra is not material when the offence can be established on the basis of documents . It appears that the goods were supplied to the companies without ensuring actual supply of the goods.
We also note that during the material time under the Central Excise Rules, it was not mandated under Rule 11 that the mode of transport and vehicle registration number was required to be mentioned on the invoice. Nevertheless, even if the vehicle number was mentioned and destination shown as Bhiwandi instead of Surat which was the consignees address, it can be concluded that the suppliers did not take reasonable steps to ensure that the goods are consigned to the appellants addressed. They never cared to verify even once whether the goods were delivered to the companies. To this extent we find that the goods are liable to confiscation under Rule 25 of the Central Excise Rules. This is because in terms of Rule 11 of the Central Excise Rules the goods are to be removed on basis of invoices in Triplicate out of which the original invoice is meant for the buyers. That is, the original copy is meant for the consignee and duplicate copy must accompany the goods. This was not ensured. If the destination address is not shown in the LR to be the same as the address of the consignee, the supplier has certainly knowingly removed the excisable goods in contravention of the Rules. This act of theirs facilitated the fraudulent availment of Cenvat credit by the consignee. Therefore the indigenous suppliers are liable to penalty under Rule 26. We uphold the order of Commissioner imposing penalties on the indigenous suppliers.
12.4 (i) As regards officers, the charges are that instead of sealing the samples under their signatures, they handed over signed slips bearing their signatures to be affixed on the covers containing sample bottles. Thereby they facilitated the substitution of samples by the exporter which resulted in fraudulent DEPB claims. We find that it is only in the case of the current consignments in containers which were seized that the officer namely Inspector Zahid admitted to this fact. None of the other officers who are appellants admitted to having given signed slips to the exporters. Department is relying on the statements of Shri Afzal Dalal that he used to replace the samples drawn by the Central Excise Officers who gave him the seals and blank envelopes duly signed by them. It is seen that the officers in their statements stated that the procedure of sampling was followed correctly by them. Therefore, it is our view that the Commissioner cannot generalize the charge against all the officers on the basis of admission of one officer. In fact we are informed that the case of this officer Shri Zahid, who is not a party in the present case, is yet to be adjudicated. Shri Afzal Dalal also stated that he was doing the substitution with the knowledge of the officers. Due to lack of any concrete evidence against the officers who handled past consignments, it is difficult to sustain the case against them. Another allegation is that in some cases there was no manufacturing at all in the factories where containers were sealed and the officers should have been aware of this. We find that in some cases there are statements from factory staff that the factory was in existence. The point to be seen is whether the goods exported were actually manufactured. As regards Revenues contention that the officers attending to exports should have verified the factory premises and machinery, the Ld. Counsel showed us that the inquiry report of the department in the disciplinary proceedings submitted vide F.No.II/10(A)/CON/2012-2013 dt. 13.11.2014 and vide F.No. II/36-4/VIG/WD/2013-14 dt. 12.11.2014 which held that the Inspectors are not required to verify plant and machinery while following the export procedure for drawal of samples. This report also goes in favour of the appellant officers.
(ii) Fact is that samples were drawn and the results in some cases after retesting by DRI tested positive. Although 30 out of 41 consignments tested negative it has not been brought on record as to what happened to the samples which were initially sent for testing. The reports have not been brought on record. If the reports were on record, it would have made the picture very clear and brought out the complicity of the officers, if any. There is force in the contention of the appellants that had the samples been replaced, none of the 41 samples would have tallied with the samples tested by DRI. In the circumstances the complicity of the officers does not get established beyond doubt.
(iii) A significant legal issue raised by the Ld. Counsels is that in terms of Section 155 (2) of the Customs Act and Section 40 of the Central Excise Act, no proceeding shall be commenced against any officer without giving the officer a months previous notice of the intended proceeding and of the cause thereof, or after the expiration of three months from the accrual of such cause. Revenue has not challenged the fact that the time lines in Section 155(2) were not adhered to. No convincing reason has been given to us why Section 155(2) will not be applicable. Reliance is placed on the case of Rajeev Kumar Agarwal vs Commissiner 2007(217)ELT 392(Tri-Bang) (supra). We find that the appeal of the appellant officers is liable to be allowed on this ground alone.
