Al Amin Exports vs Commssioner Of Central ... on 27 January, 2014

[Cites 56, Cited by 0]

Gujarat High Court

Al Amin Exports vs Commssioner Of Central ... on 27 January, 2014

Author: Akil Kureshi

Bench: Akil Kureshi, Sonia Gokani

        O/TAXAP/1142/2013                               ORDER




         IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                       TAX APPEAL NO. 1142 of 2013
                                     TO
                       TAX APPEAL NO. 1144 of 2013
                                    With
                    CIVIL APPLICATION NO. 740 of 2013
                                     In
                       TAX APPEAL NO. 1142 of 2013
                                    With
                    CIVIL APPLICATION NO. 741 of 2013
                                      In
                       TAX APPEAL NO. 1143 of 2013
                                     TO
                    CIVIL APPLICATION NO. 742 of 2013
                                     In
                       TAX APPEAL NO. 1144 of 2013

================================================================
                 AL AMIN EXPORTS....Appellant(s)
                            Versus
          COMMSSIONER OF CENTRAL EXCISE....Opponent(s)
================================================================
Appearance:
MR DEVEN PARIKH, LD.SENIOR COUNSEL WITH MR NIRAV P SHAH,
ADVOCATE for the Appellant(s) No. 1
================================================================

CORAM: HONOURABLE MR.JUSTICE AKIL
       KURESHI
       and
       HONOURABLE MS JUSTICE SONIA
       GOKANI

                              Date : 27/01/2014


                            COMMON ORAL ORDER

(PER : HONOURABLE MR.JUSTICE AKIL KURESHI) Page 1 of 67 O/TAXAP/1142/2013 ORDER

1. These appeals involve similar questions. They have been, therefore, heard together and have been disposed of by this common order.

2. For the sake of convenience, we may refer to the facts as arising in Tax Appeal No.1142 of 2013.

2.1 The appeal is filed by one Al Amin Exports, a partnership firm having its unit of manufacturing of readymade garments at Kabilpore GIDC, Navasari. The appellant was 100% Export Oriented Unit (hereinafter referred to as 'the EOU'). The Customs Department carried out investigations in connection with the activities of the said manufacturer and its interconnection and relation with an importer M/s.Arya Dyeing and Printing Pvt. Ltd., also a 100% EOU. During the course of investigation, the statements of the partners of the appellantAl Amin Exports were recorded. The statements of several other persons, including the watchman of Al Amin Exports and those of Excise officers within whose jurisdiction the manufacturing activities of Al Amin Exports Page 2 of 67 O/TAXAP/1142/2013 ORDER were located, were also recorded. On the basis of the materials so collected, the Commissioner of Central Excise and Customs, Surat, issued a show cause notice dated July 10, 2007 to several noticees, including the present appellantAl Amin Exports.

2.2 The show cause notice proceeded on the premise that M/s.Arya Dyeing and Printing Pvt.

Ltd. had imported raw fabric under EXIM policy of 2007 without payment of customs duty under the obligation to export the final product. The said importer had furnished an undertaking to fulfill such export obligation failing which they would expose themselves to the liability under the Customs Act, 1962 (hereinafter referred to as 'the Act') and the Central Excise Act, 1942 and the rules made thereunder.

As per the EXIM policy and the conditions of import, the said unit was required to export all the final products or to supply their final products to another 100% EOU under CT3, which would amount to deemed export. It was alleged Page 3 of 67 O/TAXAP/1142/2013 ORDER inter alia that M/s.Arya Dyeing and Printing Pvt. Ltd. did not fulfill such export obligations and merely obtained entries of transferring the goods to the appellantAl Amin Exports. The appellantAl Amin Exports facilitated such bogus claims of the importer.

By charging Rs.4.50 ps. to Rs.5/ per metre as a premium, they passed necessary entries though they never received any goods. We may reproduce relevant portions of the show cause notice, which read as under :

"6.. Whereas it appears that on collection of intelligence/ information the DRI, Surat have conducted a search at the premises of (1) M/s. AlAmin Exports (100% EOU) Plot NO.449, GIDC, Kabilpore, Navsari, the partnership firm having two partners namely shri Irfan gulam Rasool Saiyed (De facto owner of Sunshine Overseas) and shri Haroon Razak Chhaya and at (ii) M/s. Sunshine Overseas (100% EOU), Plot No.439, GIDC, Kabilpore, Navsari, having two partners namely Shri Rashid Sahadatali Saiyed and Kaushik Mazumdar. It was noticed that M/s.

AlAmin Exports navsari and M/s. Sunshine Overseas both 100% EOUs were showing procurement of raw materials i.e. Polyester Grey Fabrics / MMF (Proc) from various 100% EOU's, including M/s. Arya's Dyeing and Printing Pvt. Ltd. (100% EOU) Block No.278, N.h. No.8 village Baleshwar, District Surat (hereinafter referred to as the said unit_) against Central Excise invoice/ AR3s and CT3 but no goods were physically received Page 4 of 67 O/TAXAP/1142/2013 ORDER in M/s. Al Amin Exports (100% EOU) Navsari and M/s. Sunshine Overseas (100% EOU) under CT3s from the said Unit, that based on the documents received from the said unit entries were made in their inbond register and in order to fulfill their export obligations,, one shri Bilal Memon, having his office at Oasis Building, Opp. Sub Jail, Ring Road, Surat used to send ready made goods, purchased from the open market through the tempos of Shri Akbar Tempowala; after receipt of the goods in their factory, they used to carry out minor processes like sewing and packing etc. on the goods and after packing the same in cartons, they used to export these goods, after factory stuffing and preparing necessary documents, that all the goods exported by M/s. Al Amin Exports (100% EOU) Navsari and M/s. Sunshine Overseas (100% EOU) had been sent by shri Bilal Memon and the goods were exported to the firms mostly at Dubai. Shri Irfan Saiyed, partner of M/s. Alamin Exports, on being asked to operate the machines installed in M/s. Al Amin Exports, stated that all the machines except sewing machine and one pleating machine, were not capable of being run as regards the indigenous goods i.e. 65000 Pcs of dyed and printed scarves found available in the factory were supplied by Shri Bilal Memon after purchasing the same from the open market and that no legal documents were accompanying the said goods, they had received the goods in contravention of the provisions of Central Excise and Customs Act in their 100% EOU. It was also revealed that there was a meager stock of indigenous raw material in the form of cut pieces and Chindics sent by shri Bilal Latif Memon which had no relation with the goods mentioned in CT3s issued by them. Therefore, it was seen that these goods were not the goods received against CT3s and were not the goods received from any EOU. It was further stated that earlier also no goods used to come into their unit from any Page 5 of 67 O/TAXAP/1142/2013 ORDER EOU's under CT3s but the indigenous goods were being sent by shri Bilalbhai after purchasing from local market and out of which scarves and made ups were manufactured and export obligation of M/s. Al Amin Exports (100% EOU) Navsari and M/s. Sunshine Overseas (100% EOU) Navsari were fulfilled.

7. Whereas it appears that a statement of Shri Rashid A. Saiyed, Partner of M/s. Sunshine Overseas was recorded by the Senior Intelligence Officer, DRI, Zonal Unit, Ahmedabad under Section 108 of Customs Act, 1962 on 21.06.2003, wherein he stated, inter alia that he had joined with the unit i.e. M/s. Sunshine Overseas in January 2003/ February 2003 on the recommendation of Shri Haroon Razak Chhaya, one of the Partners of M/s. Al Amin Exports (100% EOU), Plot No.449, GIDC, Navsari. At the time of joining, Shri Sushil Bansal was owner of the unit. As per the partnership deed made on the direction of Shri Haroon Razak Chhaya, the share of both partners i.e. Shri Rashid A. Saiyed and Shri Sushil Bansal was 90% and 10% respectively; that he did not make any investment in the company and was getting Rs.8,000/ per month as remuneration. After becoming the partner as per partnership deed, he did the work of supervisor and day to day work of administration as directed by Shri Sushil Bansal and Shri Haroon Razak Chhaya. The unit used to bring the duty free raw materials under the cover of CT3 Annexure and after manufacturing the finished goods they were required to export the same to foreign countries for fulfilling export obligation; that their unit had shown to have received the goods under CT3 on paper only; that they used to send the invoice and AR3 to them, for showing in the statutory documents and for completing the entries against CT3; as stated above the documents like Invoices and RE3s used to come but the goods were never received, they used to receive goods from Shri Bilal Latif Page 6 of 67 O/TAXAP/1142/2013 ORDER Memon, having his office at Oasis Building, Rind Road, Surat, and through these goods they used to complete their export obligation.

8. Whereas a statement of Shri Irfan Gulam Rasul Saiyed, partner of M/s. A1Amm Exports, 439 Kabilpore, Navsari was recorded by the officers of DRI under Section 108 of Customs Act, 1962 on 21.06.2003, wherein, he stated, interalia, that he alongwith Shri Haroon Chhaya looked after the entire operation of M/s. Sunshine Overseas, 439, Kabilpore, Navsari, that they were procuring raw material from various EOUs against CT_3, that no manufacturing activities were carried out by using the said material in their unit; that on perusal of the panchnama dated 20/21.06.2003, drawn at the factory premises of M/s. Sunshine Overseas, Navsari, and statements of Shri Rashid Saiyed, partner of M/s. Sunshine Overseas dated 21.06.2003, he fully agreed with contents of the same and in token of their correctness, he put his dated signature on these documents; that he also admitted his role in M/s. Sunshine Overseas, that though on paper he was nowhere in M/s. Sunshine Overseas, he along with Shri Haroon Chhaya was looking after the entire work of M/s. Sunshine Overseas i.e. right from the procurement of raw materials and its subsequent sale into the indigenous market; that no material was received by them against the CT3s issued by their unit; that with regard to the material shown to have been received under CT_3 from various EOUs, they were paid Rs.4.50 to Rs.5/ per meter as a premium from the units (100% EOUs) to whom the CT3s were issued; that they had never received any goods in any manner except the premium as mentioned above; that they were regularly making physical exports for which they had been Page 7 of 67 O/TAXAP/1142/2013 ORDER receiving the raw materials i.e. cut pieces, scarves, duppatas, takas from Shri Bilal Latif Memon, Proprietor of M/s. Lazio Exports, Oasis Building, opposite Subjail, Surat; That out of the raw materials received from Shri Bilal Latif Memon, the cut pieces and takas were cut to size, pleated and interlaced/ inter locked for manufacturing the finished products and the scarves & dupattas received in ready condition, were exported as such, as the same were fully manufactured at the supplier's end itself; that the materials received from Shri Bilal Latif Memon were used for physical exports; that the transportation of goods/ materials received from Shri Bilal Latif Memon was arranged by Shri Bilal Memon wherein the tempo number GJ5V5738 was regularly used and at times different vehicles were also used; that the transportation charges were borne by Shri Bilal Latif Memon, that the value of the said material supplied, which was of inferior quality, was less than the declared value of the material in the export documents viz. invoice, shipping bill etc.; that they overvalued the export consignment to fulfill their export obligation that they had small machines viz. Digger dyeing machines along with 'tapela dyeing' facility which were rarely used; that though the rated capacity of the machinery was 30,000 Meters per day but they had never used the same; that they had no printing facility available in their unit; that he again reiterated that they had never received any goods/ raw materials against the CT3s issued by them on the contrary they had received a premium amount of Rs.4,50 to Rs.5/ per meter for such transaction.

