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2015 (10) TMI 2403 - AT - Central ExcisePenalty under Rule 26 - fraudulent availment of CENVAT credit - Fraudulent rebate claim - Confiscation of goods - Held that - so called merchant exporters or Rule 12B manufacturers have dealt with the goods inasmuch as they purchased the goods from market and in order to claim the rebate/or avail CENVAT credit they approached Muni Group of Companies and purchased certain invoices from them so as to fraudulently show as if the goods were purchased from Muni Group of Companies on the invoices of Muni Group and thereafter exported or used in processing. Thus, there are excisable goods which are purported to be cleared on the invoice of Muni Group. In all cases, the investigations have indicated that the goods were never transported from Muni Group of Companies to the appellants or to the port of export. Investigations revealed that the goods were lifted from some dealers in Surat, etc. Further, investigations indicate that some payments were made to Muni Group of Companies through account payee cheques. However, immediately, thereafter, Muni Group of Companies have issued cheques in the name of some other entities. These cheques were, in turn got discounted by the merchant exporter/appellants. In some cases, the amounts were paid by crossed bearer cheques to Muni Group of Companies. However, these cheques were, in reality, not deposited in the accounts of Muni Group of Companies, but were deposited either in the name of certain dealers or got discounted from various bill discounters/shroffs. In nutshell, the money which was purported to have been paid to Muni Group of Companies for purchase of material was not paid to them but either was taken back by the appellants-merchant exporters, or in some cases, some amount was paid to certain dealers in fabric. Invoices of Muni Group of Companies and the goods purported to be covered by such invoices were dealt by the merchant exporter-appellants. There can be no doubt, that these goods are liable to confiscation under Rule 25(1)(d) of the Central Excise Act, 1994. In view of the above said position, there can be no doubt that penalty is imposable under Rule 26 on the merchant exporter/manufacturer under Rule 12B. Goods procured from some other sources would be non-duty paid goods otherwise, there was no need for them to get the invoices from Muni Group of Companies. The findings recorded above in respect of merchant exporters equally be applicable in the case of Rule 12B manufacturers and, therefore, penalty is imposable. Thus, these are the cases of fraud wherein the appellants as also Muni Group of Companies were equally involved and would be equally benefitted by getting the money from the government exchequer, in the name of rebate even though in reality, no duty was paid in the scheme of the above fraud, it was fraudulently shown that the duty was paid and the appellants or Muni of Group of Companies would be able to get refund of the duty in the form of rebate which thereafter will be distributed among themselves. Penalty on merchant exporters is allowed or dismissed on the basis of their involvement in fraudulent transaction. - Appeal disposed of.
Issues Involved:
1. Imposition of penalty under Rule 26 of the Central Excise Rules, 2002. 2. Fraudulent availment of CENVAT credit by Muni Group of Companies. 3. Liability of merchant exporters and Rule 12B manufacturers. 4. Applicability of Rule 26 prior to its amendment on 01/03/2007. 5. Double jeopardy and overlapping proceedings. 6. Quantum and justification of penalties imposed. Issue-wise Detailed Analysis: 1. Imposition of Penalty under Rule 26 of the Central Excise Rules, 2002: The Tribunal examined whether penalties under Rule 26 were correctly imposed on the appellants, who were either merchant exporters or Rule 12B manufacturers. The appellants argued that the Commissioner failed to specify how the goods procured from the market and exported were liable to confiscation. The Tribunal clarified that Rule 26 applies to any person dealing with excisable goods liable to confiscation. The appellants were found to have knowingly dealt with goods covered by fraudulent invoices from Muni Group of Companies, making them liable for penalties under Rule 26. 2. Fraudulent Availment of CENVAT Credit by Muni Group of Companies: Muni Group of Companies fraudulently availed CENVAT credit without receiving any inputs and issued invoices to merchant exporters and Rule 12B manufacturers. Investigations revealed that payments made to Muni Group were returned to the appellants through various means, indicating a fraudulent scheme to claim rebates on non-duty paid goods. The Tribunal upheld the findings of fraudulent transactions, leading to the imposition of penalties. 3. Liability of Merchant Exporters and Rule 12B Manufacturers: Merchant exporters and Rule 12B manufacturers were found to have procured invoices from Muni Group to fraudulently claim rebates or CENVAT credit. The Tribunal noted that the appellants dealt with goods purportedly covered by Muni Group's invoices, which were liable to confiscation. Therefore, penalties under Rule 26 were justified. 4. Applicability of Rule 26 Prior to Its Amendment on 01/03/2007: The appellants argued that Rule 26, as amended on 01/03/2007, could not be applied retrospectively. The Tribunal clarified that the penalties were imposed under the unamended Rule 26, which was applicable to the appellants as Rule 12B manufacturers or merchant exporters involved in fraudulent activities. 5. Double Jeopardy and Overlapping Proceedings: Some appellants claimed double jeopardy, arguing that they were penalized twice for the same offense. The Tribunal distinguished the proceedings, noting that one set of proceedings was for the recovery of fraudulent rebates, while the other was for the fraudulent availment of CENVAT credit by Muni Group. The Tribunal rejected the double jeopardy claims, confirming the penalties. 6. Quantum and Justification of Penalties Imposed: The Tribunal assessed the penalties imposed on each appellant based on the extent of their involvement in the fraudulent scheme. The penalties were found to be proportionate to the fraudulent claims and the nature of the appellants' participation. The Tribunal upheld the penalties, finding them neither excessive nor disproportionate. Separate Judgments Delivered: - Appeal No. E/723/2010 (Shri Babul Jain): The appeal was allowed as the appellant was found to have acted in good faith without knowledge of the fraudulent activities. - Appeal No. E/797/2010 (Shri Farooq Razazk Gazi): The appeal was allowed as the appellant was not aware that the goods and invoices came from different sources. Final Orders: - Appeals of Shri Babul Jain and Shri Farooq Razazk Gazi were allowed. - All other appeals were dismissed, and the penalties imposed were upheld.
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