12.5 We may now take up the case of the Broker Shri Liladhar Parekh. We find that he had given a detailed statement which is reproduced below for convenience to determine his role and liability to penalty.
he had never represented any of the four companies before any suppliers/Government agencies, but infact he used to represent the four companies independently with the suppliers and Government agencies as/ he used to sign the HSS agreements and all the other relevant documents as authorized signatory of the said four firms i.e. M/s Cosmos Chemicals & Intermediates, M/s Qualigance Chemcials, M/s Chevrolet Dyes Intermediates & Agrochem Industries and M/s Colosperse Chemcia! Corporation;) that he appended his dated signature on the last page of the said statement in token of having seen the same; that he was shown the statement dated 21.09.2004, 14.12.2004 & 10.01.2005 of Shri Balkrishan N. Popawala, Authorized Signatory of M/s Hero Dye Chem Industries and partner of M/s Popawala & Co. and statement dated 10.01.2005 of Smt. Bharti B. Popawala, Prop, of M/s Hero Dye Chem Inds. and on perusal of the same he stated that the facts stated therein in respect to his role were true and correct and he accepted the same: that in token of having acceptance, he appended his signatures on the last page of all the statements; that he was shown statement dated 15.12.2004 and 05.02.2005 of Shri Bharat Himmatlal Shah of M/s Karan Monomer P. Ltd. and statement dated 12.01.2005 of Shri Bharat Mehta; Chemical Broker and stated that the facts stated by Shri Bharat H. Shah regarding his role were correct;' that with regard to statement dated 12.01.2005, of Shri Bharat Mehta he stated that he had never met Shri Bharat H. Shah in the subject deal and all the transactions on behalf of M/s Karan Monomer were done by Shri Bharat Mehta; that the fact stated by Shri Bharat Mehta that he had introduced him to Shri Bharat Shah was wrong; that in token of the above he-appended his signature on the last page of the said three statements shown to him; that he was shown the statement dated' 12.01.2005 of Shri Kaushal Shah of M/s Rose Chemicals and on perusal of the same he stated that the facts stated therein with regard to his role were correct and acceptable to him; that the goods i.e. 23.5 MT of Titanium Dioxide cleared under bill of entry No. 828503 dated 20.03.2003. were stored in Ambica Storage (540 Bags weighing 13.5 MT) and Dehmukh warehousing (400 bags weighing 10 MT) and the same were sold by him in the open market; that out of the sale . proceeds recovered by him he paid the equivalent amount of DD to M/s Cosmos Chemicals which was handed over to M/s Rose Chemicals; that M/s Rose Chemcials had not paid any amount to M/s Cosmos Chemicals ,& Intermediates; that in the subject HSS for sale of goods under bill of lading No. KKLU-634105689-dated 09.02.2003, the warehouse charges were paid by him and no goods of the subject bill of entry were delivered to M/s Cosmos Chemicals & Intermediates; that in token of the above he appended his signatures on the last page of the statement of Shri Kaushal Khan; that he was shown statement dated 17.12.2004 of Shri Apurva Shah,- Partner "of M/s C. J. Shah & Co. , statement dated 17.12.2004 of Shri Raghvendra M. Adhyapak, General Manager Commercial of M/s C. J. Shah & Co., statement dated 17.12.2004 of Shri Atul M. Gandhi, statement dated 17.12.2004 of Shri Hiren" Mehta, Prop, of M/s Vitrag Chemicals and statement dated 18.12.2004 of Shri Ketan N. Shah, Prop, of M/s Jmpex Dyechem, statement dated 18.12.2004 of Shri Mukesh A. Bakhai, Partner of M/s Amrit Chem, Mumbai, statement dated 24.09.2004 of Shri Ramavtar Poddar, Partner of M/s Maruti Rasayan, statement dated 31.12.2004 of Shri Ambrish Mehta, Partner of M/s Alfa Chemical Corporation and statement dated 08.01.2005 of Shri Mukesh Bahkai, Partner of M/s Amrit Chem , statement dtated 07.01.2005 of Shri .Rakesh Bhageria of M/s Bhagerial Dye Chem Ltd. and statement of Shri Rakesh Jajodia Partner of M/s Maruti Rasayan Mumbai,, statement dated 08.01.2005 of Shri Chetan R. Gupta, HUF Karta of M/s Shree Raghav Enterprises and statement dated 09.01.2005 of Shri Vipul P. Mehta of M/s ViraJ International, statement dated 09.01.2005 of Shri Mukesh Ramani, Director of M/s Knox Impex Pvt. Ltd. and statement dated 10.01.2005 of Shri Vijay Sheth, Director of M/s Dye-O-Tex Dyestuff & Intermediates P. Ltd. and stated that on perusal of the statements, the facts stated in these statements were true correct and acceptable to him and in token of acceptance he appended his signature on last pages of these statements; that he was shown statement dated 31.12.2004 of Shri Jagdish Singh Arora, Director_of_M/s. D. K. Foods & Chemicals P. Ltd. and on perusal of the same he stated that it was a fact that he approached "Shri Jadish