9. Statement of Shri Haroon Razak Chhaya, Partner of M/s. Al Amin Exports, Navsari was recorded by the officers of DRI on Page 8 of 67 O/TAXAP/1142/2013 ORDER 21.06.2003, under Section 108 of Customs Act, 1962 wherein he stated, interalia, that he along with Shri Irfan Saiyed looked after the entire operations of unit viz. M/s. Sunshine Overseas, plot No.439, GIDC, Kabirpole, Navsari; that they had appointed Shri Rashid Sadatali Saiyed and Shri Sushil Bansal as the partners of M/s. Sunshine Overseas, having their shares at 90% and 10% respectively; that the said two partners were dummy partners, merely acting as agents for them; that he used to give them instructions regarding the sale of the goods and preparation of records etc.; that they were paying Rs.8000/ per month as remuneration to Shri Rashid Saiyed who was also nephew of Shri Irfan Rasool Saiyed, to act as a dummy partner; that he agreed with the panchnama dated 20/21.06.2003 drawn at the premises of M/s. Sunshine Overseas and the statements of Shri Rashid Sadatali Saiyed, Partner of M/s. Sunshine Overseas recorded on 21.06.2003, under Section 108 of the Customs Act, 1962, after perusing the same had put his dated signature in token of correctness; that he was looking after the entire operations of M/s. Sunshine Overseas right from the procurement of raw materials to the sale of goods; that all the operations were carried out in M/s. Sunshine Overseas, as per his directions as well as the directions of Shri Irfan Saiyed; that he agreed with the statement dated 21.06.2003 of Shri Irfan R. Saiyed, recorded under Section 108 of the Customs Act, 1962 and he put his dated signature on the same in token of its correctness; that he himself and Shri Irfan G.R. Saiyed were the key persons, looking after the work carried out in M/s. Sunshine Overseas; that they had not received any material against CT3s issued from M/s. Sunshine Overseas to various EOUs and for this they used to get a premium of Rs.4,50 to Rs.5/ per meter from the respective Page 9 of 67 O/TAXAP/1142/2013 ORDER EOUs to whom the said CT3s were issued; that the goods covered under the said CT3s were sold irectly by the concerned EOUs; that apart from the premium amount, they had never received any goods in any manner; that for making physical exports they got cut pieces, scarves, dupattas and takas from Shri Bilal Latif Memon, Prop. Of M/s. Lazio Exports, Oasis Building, Opp. SubJail, Ring Road, Surat; that the scarves and dupattas were in ready condition for exports on which no manufacturing activity was carried out in their factory and as regards the cut pieces and takas, the same were cut to requisite size for manufacture and scarves and dupattas, wherein pleating and inter lacking processes were conducted; that they had no printing facility available in their unit.

10. Whereas it appears that the statement of Shri Banwas Prasad Mishra, watchman of M/s. A1Amin Exports, GIDC, Navsari, was recorded by the Senior Intelligence Officer DRI Zonal Unit, Ahmedabad under Section 108 of the Customs Act, 1962 on 21.06.2003 wherein he stated, interalia, that he was working as a watchman in the said unit; he was staying at the premises of M/s. A1Amin Exports only; movement of vehicles and goods coming in and going out of M/s. A1 Amin Exports happened in his presence only; he had been shown the Panchanama dated 21.06.2003 drawn at their factory premises which he signed after fully reading and understanding the same; He fully agreed with the description of machinery mentioned in the Panchanama; the goods received in their unit, used to be received through one Shri Akbar Tempowala in Shri Akbar's tempo; the material received in their factory used to be fully dyed and printed which used to be in packed bundles; the said material was unloaded by him as per the directions of Page 10 of 67 O/TAXAP/1142/2013 ORDER Shri Irfan Saiyed; that as per his knowledge, no raw materials were ever received in their unit from any of 100% EOUs of Surat.

11. Whereas a statement of Shri Bilal Latif Menon, Proprietor of M/s. Lazio Exports, Oasis building, Opposite SubJail, Ring Road, Surat was recorded by the Senior Intelligence Officer, DRI, Regional Unit, Surat under Section 108 of the Customs Act, 1962 on 09.07.03, wherein he stated, inter alia, that his real name was Shri Bilal Latif Menon but he was also known as Tinwala; that he was having an office at 028, Oasis building, Opposite SubJail, Ring Road, Surat; he was present during the Panchnama dated 20.06.2003 drawn at his office premises at Oasis Building and confirmed that the records seized under Panchnama dated 20.06.2003 were of his own; that he put signature on them in token of having inspected these documents; that he was also doing consultancy work regarding export with M/s. A1Amin Exports Navsari; that in March'2002 he came in contact with M/s. A1Amin Exports, Navsari & M/s. Sunshine Overseas, Navsari as they came to his office in Shalimar Market and told him that they were going to start 100% EOU firm namely M/s. A1 Amin Exports and M/s. Sunshine Overseas and they wanted orders for the said firm; that he had given them orders for export and he bought madeups and ready made garments for them for enabling third party exports.

12. Whereas it appears that a statement of Shri Saiyed Samad Saiyed Wazir driver of Tempo No.GJ5T829, working for Shri Akbar Tempowala was recorded by the Senior intelligence Officer, DRI, Regional Unit, Surat under Section 108 of Customs Act, 1962 on 12.7.2003, wherein, he stated, inter alia, that he was working as driver of vehicle no.GJ5T829, with Shri Akbar Bhai, Page 11 of 67 O/TAXAP/1142/2013 ORDER for the last 1.5 to 2 months; he had made three trips for transporting goods from Surat to Navsari in the first week of June 2003; that goods were loaded from the go down of Shri Bilal Bhai, situated in the lower part of his glass office (kanch ka office) which was opposite the SubJail Surat; he transported 2222 packed cartons, each weighing 35 Kg.(Approx) in three trips, that he used to load these goods at Surat under the supervision of shri Salim bhai, shri Akbarbhai used to be with him at the time of loading of these goods, after loading of these goods, he was not given any kind of documents and was instructed to carry these goods and stand in the grid near GIDC Navsari, where a person named shri Rashid bhai aged 2022 years used to meet him and guide him along with the vehicle for unloading of the goods, in M/s. Al Amin Exports, Navsari and M/s. Sunshine Overseas, Navsari.

13. Whereas a further statement of shri Haroon Razak Chhaya partner of M/s. Al Amin Exports Navsari was recorded by the Senior Intelligence Officer, DRI, Regional Unit, Surat under section 108 of Customs Act, 1962 on 30.7.2003, wherein he stated inter alia that he was one of the partners in M/s. al Amin Exports, Navsari, he was shown his affidavit dated 23.6.2003 in which he had retreacted his statements dated 21.6.2003 on which he put his dated signature, the allegations made in the aforementioned affidavit were false, the above affidavit filed by him on legal advice as per the instructions of his lawyer no threat was given to him by the officers during their visit to their factory and that all the work was done in a calm and quiet atmosphere, they did not have any dyeing or printing facility in M/s. Al Amin Exports Navsari, whatever fabrics which were shown to have been coming in their factory were actually not coming tot heir factory and no Page 12 of 67 O/TAXAP/1142/2013 ORDER processing was done on these goods, they were getting a premium for not receiving the goods from the supplying 100% EOUs they were getting Rs.4 to Rs.5 per meter of fabrics against CT3 as premium.

14. Whereas a further statement of shri Irfan Gulam Rasool Saiyed was recorded by the Senior Intelligence Officer, DRI, Regional Unit, Surat under section 108 of the Customs Act, 1962 on 30.7.2003 wherein, he stated, inter alia, that, he had been shown the Panchnama dated 21.6.2003 drawn at M/s. Al Amin Exports, Navsari and statement dated 30.7.2003 of Shri Haroon Razak Chhaya and he agreed with the facts mentioned therein,; the had been shown the letter enclosing four affidavits in which he had retracted his statements dated 21.6.2003, he had gone through the contents of the affidavits and stated that they were written on legal advice; the allegations made in the above affidavits were not correct and that the retraction was not correct and true, i token of having seen the documents he put his signature on all the above documents, the goods shown to have been in bonded in M/s. Al Amin Exports, Navsari as shown in the in bond register were not actually received by M/s. Al Amin Exports, Navsari.

15. Whereas a statement of shri Akbar Shaikh Umar, owner of Tempo No.GJ5T829 and GJ17T3710 was recorded by the Senior Intelligence Officer, DRI, Regional Unit, Surat under section 108 of the Customs Act, 1962 on 19.8.2003, wherein, he staed inter alia he agreed with the statement dated 12.7.2003 of shri Saiyed Samad Saiyed Wazir, the driver of vehicle No.GJ5T829, the said statement was read over to him and having agreed with the facts stated therein, he put his thumb impression on the same, he had been giving his tempos for transporting Page 13 of 67 O/TAXAP/1142/2013 ORDER goods for the last four months on rent to one shri Bilalbhai whose office was at Oasis Building, Opp. Sub Jail, Ring road, Surat, he had made 1012 trips to Navsari from the godown of shri Bilal bhai for transporting goods, out of which approximately four to five trips were of packed cartons and five to seven trips were of bundles (gatharis) of cloths, the weight of one carton used to be approximately 40 to 50 Kg. in which approximately 500 to 600 pieces of scarves were packed he used to carry 1516 cartons in one trip, 100 to 120 scarves used to be in one bundle of cloths and he used to take around 100 such bundles in one trip, the tempos were loaded from the godown of shri Bilal bhai which was situated in the basement of his office, Oasis Building, under the sup[ervision of shri Salim bhai after going to Navsari the tempos were used to stop at navsari grid and from there the tempos used to be unloaded at the premises of M/s. Al Amin Exports, Navsari as per the instructions of Shri Rashidbhai.

16. Whereas a further statement of shri Irfan Gulam Rasool Saiyed was recorded by the Senior Intelligence Officer, DRI, Regional Unit, Surat under section108 of the Customs Act, 1962 on 6.10.2003, wherein, he stated inter alia that he again confirmed that they had never received any goods against CT3s in M/s. Al Amin Exports, for the physical exports effected from M/s. Al Amin Exports, they had purchased Cut Pieces from one Shri Bilal Memon of Surat, these cut pieces were supplied by shri Bilal as per their agreement that shri Bilal would manage export orders, they had not given any intimation for the receipt of such fabrics in M/s. Al Amin Exports, Navsari to the Range Office of Central Excise, as they were the substituted fabrics of cheaper quality to be used for fulfilling their Page 14 of 67 O/TAXAP/1142/2013 ORDER export obligation, that on being asked about the normal procedure for bringing goods inside the warehouse premises, he stated that as and when any goods were received in the 100% EOU, they filed intimation in the form of D3 wherein, particular viz. suppliers invoice no. ARE3 and CT3 number or Annexures details were informed but they had not filed any intimation for the substituted fabrics of cheaper quality received without any valid documents like invoice or AR3s as the same were being used by them for fulfilling the export obligation instead of using the actual fabrics shown to have been received in the statutory records maintained by M/s. Al Amin Exports, Navsari, the substituted fabrics received by them were not covered by any invoice/ delivery challan issued by the supplier, the value of such substituted fabrics varied from Rs.12/ to Rs.15 per meter, the said fabrics were received in the form of cut pieces of various sizes and were dyed and printed fabrics no dyeing/ printing process was carried out by them in M/s. Al Amin Exports, Navsari he fully agreed with the contents of the statements of Akbar Shaikh Umar dated 19.8.2003, Shri Saiyed Samad Saiyed Wazir dated 12.7.2003, the owner of the Tempo NO.GJ5T 829 and GJ 17T 3710 and the driver of Tempo NO.GJ5T 829 had put their signature on the last page in token of having seen and perused by them and affirmation of the same.