Singh Arora for showing the sales on HSS basis to M/s Chevrolet, M/s Cosmos & M/s Colosperse and informed that only the import documents were to be given to the said three parties and no goods cleared in their name were to be delivered to the respective parties} that he did not accept the fact about the sale of the goods cleared under the name of the said three parties and the arranging of DEPB Scrips, as stated by Shri Jagdish Singh and stated that he also did not take the delivery of the goods from the docks after clearance of the same; that in token of having seen the said statements he appended his signatures on the last page of the said statement; that he had perused the statement dated 12.01.2005 of Shri Satish Sanghvi, Authorized Signatory of M/s Parag International and on perusal of the same he stated that the facts stated by Shri Satish Sanghvi were not correct as the goods shown to have been sold on HSS basis by M/s D. K. Foods were never sold by him as stated by him no delivery of the goods was taken by him and no DEPB scrips were arranged by him; that in token of having seen the above statements he appended his signatures on the last page of both the statements; that he was shown the statement dated 31.12.2004 and statement dated 19.01.2005 of Shri Suhail Agrawal Chairman of M/s Sahastraa Exports P. Ltd. and statement dated 31.12.2004 of Shri Preyash Nanavati Prop, of M/s Kesar Color Chem and on perusal of the same he stated that that the facts stated by Shri Preyash Nanavati about his dealings with Shri Mrs. Fernandes for the sale of Liquid Phenol on HSS basis to M/s Chevrolet were not correct as all the paper transactions and cash transactions made between M/s Sahastraa Exports and himself (M/s Chevrolet) were done by Shri Preyash Nanavati and that he had never rnet or spoken with Mrs. Fernandes; that the DD for the duty amount and for the documents were handed over by him to M/s Shahastraa Exports through Shri Preyash @ Pappubhai and the equivalent cash amount was also received by him through Shri Pappubhai; that in token of having perused the above three statements he appended his signatures on the last page of all the three statements; that he was shown-statement dated 23.01.2005 of Shri Manish Chottaial Vora. Authorized Signatory of M/s Nageshwar Enterprises, statement dated 31.12.2004 of Shri Nimesh Gandhi Prop, of M/s Aruna International and statement dated 23.01.2005 of Shri Bhaskar Mehta Proprietor of M/s B. I. Mehta, statement dated 09.11.2004 and 07.12.2004 of Shri Suresh Mehta of M/s Gaurav International, statement of Shri Rajiv M. Kanani, Prop, of M/s Prachi Trading Co., statement dated 17.01.2005 of Shri Santosh W. Natekar, Partner of M/s Uniway Trading P. Ltd. and statement dated 18.01.2005 of Shri Radheyshyam Harlalka, Chemical Broker of VAdgadi, Mumbai, statement dated 19.01.2005 of Shri Chetan Parekh, Partner of M/s Cosmos Plastics & Chemicals, statement of Shri Amrit D. Patel, Partner of M/s Shah Patel & Co., Ahmedabad and he stated on perusal of these statements, that the facts stated therein were true and correct; that he accepted the role played by him and in token of it he appended his signatures on the last page of the said statements; that he was shown statement dated 15.12.2004 of Shri Shivkant Khetan, Partner of M/s Alpic India, Mumbai and on perusal of the same he stated that he did not accept the fact stated by Shri Shivkant Khetan about his role in the said transaction; that he never met Shri Shivkaht Khetan for making the HSS agreement in the name of M/s Chevrolet; that he had never sold any consignment of chemical to Shri Shivkan Khetan and had never suggested Shri Shivkant Khetan to import acrylamide and had not suggested any indenter to Shri Khetan; that for the HSS agreement made between Shri Khetan and M/s Chevrolet one chemical broker Shri Sailesh Mehta having his office at R. No. 15, 51 Dariyasthan street, Vadgadi Mumbai approached him and managed all the transaction on behalf of M/s Alpic !ndia; that Shri Sailesh Mehta could better explain the facts about the sale of the goods pertaining to the HSS agreement between M/s Alpic India &-M/s Chevrolet; that he appended his signatures on trie last page of the said statement in token of having perused the same; that he was shown the statements dated 16.12.2004 of Shri Satish Sanghvi, Authorized Signatory of M/s' Parag International, Shri Yogesh D. Shah, Director of M/s Devansi Impex P. Ltd and Shri Bharat Sheth, Proprietor of M/s Bronze Chem Enterprise and on perusal of the same he stated that he had not passed on any instructions about the transportation of the goods to Bhiwandi nor had arranged any buyer for the sale of the subject goods from Bhiwandi; that in all the three cases as and when the Demand Drafts were received from the respective HSS buyers, the