17. Whereas a further statement of shri Irfan Gulam Rasool Saiyed, partner of M/s. Al Amin Exports, Navsari was recorded by the Senior Intelligence Officer, DRI, Regional Unit, Surat under Section 108 of the Customs Act, 1962 on 7.10.2003, wherein, he stated inter alia, that on being asked about the difference between the fabrics issued and the actual contents of the fabrics in the final products, he Page 15 of 67 O/TAXAP/1142/2013 ORDER stated that, as stated earlier, no goods had been physically received in the factory and this figure had been shown in the respective registers just to complete the entry of book of the manufacture activity and stock position of the goods shown to have been received in M/s. Al Amin Exports, he was aware of the legal provisions of the Customs Act, the Central Excise Act, 1944, the ImportExport Policy wherein norms for working of 100% EOU had been laid down, he had violated these provisions by the above mentioned acts of omission and commission.

18. Statement of Shri D.M. Julka, Superintendent of Central Excise, RangeII, Navsari was recorded under section 108 of the Customs Act, 1962 on 21.11.2003 and section 14 of the Central Excise Act, 1944 wherein he stated inter alia that he was posted to the Range II Central Excise Navsari since February, 2003 to 5th August,2003, that the CT3s and Annexures for import of raw materials were issued on the basis of Annual capacity allowed in the LOP of the unit on pro rata monthly basis, that he had not verified the working capacity along with the necessary plant and machinery, that no running bond account was maintained at the range level, that during his tenure he had not visited the unit for inspection checks purpose but he was visiting the said unit whenever there was arrival of imported raw materials and whenever there was export, that he goods received from other 100% EOUs under various CT3s were not verified either by him or by the incharge Inspector, in light of Board's Circular NO.88/98 dated 2.12.1998, that he had not carried out the monthly checks as per above circular, that on receipt of the goods assessee as filing D3 intimation and on the basis of the D3 intimation and on the basis of the in bond register entry, the rewarehousing certificates are issued Page 16 of 67 O/TAXAP/1142/2013 ORDER by him, that he had issued the CT3 procurement certificate for procurement of grey fabrics, as per the annual capacity permitted in the LOP without verifying whether the said unit had any printing and sufficient dyeing facility, that the said unit was not having any permission for job work, that no verification of goods or drawal of samples were done after the assessee filed the D3 intimations, that as per the Board's circular, as the physical verification of the received material were not possible, it was not possible to correlate the quality of the material received and exported.

19. Statement of shri Ram Bilash Singh, Inspector of Central Excise, RangeII Navsari was recorded under section 108 of the Customs Act, 1962 and section 14 of the Central Excise Act, 1944, on 21.11.2003, wherein he stated inter alia that he was posted to the RangeII as an Incharge of M/s. Al Amin Exports from 4th February,2003, that his duties were receiving of D 3intimations, export and export look outs, physical verification of the goods imported goods for rewarehousing of the same attending export if any, checking of In bond register, submission of reports, that he had no role in the issuance of CT3 and Annexures for the procurement of indigenous/ imported goods by the said unit as the same were issued by the Range Superintendent, that after issuance only the same had been given to him for perusal and information, that he had not made any entry in the B17 Bond as the same were not maintained in the Range Office, that he had visited the said unit at the time of exports, that no inspection/ checks were carried out by him in the said unit, that he had not physically verified the receipt of indigenous goods received under CT3 from various EOUs, in terms of Board's circular Page 17 of 67 O/TAXAP/1142/2013 ORDER no.88/98 dated 2.12.1998 and stated that he had perused Boards circular NO.88/98 dated 2.12.1998 and stated that he could not carry out any monthly checks due to heavy work load in the range in the light of said circular, that rewarehousing certificates for the goods received were issued by the Superintendent Incharge and that the original copies of ARE3s submitted along with D3 intimation were duly countersigned by the Superintendent, that the In bond entries as mentioned in ARE3A were checked with the in bond register that detailed verification of the installed/ working capacity of the unit were not done by him, that the unit had no permission for job work, that he was not aware of the quality of the goods received, that no sample of raw material received under CT3 was drawn, that it was not possible to correlate the receipt of the goods and export of the final product, that as greater emphasis had been placed on checking of records only, the record of receipt of raw material and other records submitted by the unit were checked and no precise steps like physical supervision/ verification were carried out to ensure that the final product cleared for export or DTA were manufactured out of the material received/ procured.

20. Statement of Smt. Deepika Chandulal Patel, Inspector of Central Excise, Range II, Navsari was recorded under section 108 of the Customs Act, 1962 and section 14 of the Central Excise Act,1944 on 21.11.2003, wherein she stated inter alia that she was posted to the RangeII, as an Incharge of the said unit since 17th January, 2003, that her duties were receiving of D3 intimations, export and import look outs, physical verification of the goods imported goods for rewarehousing of the same, attending export if any, checking of In bond register submission of reports, that she had Page 18 of 67 O/TAXAP/1142/2013 ORDER no role in the issuance of CT3 and Annexures for the procurement of indigenous/ imported goods by the said unit as the same were issued by the Range Superintendent, that after issuance only the same had been given to her for perusal and information, that she had not made any entry in the B17 Bond as the same were not maintained in the Range Office, that she had visited the said Unit during the time of rewarehousing of imported goods and at the time of exports, that no inspection/ checks were carried out by her in the said unit, that she had not physically, verified the receipt of indigenous goods received under CT3, from various EOUs, in terms of Board's circular nO.88/98 dated 2.12.1998 and stated that she had perused Boards circular NO.88/98 dated 2.12.1998 and stated that she never carried out any monthly checks in the light of said circular, that rewarehousing certificates for the goods received were issued by the Superintendent Incharge and that the original copies of ARE3s submitted along with D3 intimation were duly countersigned by the Superintendent, that the in bond entries as mentioned in Are3A were checked by her with the in bond register, that verification of the installed/ working capacity of the unit along with the necessary plants and machineries of the said unit viz. Sewing machines, pleating machines were not done by her, that she had not checked the goods received under CT3 from other EOUs and accordingly, no efforts were made to correlate the goods stuffed in container and as regard the manufacturing facility available in the said unit at the time of examination of the goods, she had not verified the same that as the said unit had received the raw material from other EOUs and D3 were filed on the receipt of the material, that as per Board'sCircular No.88/98 the goods were not verified hence, it was not possible to correlate the receipt of the goods and exports of the final Page 19 of 67 O/TAXAP/1142/2013 ORDER product, that as greater emphasis had been placed on checking of records only, the records of receipt of raw material and other records submitted by the Unit were checked and no precise steps like physical supervision/ verification were carried out to ensure that the final product cleared for export or DTA were manufactured out of the material received /procured.

21. Whereas a further statement of shri Haroon Razak Chhaya partner of M/s. Al Amin Exports Navsari was recorded by the Senior Intelligence Officer, DRI, Regional Unit Surat under section 108 of the Customs Act, 1962 on 28.11.2003, wherein, he stated inter alia, that he was shown statements of shri Irfan Gulam Rasool Saiyed dated 6.10.2003 and 7.10.2003 and he agreed with the facts mentioned in the above mentioned statements all the goods exported from M/s. Al Amin Exports, Navsari, the goods were manufactured out of the goods supplied by shri Bilal Memon, the orders for all the export consignments were procured by shri Bilalbhai and were exported through him, the payments for the goods supplied by shri Bilalbhai were made in the form of crossed cheques or third party cheques, from the export proceeds they were issuing cheques to show payments to the various EOU's from whom the goods were shown to have been received, they had not received any goods against the CT3s issued by M/s. Al Amin Exports, Navsari, they had not informed any Central Excise officer or authority regarding the receipt of the goods supplied by shri Bilal Memon without the cover of bill or challan, out of which they had fulfilled their export obligation, as this was an illegal transaction, he was aware that to bring illegal goods into the 100% EOU and to export such goods was an offence under the provisions of Customs Act and the Central Excise Act, he accepted his offence so committed and that he was ready to accept Page 20 of 67 O/TAXAP/1142/2013 ORDER the penalty which would be imposed for this act, whenever the goods were supplied by shri Bilalbhai, Shri Rashid used to go to Navsari Grid and used to escort the tempo to their factories and get the goods unloaded, whenever the tempos reached Navsari Grid, the driver used to inform Rashidbhai telephonically and thereby shri Rashid used to go to Grid and accompany the tempos to their factory.

22. Whereas a further statement of shri Rashid Sahadatali Saiyed Partner of M/s.Sunshine Overseas, Navsari was recorded by the Senior Intelligence Officer, DRI, Regional Unit, Surat under section 108 of Customs Act, 1962 on 28.11.2003 wherein he stated, inter alia that he was shown the statements dated 19.8.2003 of shri Akbar Sheikh Umer owner of the tempo No.GJ5T829, the statement dated 12.7.2003 of Shri Saiyed Samad Wazir, driver of tempo NO.GJ5T 829 statement dated 28.11.2003 of shri Haroon R. Chhaya and statements of shri Irfan Saiyed dated 6.10.2003 and 7.10.2003, he fully agreed with contents mentioned in the statements and in token of its correctness he put his dated signatures on the same.

23. Whereas it appears that the M/s. Arya's Dyeing and Printing Pvt. Ltd (100% EOU) was closed since long back and the possession of the unit had been taken over by the Sarvodaya Sahakari Bank, Surat as intimated by them on 29.8.2005.

24. Whereas it appears that M/s. Arya's Dyeing and Printing Pvt. Ltd. (100% EOU) had cleared the goods against Ct3 to M/s. Al Amin Exports (100% EOU) GIDC, Kabilpore, Navsari i.e. MMF (P) 1508216.6 (L.Mtrs) valued at Rs.5,70,87,598/ under deemed export Scheme, under various ARE3As (Details as per Annexure:A). The Range Superintendent have issued summons to the Director's of M/s. Arya's Dyeing and Page 21 of 67 O/TAXAP/1142/2013 ORDER Printing Pvt. Ltd (100% EOU) Palsana, Surat on 21.7.2005, 29.7.2005, and 23.8.2005 and on 11.5.2007 by pasting the summons on the main gate of the unit in the presence of two independent panchas to investigate the genuineness of the goods supplied to M/s. Al Amin Exports, Navsari (100% EOU0, but they have not responded to the summons. It is noticed that the unit was closed and sealed by the Sarvodya Cooperative Bank, Surat.

25. Whereas, it appears that the Range Officer, RangeV DivisionV had verified the vehicles used for transportation of the goods from the Regional Transport Office, Surat and RTO vide their letter dated 3.11.2006 informed that out of the three vehicles two vehicles (GJ5V 4123 and GJ5 U 2522) were registered in the name of M/s. Arya's Dyeing and Printing Mills GJ5U2522 was Swaraj Mazda and GJ5V4123 was of Eicher Make and the third one GJ5V1881. Eicher make was registered in the name of Shri Sanjay Namdev Patil, Surat and accordingly Summons were issued to the transporters used their vehicles to transport the goods from M/s. Arya's Dyeing and Printing Pvt. Ltd. (100% EOU) to M/s. Al Amin Exports (100% EOU) Navsari Shri Sanjay Namdev Patil owner of the vehicle No.GJ5V1881 as appeared on 17.11.2006 and he has filed his reply that he had purchased the vehicle Tempo No.GJ5V 1881 from Mr. Karansingh Indersingh Bhati, P.NO.62, Vishnunagar Society, Punagam, Taluka Choryasi, Surat on 14.8.2003, that he had not taken any transport work from M/s. Arya's Dyeing and Printing Pvt. Ltd., Palsana, that he had purchased that vehicle after the period of transportation of goods to M/s. Al Amin Export, Navsari from M/s. Arya's Dyeing and Printing Pvt. Ltd. He also submitted copy of the Registration Book issued by RTO for proof of the date of transfer entries on his name. Further this Page 22 of 67 O/TAXAP/1142/2013 ORDER office has issued summons on 20.11.2006 and 4.12.2006 to shri karansingh Indersingh Bhati the then owner of vehicle No.GJ5V 1881. But the summons were received back from the Postal authorities without serving to the addressee with a remark that, the owner had left Surat and not staying in the address since long.

26. Whereas, the summons issued on 7.12.2006 to shri Uma Shanker KUndal, Director of M/s. Arya's Dyeing and Printing Pvt. Ltd. Palsana, at his residence address B407, New Swagat Apartment, Behind Swagat, Opp. Kuber Nagar, Ishwar Kripa Society, Surat and shri Om Prakash, Director of M/s. Arya's Dyeing and Printing Pvt. Ltd. Palsana at their residence address as well as company address, but both the summons were returned with remarks "that owner had shifted without giving new address.

27. Whereas, summons dated 10.2.2006, 20.2.2006, and 27.2.2006 were issued to shri Haroon ARazaq Chhaya, Partner of M/s. Al Amin Exports, Navsari but he had not responded to the Summons Again summons dated 11.5.2007 served to shri Haroon A. Razaq Chhaya, partner of M/s. Al Amin Exports, Navsari through the Range Superintendent, Central Excise, Navsari on 16.5.2007. But he did not respond to the summons and sent a letter address to the Range Officer informing that Central Excise Authorities have withdrawn all their documents and records. Therefore, they were not in a position to supply the documents and records for scrutiny and examine in the concerned matter.

28. Whereas, M/s. Arya's Dyeing and Printing Pvt. Ltd. Surat had cleared the goods of quantity MMF(P) 1508216.6 (L.Mtrs) valued at Rs.5,70,87,598/ under deemed export scheme under various Are3As in the 49 consignments (Annexure:A) to M/s. Al Amin Page 23 of 67 O/TAXAP/1142/2013 ORDER Exports (100% EOU) Navsari against CT3 issued by the then Superintendent Central Excise, Navsari. On being asked about the issuance of the rewarehousing certificates, the Superintendent of Central Exciwse, Navsari vide their letter F.No.NVS II/Al Amin/2005/1719 dated 7.2.2006 stated that, "No physical verification of the goods had been carried out by then Inspector/Superintendent and the Re warehousing certificate were issued on the basis of copies received and the instructions under Board's Circular NO.88/98Cus dated 2.12.1998 was followed that it was not possible to say that the goods had been actually received or otherwise by the EOU. Therefore, the re warehousing certificates for the 49 consignments issued in favour of M/s. Al Amin export (100% EOU) Navsari by the Superintendent Central Excise, RangeII Navsari did not show the factual position and reflects the paper work done by the EOU unit (Ann;A).

29. Whereas it appears from the re warehousing certificate in respect of the excisable goods received by M/s. Al Amin Exports have been issued by the jurisdictional Superintendent, Central Excise Range, Navsari at the material period with the remarks' (copy received Physical verification is not carried out as per Board's Circular No.88/98 -Cus dated 2.12.1998 by the Superintendent /Sector Inspector.

30. In view of the facts as discussed above in the form of various statements it appears that the supplies from the M/s. Arya's Dyeing and Printing Pvt. Ltd. Surat (100% EOU) were only paper transactions and in fact the goods were not physically delivered to M/s. Al Amin Export (100% EOU) Navsari and they had received the premium of Rs.4 to Rs.5 per meter for showing the receipt in Page 24 of 67 O/TAXAP/1142/2013 ORDER their records only and in actual the goods were diverted in the open market.

31. In view of the above facts and circumstances M/s. Arya's Dyeing and Printing Pvt. Ltd. (100% EOU) had cleared/ sold/diverted the goods under CT3 to M/s. Al Amin Exports (100% EOU) GIDC, Kabilpore, Navsari MMF (P) admeasuring 1508216.6 (L.Mtrs.) valued at Rs.5,70,87,598 under deemed export scheme, under various ARE3As (details as per Annexure:A) in the open market illicitly illegally without the issuing the statutory invoices, without payment of Central Excise and Customs Duty leviable thereon and without following the procedure as laid down under 100% EOU scheme and Exim Policy.

32. In view of the above fact, M/s. Arya's Dyeing and Printing Pvt. Ltd. (100% EOU) had cleared the goods quantity of MMF (P) 1508216.6 (L.Mtr.s) valued at Rs.5,70,37,598 under deemed export scheme under various ARE3As in the 49 consignments (Ann;A) to M/s. Al Amin Exports (100% EOU) Navsari were only paper transactions and actually no movement of goods had taken place. Hence, the goods cleared under the various ARE3 in the 49 consignments were illicitly cleared in the open market without Central Excise invoices and payment of duty leviable thereon. The unit had received /imported inputs grey fabrics from indigenous EOUs, as well as foreign countries therefore, the Central Excise duty as well as Customs duty is attributable on the raw materials procured against the CT3 and Annexures and the Central Excise duty equivalent to all customs duties is also leviable on the clearance of the finished goods which are not discharged by the unit.

33. The unit had received grey fabrics Under CT3 /Annexures as the case may be and processed the same and cleared it in the Page 25 of 67 O/TAXAP/1142/2013 ORDER open market without payment of Central Excise duty and without issuing Central Excise invoices and shown the clearance to M/s. Al Amin Exports 100% EOU, Navsari, on paper only. Actually no goods have been sent to M/s. Al Amin Exports 100% EOU, Navsari physically and given premium of Rs.4 to 5 to them for showing paper transaction. Hence, they had violated the conditions of B17, Bond furnished by them. Hence, duty and interest on finished goods and duty foregone and interest on raw material is required to be recovered from them under the conditions of B17, Bond furnished by them.

34. Whereas it appears that as per the proviso to section 3 of Central Excise Act, 1944 the duties of Central Excise levied and collected on any excisable goods procured or manufacturer by a 100% EOU and brought to any other place in India shall be an amount equal to the aggregate of the duties of Customs which he leviable under the Customs Act, 1962 or any other law for the time being in force on like goods produced or manufactured out side India if imported in to India and where the said duties of Customs are chargeable by reference to their value, the value to such excisable goods shall not withstanding anything contain in any other provision of this Act, be determined in accordance of the provisions of the Customs Act, 1962 and the Customs tariff Act, 1975. Thus, the unit was required to pay the Central Excise duty, equivalent to the aggregate of the duty of Customs leviable under section 12 of the Customs Act, 1962alongwith interest due thereon as per the proviso to section 3 of the Central Excise Act, 1944. Thus the unit have contravened the provision of section 3 of the Central Excise Act, 1944 Rule 4, 5, 8, 11 12 and 19 of the Central Excise rule, 2002 in as much as they have illicitly cleared the goods manufactured in 100% EOU and failed to pay the duty of excise Page 26 of 67 O/TAXAP/1142/2013 ORDER equivalent to aggregate to Customs duty on their goods failed to issue required invoices etc. All these acts of contravention on their part by recourse to suppression of facts, willful statement and fraud with intend to evade payment of duty leviable on the same. Hence, the total duty of Excise equivalent to aggregate of Customs duty amounting to Rs.5,95,48,784/ details shown in Annexure B to this SCN) in required to be recovered from them under section 11(A) of the Central Excise Act, 1944 and B 1 Bond furnished by them. It also appears that the interest at appropriate rate on evaded Central Excise duty is recoverable from them under section 11AB of the Central Excise Act, 1944 and B17 Bond furnished by them and penalty should not impose on them under Section 11AC of Central Excise Act, 1944. It further appears that all these acts of contravention of their part as discussed above constitute an offence of the nature, as described in Rule 4.8.17 and 25 of Central Excise rule 2002 rendering, 1508216.6 L. Mtrs. cleared to M/s. Al Amin valued at Rs.5.76,87,598 liable to confiscation under rule 25 of the Central Excise Rules,2002, however the goods are not physically available for confiscation and rendering themselves liable for penal action under Rule 25 of the Central Excise Rules, 2004.

35. As per Notification No.53/97 Cus dated 3.6.1997 as amended and 1/95CE dated 4.1.1995 as amended from time to time, the specified goods when imported into India or procured by 100% EOU for the purpose of manufacture of articles for export out of India or for being used in connection with the production or packing or job work for export goods or service out of India by 100% EOU are exempted from whole of the duty of Customs and Additional Duty of Customs or Central Excise duty of Customs and Additional duty of Excise leviable thereon Page 27 of 67 O/TAXAP/1142/2013 ORDER under Customs Tariff Act, 1975 or CETA, 1985 or CETA 1985 respectively. The unit has procured raw material i.e. Polyester Grey Fabrics duty free under 100% EOU scheme as per Notification No.53/97 Cus dated 3.6.1997 and 1/95CE dated 4.1.1995 as amended, however instead of using the same in the manufacture of export goods they used it in the goods which were cleared by them into open market without paying appropriate duties and they have not complied with the provisions of Exim Policy and the said notification. Therefore, the unit is required to pay not only appropriate Central Excise duty on the finished goods under the proviso to section 3 of the Central Excise Act, 1944 but also an amount equal to exemption availed on inputs used in the goods cleared in illicitly illegally cleared as per section 12 of the Customs Act, 1962 and proviso to section 3 of the Central Excise Act,1944 in terms of the conditions of Notification No.53/97 Cus dated 3.6.1997 and 01/95CE dated 4.1.1995 and B17 Bond furnished by the unit. Therefore, it appears that the Grey Fabrics obtained duty free and used in the manufacture of finished goods are not entitled to exemption under notification No.53/97 (as dated 3.6.1997 and 1/95CE dated 4.1.1995 as the case may be. The unit had imported grey fabrics under Annexures as well as received grey fabrics from other EOUs under CT3s and no separate account regarding imported/ indigenous raw material viz. Grey Fabrics used in production of the finished goods was maintained by the unit. Hence, it appears that the unit is liable to pay the Central Excise duty equivalent to aggregate of all Central Excise duties/ Customs duty amounting to Rs.3,23,02,426/ leviable on 1675795 L.Mtrs. (1910406 sq. mtrs.) of Polyester Grey Fabrics valued at Rs.3,35,15,900 (as per Annexure:C attached to this SCN) which were used in the manufacture of finished goods removed under Page 28 of 67 O/TAXAP/1142/2013 ORDER illicitly/ illegally cleared/ sold out in open market, in terms of the conditions of Notification No.53/97Cus dated 3.6.1997 and 01/95Ce dated 4.1.1995 and B17 Bond furnished by the unit.