equivalent amount of cash was returned by the respective buyers; that all the three sellers were informed in advance that the HSS buyers i.e. M/s Cosmos, M/s Chevrolet, M/s Qulaigance & M/s Colosperse were interested in the import documents only and no goods cleared under the HSS agreements would be physically delivered to the factory premises of the HSS buyers; that he had not instructed them to appoint any CHA and he appended his signatures on the last page of all the three statements in token of having seen the same; that he had perused the statement dtd 20.01.2005 of Shri Suresh Bhagwandas Jaju, Authorized Signatory of M/s B. R. Enterprises and stated that the facts stated by Shri Suresh Jaju about his role were correct and acceptable to him; that all the goods shown to have sold to M/s Cosmos & M/s Qualigance were never physically delivered to them and only C. Ex. Duty paying documents were sent to the respective parties; that he had received 0.5 % of the value of the goods as his brokerage and all the transactions of handing DD to M/s B. R. Enterprises and returning cash to the respective parties was done by "him; that he appended his signature on the last page of statement of Shri Suresh Bhagwandas Jaju in token of its acceptance; that he was shown the statement dated 09.01.2005 of Shri Bharat Jayantilal Shah, Partner of M/s Paras Sales Agency, the statement dated 23.01.2005 of Shri Jugal Ktshore Jaju, Partner of M/s Bhagwandas Ramchandra, the statements dated 03.02.2005 of Shri Surendra Roshanal Duggal, Partner of M/s Bharat Solvents & Chemicals Corp. New Delhi and statement of Shri Hiren R, Gosalia, Prop of M/s Ramniklal Gosalia & Co. and on perusal of the same he stated that the facts stated about his role were true and correct and were acceptable to him, in token of this he appended his signature on the last page of all the statements; that Shri Afzal Dalai & Shri Asif Bidiwala first approached him in Dec, 2001 for arranging buyers for the sale of approx 20 MT of Titanium.Dioxide of foreign Origin; that this quantity of Titanium Dioxide was stored by them in one of the warehouses at Bhiwandi; that for the subject deal he had charged brokerage of 1% of the sales proceeds; that they again visited his office and stated that they had manufacturing units In Gujarat and they required the duty paying documents of import consignments i.e. BE, BL, etc and Central Excise Invoices in respect of indigenous consignments on regular basis; that they offered him brokerage of 1% of the transaction value which was subsequently reduced to 0.5 % and at times he was getting 0.25 %; that as per the normal trade parlance whenever any such sales were made wherein any document ie. Duty paying C. Ex. Invoice or bill of entry document showing HSS, were taken by the buyer and the goods were retained and sold by the sellers, the seller had to pay 1% or 2% commission to the buyer because all payments for such sales were made/shown from the account of the buyer; that in the subject deal Shri Afzal Dalai and Shri Asif Bidiwala had informed that they did not want any such commission from the HSS sellers and the parties issuing/arranging the C. Ex. Invoices; that this enabled him to get the subject deal finalized with many HSS sellers and indigenous parties; that no commission was paid to any of the indigenous suppliers except the sales tax part which was paid by the respective buyers i.e. M/s Cosmos, M/s Chevrolet, M/s Qualigance & M/s Colosperse; that this was the only indirect benefit to the indigenous parties From the statement we find that he has made confessions at various places about receiving brokerage amounts for dealing with imported and indigenous goods which were not delivered to the importers/consignees but were actually sold in the open market. After selling the imported goods, he received demand drafts from the buyers and paid equivalent amount in cash. However, at the same time we also find that in some cases pointed out by the Ld. Counsel for the appellant and stated in para 9 above the transactions were done through another broker Pappu Kesar. In respect of these transactions, he has not made any confession in his statement. Amount of credit wrongly availed is Rs.417205/- and Rs.1611620/- through Pappu Kesar. The wrong availment of Cenvat credit of Rs.96,72,000/- was a result of transaction amongst the associate companies. Neither is there any allegation in the show cause notice or finding in the order that he had brokered these deals. Similar is the case regarding Cenvat Credit availed of Rs.1294563/-. The Credit of Rs.121650/- held in admissible on basis of letter dt. 18.4.2005 of M/s. Basal Impex which does not even appear in the relied upon documents. Also the Cenvat Credit of Rs.393240/- and Rs.304537/- finds no mention in the show cause notice or the findings.
We find that Shri Liladhar Parekh definitely had a hand in brokering deals in some cases with full knowledge that the goods are not to be delivered to the importers/consignments and that only the documents were to be used for availing Cenvat credit. But the cenvat Credit wrongly availed in such transactions which he dealt with is about Rs.1 crore only as explained in above para. Therefore, the penalty of Rs.11 lakhs imposed on him is excessive and we order that the penalty is reduced to Rs.4 lakhs.
13. The departments appeal is on the following grounds:
(1) The adjudicating authority has not imposed penalty on the DEPB Holders under Section 114A as mentioned at Para-O(iv).
(2) The adjudicating authority has not confirmed duty demand on DEPB Holder M/s. Corporate Chemicals and Intermediates which was required to be done as the goods were confiscated.
(3) The adjudicating authority confirmed duty against M/s. Cosmos Chemicals and Intermediates to the extent of Rs.16,73,355/- instead of Rs.58,02,726/- (Para-S(ii) of the Order).
As regards these appeals since we have already remanded the appeals of appellants in respect of duty demand/penalty against DEPB holders/importers we remand these appeals also to the Commissioner for fresh adjudication.
(4) Non imposition of penalty under Rule 26 in respect of certain High Sea Sellers and certain Indigenous Suppliers. As regards the high sea sellers we have already held that penalty is not imposable on them. As regards the indigenous suppliers we have upheld the penalty imposed on some indigenous suppliers. Therefore, in the cases where penalty has not been imposed on indigenous suppliers by the Commissioner, we remand the matter back to the Commissioner in re-adjudication after affording an opportunity of personal hearing.
(5) The adjudicating authority imposed mandatory penalty of Rs.3000/- instead of minimum mandatory penalty of Rs.10,000/- under Rule 26 on the indigenous supplier M/s. Advance Packaging Pvt. Ltd. Therefore, we order that the penalty on M/s. Advance Packaging Pvt. Ltd. be increased to Rs.10,000/-.
14. We order as under:
(1) The order relating to confiscation of export/imported goods, demand of duty against the importers/DEPB holders and consequent penalties is remanded to the Commissioner in terms of our observations in para 12.1 above. The cases appealed by the Revenue where demand of duty has not been confirmed and penalty has not been imposed on the DEPB Holder as mentioned in Para 13 above, are also remanded to the Commissioner accordingly. The case relating to appeal of department regarding wrong confirmation of duty against M/s. Cosmos Chemicals and Intermediate is also remanded back to the Commissioner on the same lines.
(2) Penalties against High Sea Sellers are set aside.
(3) The penalties against indigenous suppliers are upheld. However the case of Ms Mini Sarvodyog is remanded back as they did not receive the SCN or the impugned Order. The cases relating to appeals filed by department in respect of indigenous supplier where Commissioner has not imposed penalties as mentioned in Para-13 above are remanded back to the Commissioner for fresh adjudication.
(4) The penalties against appellant officers are set aside.
(5) The penalty against Shri Liladhar Parekh, broker is reduced from Rs.12 lakhs to Rs. 4 lakhs.
15. We would like to offer our gratitude to the Special Counsel who painstakingly presented the facts of the long impugned Order in a very coherent and structured manner.
16. Appeals disposed in terms of para 14 above.
(Pronounced in court on 29/10/2015) (Ramesh Nair) Member (Judicial) (P.S.Pruthi) Member (Technical) SM.
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