36. Whereas in view of the above at appears that the said unit has not fulfilled the conditions as laid down under the Notification No.01/95CE dated 4.1.1995 and 53/97 Cus dated 3.6.1997 in as much as through they have procured the duty free goods under Notification No.01/95CE dated 4.1.1995 and 53/97 Cus dated 3.6.1997 but have not used in the same in connection with production of goods of packing job work for export goods or service export out of India by 100% EOU to therefore, appears that the unit has contravened the provisions and conditions of Notification NO.01/95CE dated 4.1.1995 and 53/97Cus dated 3.6.1997 and thereby contravened the provisions of Exim Policy and abused the 100% EOU scheme. All the said apparent acts of contravention of their part constitute an offence of the nature as described in erstwhile Rule 209 of Central Excise Act, 1944 Rule 25 of the Central Excise Rules, 2001 (Now Rule 25 of the Central Excise Rule 2002) and section 112(a) of the Customs Act, 1962 rendering themselves liable for penal action under the said rule and also due to all acts of contravention of the provisions of section 68 to 71 of Customs Act, 1962 rendering the goods i.e. raw materials liable to confiscation under section 111(o) of the Customs Act, 1962/ Rule 25 of Central Excise Rule 2002. As the goods are not available for confiscation, it appears that the redemption fine in lieu of confiscation under section125 of the Customs Act, 1962/ Rule 25 of the Central Excise Rule 2002 is required to be imposed and are recoverable by enforcing the terms of bond furnished by them they appear to have render themselves liable for penal action under section 112(a) Page 29 of 67 O/TAXAP/1142/2013 ORDER of the Customs Act, 1962 and Rule 25 of the Central Excise Rules, 2002.

37. It appears that the Central Excise (Customs duty equivalent to aggregate of all Customs duties amounting to Rs.3,23,02,426/ (as per Annexure:C attached to this SCN) on grey fabrics is required to be recovered from them under proviso to section 11A(1) of Central Excise Act, 1944 /Section 28A of Customs Act, 1962 and in terms of the conditions of Notification No.53/97Cus dated 3.6.1997 /01/95 CE dated 4.1.1995 as applicable and B17 Bond furnished by the Unit. The interest on the short payment of above said duties at appropriate rate is also required to be recovered from them under section 11AB of the Central Excise Act, 1944 /Section 28AB of Customs Act, 1962 and in terms of the conditions of Notification No.01/95CE dated 4.1.1995 and 53/97Cus dated 3.6.1997 as applicable and B17 Bond furnished by the unit and the unit is also liable for penal action under section 11AC of Central Excise Act, 1944/ Section 112(a) of Customs Act, 1962.

38. Whereas, it appears from the records that the unit had not procured any dyes/ chemicals under CT3 and not imported any dyes/ chemicals under any Annexures.

39. In view of the above facts discussed hereinabove it appears that shri Uma Shankar Kundal and shri Om Prakash Directors of M/s. Arya's Dyeing and Printing Mills Ltd. (100% EOU) Block NO.278, N.H.8 village Bhalleshwar, District Surat intentionally and knowingly master minded the scheme for clandestine removal diversion of warehoused goods and failed to warehouse physically goods at M/s. AlAmin Exports, Navsari and shown clearances only on paper /records as detailed in para, supra, with an intent to evade the duty of Central Excise/ Customs and they had also not appeared to give their Page 30 of 67 O/TAXAP/1142/2013 ORDER statement persistent non cooperation of their part by not responding to general summons lead to conclusion that they had manipulated the reasons of their unit and conspired with the Navsari bared 100% EOU M/s. Al Amin Export (100% EOU). Hence, they rendered themselves liable for penal action separately under Rule 26 of the Central Excise Rule, 1944 and under section 112(a) and 117 of Customs Act, 1961.

40. In view of the above facts discussed above and material evidence available on record in the form of statements of shri Irfan Ghulam Rasul Syed and shri Haroon R. Chhaya of m/s. Al Amin Exports Plot NO.449, GIDC, Kabilpore, Navsari that M/s. Al Amin Exports had involved/ indulged themselves with M/s. Arya's Dyeing and Printing Mills Ltd. (100% EOU)in evasion of duty by issuing CT3 and showing receipt of goods on paper only whereas in actual they had not received any goods from the unit and received Rs.4 to 5 per meter as a premium for showing paper transaction only and indulged themselves in transporting removing, depositing, keeping, concealing, selling or purchasing or in any other manner which they knew or had reasons to believe shall be liable to a penalty under Rule 26 of Central Excise Rules, 2002. They also abetted with M/s. Arya's Dyeing and Printing Mills Ltd. (100% EOU) in fulfilling export obligations (fake) on paper only. Hence, they are liable for penal action under section 114(ii) of Customs Act, 1962.

41. Now, therefore, M/s.Arya's Dyeing and Printing Pvt. Ltd. (100% EOU) Block NO.278, N.H.NO.8 Village Baleshwar, District Surat is hereby required to show cause to the Commissioner, Central Excise and Customs SuratI, New Central Excise Building, 3rd Page 31 of 67 O/TAXAP/1142/2013 ORDER floor, Chowk Bazar, Opp. Gandhi Baug, Surat as why.

(A) (i) The duties of Excise equal to aggregate of the duties of Customs amounting to Rs.59548784/ as detailed in attached Annexure:B to the show cause notice leviable on 1508216.6 L.Mtrs. Polyester Dyed Fabrics valued at Rs.5,70,87,598 illicitly removed as discussed in foregoing paras should not be demanded and recovered from them under proviso to section 11A(1) of Central Excise Act, 1944 and also in terms of B17, Bond furnished by them.

(ii) Interest at an appropriate rate on the duty amount at sub para A(i) above should not be recovered from them under section 11AB of the Central Excise Act, 1944 and also in terms of B17, Bond furnished by them.

(iii) The finished goods 150821.6 L.Mtrs. of MMF(P) valued at Rs.57087598/ (as mentioned in Annexure:B) illicitly removed though physically unavailable should not be held liable for confiscation under Rule 25 of Central Excise Rule 2002. As the said goods are not available for confiscation redemption fine in lieu of confiscation should not be imposed on them under Rule 25 of the Central Excise Rule, 2002 and recovered from them in terms of B17, Bond executed by them.

(iv) penalty should not be imposed upon them under Rule 25 of Central Excise Rules, 2002 read with section 11AC of Central Excise Act, 1944.

(B)(i) The Customs duty/ Central Excise amounting to Rs.3,23,02,426/ as detailed in attached Annexure:C to the show cause notice leviable on raw material viz. Grey Fabric used in the manufactured of finished goods should not be recovered from them under Page 32 of 67 O/TAXAP/1142/2013 ORDER section 28(1) read with section 12 and section 72 of Customs Act, 1962/ section 11A of Central Excise Act, 1944 and in term Notification No.1/95Ce dated 4.1.1995/ Notification No.53/97 Cus dated 3.6.1997 and also in terms of B17 Bond furnished by them.

(ii) Interest at an appropriate rate on the duty amount at sub para B(i) above should not be recovered from them under section 11AB of the Central Excise Act, 1944/ Section 28AB of Customs Act, 1962 and also in terms of B17, Bond furnished by them.

(iii) The raw material i.e. Grey fabrics admeasuring 1675795 L.Mtrs. valued at Rs.33515900/ detailed as per Annexure:C though physically unavailable should not be confiscated under rule 25 of the Central Excise Rules, 2002/ Section 111(O) and 111(j) of Customs Act, 1962. As the said goods are not available for confiscation, redemption fine in lieu of confiscation should not be imposed on them under Rule 25 of the Central Excise Rule 2002 /Section 111(O) and 111(j) of Customs Act, 1962 and recovered from them in terms of B17 Bond executed by them.

(iv) Penalty should not be imposed upon them under Rule 25(1) of Central Excise Rules, 2002/ section 112 read with section 114(a) of Customs Act, 1962.

42. Now, therefore, shri Uma Shankar Kundal and Shri Omprakash, Directors of M/s. Arya's Dyeing and Printing Mills Ltd. (100% EOU) Block NO.278, N.H.No.8 Village Bhaleshwar District Surat, are hereby directed to show cause to the Commissioner, Central Excise and Customs, Surat1 3rd floor, New Central Excise Building Chowk Bazar, Surat at to why penalty should not be imposed upon each of them separately under Rule 26 of the Central Page 33 of 67 O/TAXAP/1142/2013 ORDER Excise Rule 2002 and under section 112(a) and 117 of Customs Act, 1962.

43. Now M/s.AlAmin Exports 100% EOU Plot No.449, GIDC, Kabilpore, Navsari is hereby directed to show cause to the Commissioner, Central Excise and Customs Surat1 3rd floor, New Central Excise Building, Chowk Bazar, Surat at to why. penalty should not be imposed upon each of them under section 26 of the Central Excise Rules, 2002 read with section 114(ii) of Customs Act, 1962.

44. M/s.Arya's Dyeing and Printing Mills (100% EOU) Block No.278, N.H. NO.8 village Bhaleshwar, District Surat shri Uma Shankar Kundal and Shri Omprakash Director of M/s. Arya's Dyeing and Printing Mills Ltd. (100% EOU) M/s. Al Amin Exports, 100% EOU plot no.449, GIDC Kabilpore, Navsari are hereby directed to produce at the time of showing cause, all the evidence upon which they intend to rely in support of their defence.

45. They are further advised to indicate in their written explanation as to whether they desire to be heard in person before the case is adjudicated. If no mention is made about this is their written explanation, it would be presumed that they do not desire to be heard in person.

46. If no cause is shown by them against the action proposed to be taken within 30 (thirty days) of receipt of this notice or if they do not appear before the adjudicating authority when the case is posted for hearing the case would be liable to be adjudicated on the basis of material evidence available on records.

47. This notice is issued without prejudice to any other action that may be taken against all of them under the Central Excise Act, 1944 /Customs Act, 1962 or under any other law for the time being in force.

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48. The documents relied upon for issuance of this show cause notice are mentioned under Annexure:X to show cause notice."

2.3 The Adjudicating Authority passed an order dated December 20, 2012, in which he noticed that none of the noticees filed reply to the show cause notices. He also recorded that personal hearing was granted on December 07, 2012, December 14, 2012 and December 19, 2012.

Notice to M/s.Arya Dyeing and Printing Pvt.

Ltd. returned with remarks "closed". Notices to the Directors of the said firm returned with remarks "left without address". The appellant Al Amin Exports received the notices for personal hearing but neither requested for adjournment nor appeared for hearing. The adjudicating authority, therefore, proceeded to hear the matter ex parte and passed the following order:

"27. I find that the unit M/s.Arya has fraudulently cleared the said goods which were manufactured out of raw material procured duty free under 100% EOU Scheme under Notification No.53/97Cus dated

3.6.1997, with a clear intention to evade payment of duty by suppressing the facts and Page 35 of 67 O/TAXAP/1142/2013 ORDER without preparing and issuing valid documents/ invoices, without payment of Central Excise duty leviable on the said goods, without following the procedures as laid down under 100% EOY Scheme. They have also contravened the provisions and conditions of Noti.No.1/95CE dated 4.1.1995 which exempts indigenous raw materials and capital goods for manufacture in EOU for export from whole of Excise duty by way of suppression of facts, mis statement with intent to evade duty. Thus, I find that they have contravened the provisions of Exim Policy and conditions of Notification No.53/ 97Cus dated 3.6.1997, as amended and Noti. No.1/95CE dated 4.1.1995, read with Rule 9, 100B, 100C, 100D, and 100E and 209 of Central Excise Rules, 1944 in force at the material time (Now Rules 4, 8, 11, 17 and 25 of the Central Excise Rules, 2002). All these acts of contravention on their part committed by them by recourse to suppression of facts and willful misstatement with an intent to evade the payment of Central Excise duty equivalent to aggregate of all Customs duties and further all these acts of contravention on their part constitute an offence of the nature as described under Rule 209 of Central Excise Rule, 1944 (Now Rules 25 of the Central Excise Rules, 2002) rendering themselves liable for penal action under said Rule 209 of the erstwhile Central Excise Rules, 1944 (Now Rule 25 of the Central Excise Rules, 2002) read with section 11AC of Central Excise Act, 1944. Thus, I find that the evaded Central Excise duty equivalent to aggregate of all Customs duties as demanded in the show cause notice, leviable on the illicit removal of goods is required to be recovered from them under proviso to sub section (1) of Section 11AC of Central Excise Act, 1944. The interest at the appropriate rate leviable on the delayed payment of evaded Central Excise duty equal to aggregate of all Customs duties is also Page 36 of 67 O/TAXAP/1142/2013 ORDER required to be recovered from them under section 11AB of Central Excise Act, 1944.

Further, I find that the unit has failed to utilize the raw material procured duty free under exemption Notification No.53/97Cus dated 3.6.1997 and Noti. 1/95 CE dated 4.1.1995 as amended, in the manufacture of the resultant articles to be exported out of India or to be disposed off in the manner as provided under the Exim Policy but the same were utilized in manufacture of finished goods which were clandestinely cleared/ diverted fraudulently to the local market and thereby the unit has failed to fulfill the conditions stipulated in the Notification No.53/97Cus dated 3.6.1997 and Noti. 1/95CE dated 4.1.1995and thereby contravened the provisions of Exim Policy and section 65, 68, 71 and 72 of the Customs Act, 1962. Therefore, the unit was ineligible to the exemption of Customs duties availed on raw material utilized in the manufacture of final product cleared illicitly and as such the Customs Duties as demanded in the show cause notice are liable to be recovered from them under section 72 of the Customs Act, 1962. The interest at the appropriate leviable rate was also required from them under section 72 of the Customs Act, 1962. Since the unit have failed to fulfill the conditions to which inputs were procured duty free, the said nputs were liable for confiscation under section 111(0) of the Customs Act, 1962. Also as these inputs were improperly utilized by the unit furnishing B17 Bond and the goods were not available for confiscation under section 125 of the Customs Act, 1962 was required to be imposed and recovered from them. Since the unit have committed such acts of contravention, which have rendered the goods liable to confiscation section 111(b) of the Customs Act, 1962 and the same are liable for confiscation and the EOU liable for penal Page 37 of 67 O/TAXAP/1142/2013 ORDER action under section 112(a) of the Customs Act, 1962. Similarly, the unit has also procured indigenous raw material duty free under exemption noti. No.1/95CE dated 4.1.1995. The condition of the Notification that the goods should be utilized for manufacture of products to be exported has been violated, therefore, the raw material procured duty free indigenously is also liable to be confiscated under Central Excise provisions and such duty foregone on indigenous raw material is also liable to be recovered under the Proviso to section 11A(1) of Central Excise Act and goods liable for confiscation under Rule 25 of the Central Excise Rules.

28. The goods are not available for confiscation, however, the assessee has executed a B17 bond and therefore, the goods are liable for confiscation and a redemption fine is liable to be imposed in terms of the Judgment of Honourable Supreme court in the case of M/s. Weston Components Vs. Commr. 2000 (115) ELT 278 (SC) wherein, it was held that fine can be imposed when goods were released against a Bond.

29. Regarding the issue of imposition of penalty on shri Om Prakash and Uma Shankar Kundal, Directors of M/s.Arya Dyeing and Printing Pvt. Ltd., I find from his statements recorded that he intentionally and knowingly master minded the scheme for clandestine removal/ diversion of warehousing goods and failed to warehouse the goods physically at M/s. Al Amin Exports. They clearances of export goods only on paper without physical delivery of the goods to the consignee EOUs, with intent to evade the duty of Excise /Customs and also conspired with Navsari based EOUs knowing well that the goods are liable for confiscation. Being the Director, of the Unit and looking after entire affairs of the Unit, it is the responsibility of the Page 38 of 67 O/TAXAP/1142/2013 ORDER Director to pay the excise duty on clearance of their goods and the unit should not devise methods to evade payment of excise duty. I therefore, find that he has knowingly indulged in the acts or receiving, removing, depositing, keeping, concealing, selling or purchasing or in any other manner dealing with the goods which he knew or had reason to believe that the same were offending in nature were liable to confiscation under the provisions of Central Excise Act, 1944 and Rules framed thereunder, thereby he had contravened the provisions of Rule 26 of the Central Excise Rules, and section 112(a) of the Customs Act, 1962.

30. I also find that M/s. Al Amin Exports had aided and abetted M/s. Arya Dyeing and Printing Ltd.in evasion of duty by issuing CT3 certificates and showing receipt of goods on paper only without physically receiving the goods. They received Rs.4 to 5 per mtrs. as a premium for showing paper transaction only. They tried to circulate the money received from M/s. Arya Dyeing and Printing Pvt. Ltd. to give the financial transaction colour of legitimacy. They indulged themselves in transporting, removing, depositing, keeping, selling or purchasing the goods which they knew or had reasons to believe are liable for confiscation. They are, therefore liable for penalty under Rule 26 of the Central Excise Rules 2002 and under section 114 (2) of Customs Act, 1965. Honourable Punjab and Haryana High Court Vee Kay Enterprises Vs. Commissioner of Central Excise reported in 2011 (266) ELT 436 (P&H) has held that penalty under rule 26 and 25 is imposable as applicants concerned with selling of goods and not contravened provisions merely by issuing invoices but the invoices issued without delivery with intent to enable evasion. Tribunal in CCE, Ahmedabad Vs. Page 39 of 67 O/TAXAP/1142/2013 ORDER Navneet Agarwal 2012 (276) ELT 515 (Tri. Ahmd) held that when only invoices are issued without supply of goods, penalty under Rule 26 is imposable.

31. I also find that the Central Excise Rules, 1944 as in force during the period covered by the Show Cause Notice are also in force and applicable in terms of Section 38A of Central Excise Act, 1944.

32. I also find that the unit has contravened the provisions of Sections 68, 71, 111(O) of Customs Act, 1962 in as much as they have removed/ unauthorized utilized the duty free raw materials warehoused in their factory premises. The said goods are therefore, liable to confiscation in terms of Section 111(o) & (j) of Customs Act, 1962. Since the goods are not physically available for confiscation, this aspect has been considered while imposing penalty under Section 112(a) of Customs Act, 1962.

ORDER

33. On the basis of findings above, I order as follows I. I order confiscation of 1508216.6 L./Mtr. of MMF Processed fabrics valued at Rs.5,70,87,598/ cleared illicitly/ clandestinely under rule 25 of Central Excise Rules 2002. The goods are not available physically. I therefore, impose a fine of Rs.60,00,000/ against M/s. Arya Dyeing and Printing Pvt.Ltd. (100% EOU) in terms of Hon. Supreme Court decision in Weston Components and B17 bond.

II. I confirm and demand duty of Central Excise of Rs.5,95,48,784/ leviable on 1508216.6 L.Mtrs. of Polyester Dyed Fabrics illicitly removed and order its recovery Page 40 of 67 O/TAXAP/1142/2013 ORDER against M/s.Arya Dyeing and Printing Pvt. Ltd. (100% EOU) under proviso to Section 11A(1) of CE Act 1944 and in terms of B17 bond executed by them and proviso to section 3(1) of CE Act.

III. I confirm and demand duties of Customs and Central Excise of Rs.3,23,02,426/ leviable on the raw materials procured duty free under Notification No.1/95 CE dated 04.01.1995 and Notification No.53/97Cus dated 03.06.1997 and order its recovery against M/s.Arya Dyeing and Printing Pvt.Ltd (100% EOU) under proviso to Section 28(1) of Customs Act and Proviso to Section 11A(1) of CE Act 1944 and in terms of B17 bond executed by them and conditions of Notifn. 1/95 and 53/97Cus.

IV. I order confiscation of above raw material i.e. grey fabrics admeasuring 1675795 L.Mtrs. valued at Rs.3,35,15,900/ under rule 25 of CE Rules 2002 and Section 111(o) & (j) of Customs Act. The goods are not available physically. I therefore, impose a fine of Rs.35,00,000/ against M/s.Arya Dyeing and Printing Pvt. Ltd. (100% EOU) in terms of Hon. Supreme Court decision in Weston Components.

V. Interest at the applicable rates on the duties confirmed above is confirmed under section 11AB of CE Act, 1944/ section 28AB of Customs Act, 1962 as applicable and in terms of B17 bond executed by them.

VI. I impose penalties of Rs.5,95,48,784/ against M/s.Arya Dyeing and Printing Pvt. Ltd. (100% EOU) under section 11 AC of CE Act and rule 25(1) of CE rules 2002. Since I have imposed mandatory penalty under Central Excise equivalent to duty evaded I refrain from imposing penalty under Customs Act.

VII. I impose penalty of Rs.25,00,000/ on Shri Uma Shankar and Shri Om Prakash, Page 41 of 67 O/TAXAP/1142/2013 ORDER Directors of M/s. Arya Dyeing and Printing Pvt. Ltd. (100% EOU) under rule 26 of Central Excise Rules, 2002.

VIII. I impose penalty of Rs.25,00,000/ on Shri Uma Shankar Kundal and Shri Om Prakash, Directors of M/s.Arya Dyeing and Printing Pvt. Ltd. (100% EOU) under Section 112(a) of Customs Act.

IX. I impose penalties of Rs.10,00,000/ each on M/s.Alamin Exports, Navsari under rule 26 of Central Excise Rules, 2002.

X. I impose penalties of Rs.25,00,000/ each on M/s. Sunshine Overseas, Navsari and M/s. AlAmin Exports, Navsari under Section 114(ii) of Customs Act.

34. This order is issued without prejudice to any other action that may be taken against them under the Central Excise Act, 1944/Customs Act, 1962 and the Rules famed there or any other law for the time being in force."

2.4 Against the said order of the adjudicating authority, the appellant preferred an appeal before the Tribunal. Along with the appeal, the appellant also filed an application praying for stay of the order of the adjudicating authority. On such application, the Tribunal passed an order dated May 03, 2013 requiring the appellant to deposit 50% of the penalties imposed under the Customs Act within a period of eight weeks, on which condition there would Page 42 of 67 O/TAXAP/1142/2013 ORDER be stay against the order of the adjudicating authority. The Tribunal, however, granted complete stay against the penalties imposed under section 112A and 114 of the Act and Rules 209A and 26 of the Central Excise Rules.

Relevant portion of the Tribunal's order reads as under :

"6. In view of the decision already taken by this Bench, appellants have made out a prima facie case for complete waiver of the penalties imposed under Section 112 of the Customs Act and Rule 209 A/ Rule 26 of the relevant Central Excise Rules.

7. So far as the imposition of penalties on M/s.AlAmin Exports and M/s.Sunshine Overseas, under Section 114 of the Customs Act, 1962 is concerned, it is relevant to mention that adjudicating authority while deciding the issue under OIO No.6/Dem/2012 13 and 7/Dem/201213 has clearly held that Shri Irfan Saiyed Partner of M/s.AlAmin Exports has admitted that the goods exported by them were purchased from the open market to fulfill the export obligations and the inputs received without payment of duty were diverted to domestic market. Shri Haroon Razak Chhaya another partner of M/s.AlAmin Exports agreed that Shri Irfan Saiyed (who was also partner of M/s.Sunshine). In view of the above admissions that the goods purchased from the open market were being exported by M/s.AlAmin Expoerts and M/s.Sunshine Overseas; clearly convey that both these appellants made false entries in the shipping bills and the goods purchased from local market were exported in the guise Page 43 of 67 O/TAXAP/1142/2013 ORDER of goods which were required to be manufactured out of duty free raw materials obtained by the 100% EOU as per the prescribed procedures. The word entry has been defined under Section 2(16) of the Customs Act, 1962, as follows: "Section 2 .. ..

(16) "entry" in relation to goods means as entry made in a bill of entry, shipping bill or bill of export and includes in the case of goods imported or to be exported by post, the entry referred to in Section 82 or the entry made under the regulations made under Section 84."

8. From the above definition an entry means the declaration given by the exporter, interalia in the shipping bill. At this stage, it is also relevant to mention the provisions contained in Section 113(1) of the Customs Act, 1962 which is reproduced below: "Section (113)(a) to (h) .. .. ..

(i) any goods entered for exportation which do not correspond in respect of value or in any material particular with the entry made under this Act or in the case of baggage with the declaration made under Section 77."

9. From the facts available on records, it is apparent that appellant M/s.AlAmin Exports and M/s.Sunshine made wrong declarations in the export documents by which the goods exported were liable to confiscation and accordingly, both the appellants are liable to penalty under Section 114 of the Customs Act, 1962. In view of the above, appellants have not made out a prima facie case for complete waiver of predeposit of penalties imposed under Section 114 of the Customs Act, 1962 for handling such goods in some manner. Appellant M/s.AlAmin Exports and Page 44 of 67 O/TAXAP/1142/2013 ORDER M/s.Sunshine Overseas are directed to pay 50% of the penalties imposed upon them under Section 114 of the Customs Act, 1962, within a period of eight weeks from the date of pronouncement of this order and report compliance on 04.07.13 before Deputy Registrar. The Deputy Registrar, after ascertaining the compliance will place the papers before the Bench for necessary order on 11.07.13. On payment of the above pre deposit, there shall be stay on the remaining amounts of penalties imposed till the disposal of appeals."

2.5 The appellant filed Miscellaneous Application before the Tribunal seeking modification of the stay order. In such application the sole ground raised was that no penalty could have been imposed under section 114 of the Act as it existed at the relevant time i.e. prior to its amendment with effect from May 14, 2003 and that therefore the Tribunal must grant unconditional stay. On such premise, it was prayed that "in light of the above, it is respectfully prayed that the Hon'ble Tribunal may be pleased to reconsider the aforesaid points and grant unconditional stay and also decide the appeals finally".

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O/TAXAP/1142/2013 ORDER 2.6 On such Miscellaneous Application, the Tribunal passed its impugned order dated July 17, 2013. The Tribunal refused to modify its earlier order, but extended the time for compliance of predeposit by another eight weeks. Relevant portion of the order of the Tribunal reads as under :

"4. After careful consideration of the submissions made by both sides, we find that the Bench while passing the order of pre deposit of 50% of the amount of penalty imposed under Section 114 of the Customs Act, 1962, has gone into detail the submissions made by the learned counsel. In the case in hand, we find that we have specifically mentioned that the appellants have made wrong declarations in the export documents and hence the issue needs to be considered in detail which can be done only at the time of final disposal of the appeals. We were of the primafacie view that the appellants have not made out a case for complete waiver. We do not find any reason for modifying our stay order dated

03.05.2013. Accordingly, applications for modification of our stay order are dismissed.

5. At this juncture, on specific query from the Bench, learned counsel submits that they are praying for some time for depositing the amount ordered. Accordingly, considering the fact that appellants had filed application for modification of stay order, we are inclined to accept prayer of the learned counsel and extend the time for compliance of predeposit by another eight Page 46 of 67 O/TAXAP/1142/2013 ORDER weeks and direct the appellants to report compliance by 12.09.2013. It is made clear to the learned counsel that non compliance of such order the appeals will be liable to dismissal without further indulgence."

2.7 It is this order of the Tribunal which the appellants have challenged in this appeal.

3. The facts being similar in other appeals as well, it will not be necessary to record them separately.

4. The learned Senior Counsel Shri Deven Parikh for the appellants vehemently contended that the Tribunal committed serious error in not granting unconditional stay. He raised the following three grounds in support of his contentions :

(i) The show cause notice as well as the order passed by the adjudicating authority referred to a wrong provision. Section 114 of the Act, as it stood prior to May 14, 2003, would not apply to the present appellants. The entire action, therefore, was vitiated.

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        O/TAXAP/1142/2013                             ORDER



(ii)       No   other   provision   covers   the   situation,

where the alleged acts and omissions of the appellant could be penalised under the Customs Act.

(iii) The authorities had no power to impose any penalty on the appellants.

4.1 The learned Senior Counsel Mr.Parikh has relied on the following decisions in support of his contentions :

(i) In the case of Amrit Foods v. Commissioner of Central Excise, U.P., 190 ELT 433, the Supreme Court upheld the decision of the Tribunal setting aside the order of Commissioner of penalty under Rule 173Q of the Central Excise Rules, 1944, on the ground that Rule 173Q contains six clauses and was, therefore, necessary for the assessee to be put to notice as to exact nature of contravention for which the assessee was liable under the provisions of the said Rules.

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(ii) Hissar Medical Diagnostic & Hospitals Ltd.

v. C.C., New Delhi, 202 ELT 268, where the Delhi Bench of the Tribunal quashed the penalty imposed under section 114A of the Customs Act, 1962, as there was no misdeclaration at the time of clearance of imported goods. It was observed that the provision under section 112(a) of the Act was neither proposed under the show cause notice nor discussed under the impugned order and hence, cannot be invoked now for imposition of penalty.

(iii) Electro Controls v. Collector of Central Excise, reported in 1993 (63) ELT 322, wherein the reference to the show cause notice was to section 112 of the Act without specifying whether Clause (a) or Clause (b) of section 112 would apply. The Tribunal, therefore, set aside the penalty. However, the Tribunal also held that the essential ingredients have not been specifically set out with reference to either of the clauses.

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(iv) For the same purpose, the learned Senior Counsel for the appellant relied on the decision of Tribunal in the case of Commissioner of Customs, Amritsar v. A.T.M. International Ltd., reported in 2007 (208) ELT

288.

5. On the basis of above contentions, the learned counsel for the appellant contended that the entire predeposit should have been waived. Stay without condition should have been granted. The appeals of the appellants ought to have been heard on merits.

6. Having perused the documents on record and having heard the learned counsel for the appellants, the following aspects clearly emerge:

6.1 In response to the show cause notice, the appellantAl Amin Exports neither filed any reply nor appeared for personal hearing though notices were duly served. No grievance, Page 50 of 67 O/TAXAP/1142/2013 ORDER therefore, has been raised before us about opportunity of representing the appellants' case not being made available to them.

6.2 We are considering the issue at the stage of predeposit. In that view of the matter, while discussing the contentions raised by the appellants on merits would reflect only our prima facie view and none of the observations are meant to govern the disputes finally.

6.3 The allegations against the appellants which were ultimately confirmed by the adjudicating authority are to the effect that the appellants abetted M/s.Arya Dyeing and Printing Pvt. Ltd.

in avoiding its export obligations. M/s.Arya Dyeing and Printing Pvt. Ltd. had imported goods without payment of customs duty undertaking that such raw material would be used in the manufacturing process and the final product would be reexported. Instead of exporting goods itself, M/s.Arya Dyeing and Printing Pvt. Ltd. could as well transfer the Page 51 of 67 O/TAXAP/1142/2013 ORDER goods to a 100% EOU and claim deemed export.

M/s.Arya Dyeing and Printing Pvt. Ltd. claimed to have transferred the goods to the appellant Al Amin Exports, whereas it was found by the Department that no such goods were physically ever received by the appellant Al Amin Exports. Al Amin Exports merely accepted the premium of Rs.4.50 ps. to Rs.5/ per metre and issued CT3. To show its own export obligation, Al Amin Exports collected the goods from local market, showed minor manufacturing process and exported them.

6.4 Section 111 of the Act provides that the following goods shall be liable to confiscation. Clause (o) thereof reads as under

:

"(o) any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non observance of the condition was sanctioned by the proper officer."

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O/TAXAP/1142/2013 ORDER 6.5 Section 112 of the Act provides for penalty for importation of goods illegally, etc. Clause

(a) thereof provides that any person who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under section 111, or abets the doing or omission of such an act, shall be liable to penalty provided therein.

6.6 Section 113 of the Act pertains to confiscation of goods attempted to be improperly exported.

6.7 Section 114 of the Act provides for penalty for an attempt to export goods improperly.

6.8 It can, thus, be seen that if the allegations against the appellants raised by the adjudicating authority, finally found to have been established, the appellants would certainly expose itself to the penalties under the Act. As per the allegations the appellants abetted M/s.Arya Dyeing and Printing Pvt. Ltd.

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O/TAXAP/1142/2013 ORDER in claiming export of goods from imported raw material where no such export took place. In the process, the appellants also claimed to have exported such goods which was also a false claim. Even otherwise, merely because there was wrong reference of certain provisions either in the show cause notice or even in the final order, would it mean that the entire order would stand vitiated ?

6.9 The learned counsel for the appellants would rely on certain decisions to contend that even a wrong reference to the statutory provision would vitiate the action of the authority.

6.10 However, in the case of Roche Products Limited v. Collector of Customs and another, reported in 1989 Supp. (2) SCC 532, the Apex Court held and observed as under :

"24. We may first consider whether the Collector of Customs had exceeded his jurisdiction in confiscating the goods and imposing penalty for the first time in exercise of his revisional jurisdiction under section 130(2) of the Act. In view of the provisions of section 122 read with Page 54 of 67 O/TAXAP/1142/2013 ORDER section 124 of the Act, the Collector of Customs has the jurisdiction to confiscate goods or impose penalty after issuing show cause notice on the person concerned. He has, therefore, both the original jurisdiction as also revisional jurisdiction. In exercise of his revisional jurisdiction under section 130(2) of the Act, he set aside the order of the Customs Officer allowing the goods to be cleared by the appellant and, thereafter, in exercise of his original jurisdiction under section 122 read with section 124 of the Act, he issued a show cause notice on the appellant and, after hearing the appellant, confiscated the goods and imposed penalty on the appellant. It, however, appears from the impugned order dated November 14, 1979 that the confiscation was made and the penalties imposed by the Collector of Customs in exer cise of his revisional power under section 130(2) of the Act. This, in our opinion, is a mere irregularity not af fecting the order. Admittedly, the Collector of Customs had the power to confiscate the goods and impose penalty under section 122 read with section 124 of the Act. When an au thority has the power to do a certain act and in exercise of such power he does the same, but refers to a wrong provision of the law, that would be a mere irregularity and would not vitiate such act. In the instant case also, the Collector of Customs had admittedly the power to confiscate goods and impose penalty and even though in the impugned order it is stated that the confiscation of the goods was made and the penalty was imposed in the exercise of his power under section 130(2) of the Act, that would not be fatal and vitiate the order."

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O/TAXAP/1142/2013 ORDER 6.11 In the case of N. Mani v. Sangeetha Theatre and others, reported in (2004) 12 SCC 278, it was observed as under :

"9. It is well settled that if an authority has a power under the law merely because while exercising that power the source of power is not specifically referred to or a reference is made to a wrong provision of law, that by itself does not vitiate the exercise of power so long as the power does exist and can be traced to a source available in law."

6.12 In the case of Ram Sunder Ram v. Union of India and others, reported in (2007) 13 SCC 255, it was observed as under :

"19. As noticed above, the appellant had shown cause vide reply dated 13.08.1991 (Annexure P6) to the show cause notice dated 03.07.1991 (Annexure P5) issued to him by respondent No.5. The competent authority considered the reply of the appellant in right perspective and found the same not satisfactory. Therefore, on 09.09.1991, the competent authority passed the order of discharge (Annexure P7) of the appellant from the army service with immediate effect in exercise of the power under Section 20 of the Army Act. It appears that the competent authority has wrongly quoted Section 20 in the order of discharge whereas, in fact, the order of discharge has to be read having been passed under Section 22 of the Army Act. It is well settled that if an authority has a power under the law merely because Page 56 of 67 O/TAXAP/1142/2013 ORDER while exercising that power the source of power is not specifically referred to or a reference is made to a wrong provision of law, that by itself does not vitiate the exercise of power so long as the power does exist and can be traced to a source available in law [see N. Mani v. Sangeetha Theatre & Ors. (2004) 12 SCC 278]. Thus, quoting of wrong provision of Section 20 in the order of discharge of the appellant by the competent authority does not take away the jurisdiction of the authority under Section 22 of the Army Act. Therefore, the order of discharge of the appellant from the army service cannot be vitiated on this sole ground as contended by the learned counsel for the appellant. A plain reading of the order of discharge shows that it is an order of termination of service simpliciter without casting or attaching any stigma to the conduct of the appellant, therefore the said order cannot be termed to be punitive in nature or prejudicial to the future employment of the appellant in getting employment in civil service. Thus, the contention of the learned counsel for the appellant that the order of discharge is punitive in nature does not merit acceptance."

6.13 In the case of Rajendra Singh Verma (dead) through Lrs. and others v. Lieutenant Governor (NCT of Delhi) and others, reported in (2011) 10 SCC 1, it was observed as under :

"209. In fact Mr. Rohilla should have pointed out to the High Court the relevant and material fact that for two years that is for the year 1993 and for the year 1994 he had suffered adverse ACR `C' & 'Integrity Page 57 of 67 O/TAXAP/1142/2013 ORDER Doubtful'; and that the representations made by him were rejected which were not challenged by him before higher forum. In any view of the matter, it is settled law that when power can be traced to a valid source, the fact that the power is purported to have been exercised under a wrong provision of law, would not invalidate exercise of power."

7. From the above, it can be seen that consistently the Supreme Court has been suggesting that mere wrong reference to a provision either in the show cause notice or in the final order would not vitiate the action of the authority, if otherwise the powers can be traced to another statutory provision.

8. We have noticed the allegations in the final findings of the adjudicating authority. We prima facie do not find that the alleged wrong committed by the appellants could not be visited with any penalty under the Customs Act at all.

The allegations in the show cause notice were specific and brought on record alleged acts and omissions of the appellants which if duly established would invite penalty under the Customs Act. In that view of the matter, one Page 58 of 67 O/TAXAP/1142/2013 ORDER aspect would be whether mere wrong reference to statutory provision would vitiate the action.

However, whether such principle would apply in the present case or as suggested by the counsel for the appellants, being the penal liability, the authorities must be put to strict compliance of mentioning correct provision in the show cause notice as well as in the final order of adjudication would be the principle to be applied need not be finally decided in these appeals.

9. We are dealing with the appeals at the stage of predeposit. Section 129E of the Act pertains to deposits pending appeal, of duty and interest demanded and penalty levied. It provides that where in any appeal, the decision or the order appealed against relates to any duty and interest demanded in respect of goods which are not under the control of the customs authorities or any penalty levied under the Act, the person desirous of appealing against such decision or order, shall pending the appeal deposit with the proper officer the duty and interest demanded or the Page 59 of 67 O/TAXAP/1142/2013 ORDER penalty levied. Proviso to section 129E of the Act, however, provides that where in any particular case, the Appellate Tribunal is of the opinion that the deposit of duty and interest demanded or penalty levied would cause undue hardship to such person, the said Appellate Forum may dispense with such provision, subject to such conditions as may be deemed fit to impose to safeguard the interest of the Revenue.

10. It can thus be seen that the predeposit of amount of duty and interest with penalty is the requirement of section 129E of the Act unless under the proviso, the Appellate Commissioner or the Tribunal dispenses with such requirement of predeposit. Dispensing of requirement has two elements. One of undue hardship to the appellant and the other of imposing condition to safeguard the interest of the Revenue. Through judicial pronouncements, the concept of undue hardship recognizes the financial hardship and difficulties of the appellants to deposit such amount as also a strong prima facie case. It is Page 60 of 67 O/TAXAP/1142/2013 ORDER held that mere arguable point would not require the appellant forum to grant unconditional stay.

11. In the case of Indu Nissan Oxo Chemicals Industries Limited, reported in (2007) 13 SCC 487, the Apex Court has observed as under :

"10. Principles relating to grant of stay pending disposal of the matters before the concerned forums have been considered in several cases. It is to be noted that in such matters though discretion is available, the same has to be exercised judicially.

11. The applicable principles have been set out succinctly in Silliguri Municipality and Ors. v. Amalendu Das and Ors. (AIR 1984 SC

653), M/s Samarias Trading Co. Pvt. Ltd. v.

S. Samuel and Ors. (AIR 1985 SC 61) and Assistant Collector of Central Excise v. Dunlop India Ltd. (AIR 1985 SC 330).

12. It is true that on merely establishing a prima facie case, interim order of protection should not be passed. But if on a cursory glance it appears that the demand raised has no leg to stand, it would be undesirable to require the assessee to pay full or substantive part of the demand. Petitions for stay should not be disposed of in a routine matter unmindful of the consequences flowing from the order requiring the assessee to deposit full or part of the demand. There can be no rule of universal application in such matters and the order has to be passed keeping in view the factual scenario involved. Merely because this Court has indicated the Page 61 of 67 O/TAXAP/1142/2013 ORDER principles that does not give a license to the forum/authority to pass an order which cannot be sustained on the touchstone of fairness, legality and public interest. Where denial of interim relief may lead to public mischief, grave irreparable private injury or shake a citizens' faith in the impartiality of public administration, interim relief can be given.

13. Section 129E of the Act reads as follows:

"129E. DEPOSIT, PENDING APPEAL, OF DUTY AND INTEREST DEMANDED OR PENALTY LEVIED. Where in any appeal under this Chapter, the decision or order appealed against relates to any duty and interest demanded in respect of goods which are not under the control of the customs authorities or any penalty levied under this Act, the person desirous of appealing against such decision or order shall, pending the appeal, deposit with the proper officer the duty and interest demanded or the penalty levied. Provided that where in any particular case, the Commissioner (Appeals) or the Appellate Tribunal is of opinion that the deposit of duty and interest demanded or penalty levied would cause undue hardship to such person, the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal may dispense with such deposit subject to such conditions as he or it may deem fit to impose so as to safeguard the interests of revenue."

14. Two significant expressions used in the provisions are "undue hardship to such person" and "safeguard the interests of revenue". Therefore, while dealing with the application twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interest of Revenue have to be kept in view.

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15. As noted above there are two important expressions in Section 129E. One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient. It was noted by this Court in S. Vasudeva v. State of Karnataka and Ors. (AIR 1994 SC 923) that under Indian conditions expression "Undue hardship" is normally related to economic hardship.

"Undue" which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances.

16. For a hardship to be 'undue' it must be shown that the particular burden to have to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which the applicant would derive from compliance with it.

17. The above position has been highlighted in M/s Benara Valves Ltd. and Ors. v. Commissioner of Central Excise and Anr. (2006 (12) SCALE 303). Though the said case related to dispute under the Customs Excise Act, 1944 (in short the 'Excise Act') the parameters are the same."

12. In the case of Ketan V. Parekh v. Special Director, Directorate of Enforcement, reported in 2012 (275) ELT 3, the Supreme Court has observed as under :

Page 63 of 67

O/TAXAP/1142/2013 ORDER "27. In this context, reference can usefully be made to the judgment of this Court in Benara Values Ltd. v. Commissioner of Central Excise (2006) 13 SCC :

347. In that case, a two Judge Bench interpreted Section 35F of the Central Excise Act, 1944, which is pari materia to Section 19(1) of the Act, referred to the judgments in Siliguri Municipality v.

Amalendu Das (1984) 2 SCC 436, Samarias Trading Co. (P) Ltd. v. S. Samuel (1984) 4 SCC 666, Commissioner of Central Excise v. Dunlop India Ltd. (1985) 1 SCC 260 and observed:

"Two significant expressions used in the provisions are 'undue hardship to such person' and 'safeguard the interests of the Revenue'. Therefore, while dealing with the application twin requirements of considerations i.e. consideration of undue hardship aspect and imposition of conditions to safeguard the interests of the Revenue have to be kept in view.

As noted above there are two important expressions in Section 35F. One is undue hardship. This is a matter within the special knowledge of the applicant for waiver and has to be established by him. A mere assertion about undue hardship would not be sufficient. It was noted by this Court in S. Vasudeva v. State of Karnataka that under Indian conditions expression 'undue hardship' is normally related to economic hardship. 'Undue' which means something which is not merited by the conduct of the claimant, or is very much disproportionate to it. Undue hardship is caused when the hardship is not warranted by the circumstances. For a hardship to be 'undue' it must be shown that the particular burden to observe or perform the requirement is out of proportion to the nature of the requirement itself, and the benefit which Page 64 of 67 O/TAXAP/1142/2013 ORDER the applicant would derive from compliance with it.

The word 'undue' adds something more than just hardship. It means an excessive hardship or a hardship greater than the circumstances warrant.

The other aspect relates to imposition of condition to safeguard the interests of the Revenue. This is an aspect which the Tribunal has to bring into focus. It is for the Tribunal to impose such conditions as are deemed proper to safeguard the interests of the Revenue. Therefore, the Tribunal while dealing with the application has to consider materials to be placed by the assessee relating to undue hardship and also to stipulate conditions as required to safeguard the interests of the Revenue.'

28. The same view was reiterated in Indu Nissan Oxo Chemicals Industries Ltd. v. Union of India (2007) 13 SCC 487 by considering proviso to Section 129E of the Customs Act, 1962, which is almost identical to Section 19 of the Act."

13. In the case of Golden Tobacco Ltd. v.

Commissioner of C.Ex., DelhiI, reported in 2012 (275) ELT 375 (Del.), the Delhi High Court referred to various decisions of the Supreme Court on the question of predeposit and after prima facie consideration of the order passed by the Tribunal rejected the assessee's appeal for interference with the order of predeposit.

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14. Before us, the appellants have not presented the application for stay filed before the Tribunal. From the order passed by the Tribunal insisting 50% amount to be deposited by way of predeposit, it does not appear that the appellants pleaded or at least proved any financial hardship. In the application for rectification also, there was hardly any mention about the financial hardship. Before us also, the only contention raised by the learned counsel for the appellants was that since the appellants have an excellent case on merits and in his opinion, the order of the adjudicating authority is ex facie illegal, the same may be stayed unconditionally without requirement of any pre deposit.

15. Culmination of above discussion is that we do not find that the order of adjudicating authority is ex facie illegal or without jurisdiction so as to waive complete predeposit.

The Tribunal having given its reasoning for insisting on 50% amount by way of predeposit, in Page 66 of 67 O/TAXAP/1142/2013 ORDER our opinion, therefore, does not give rise to any question of law. Mere arguable point in appeal would not be sufficient to insist on complete waiver of deposit.

16. In the result, all the appeals are dismissed. Consequently, the connected Civil Applications do not survive and the same stand disposed of accordingly.

(AKIL KURESHI, J.) (MS SONIA GOKANI, J.) Aakar Page 67 of 67

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