2017 (4) TMI 737 - AT - Central Excise

SSI exemption - dummy units - Acta Exteriora Indicant Secreta Interiora - clearances of corrugated boxes - alleged clearances through seven alleged dummy units created by ACPL, apparently with intention to evade payment of duty - intentional omission and suppression to evade discharge of Central Excise duty - the appellant has admitted and accepted this modus operandi in respect of one such dummy unit, namely, M/s. Appolo Packers, and have conceded that value of clearances of ₹ 28,45,027/- alleged in respect of that unit should be clubbed with that of ACPL. However, in respect of the remaining 6 alleged dummy units, ACPL has contended that they have done only job work for these units, that the said units are independent and distinct and that they had undertaken activity of stitching in their respective premises. Held that - the contentions of the appellant are but diversionary, albeit futile, tactics to draw attention to perceived deficiencies in investigation and adjudication. But nothing has been demonstrated by the appellant to show that they were pure as the driven snow or that they had no unaccounted clearances. On the other hand, investigation has successfully unearthed a well planned subterfuge of deceit and deception planned and executed by the manufacturer appellant with the nefarious intent of evading central excise duty that was enjoined of them to discharge, adversely affecting the exchequer. The maxim Acta Exteriora Indicant Secreta Interiora (outward acts show the secret intentions) is thus verily applicable to the appellants. Appeal dismissed - decided against appellant.

Issues Involved:
1. Admissibility of duty liability for the years 2001-02, 2002-03, and 2003-04.
2. Clubbing of clearances from alleged "dummy" units.
3. Eligibility for SSI exemption for the year 2003-04.
4. Imposition of penalties under Section 11AC of the Central Excise Act, 1944, and Rule 26 of the Central Excise Rules, 2002.

Detailed Analysis:

1. Admissibility of Duty Liability for the Years 2001-02, 2002-03, and 2003-04:

For the year 2001-02, the appellant admitted to a duty liability of ?9,32,882/- against the demanded ?9,85,606/-, contending that clearances of ?2,56,762/- from 2000-01 were wrongly included. The tribunal found no evidence supporting this contention and upheld the duty demand of ?9,85,606/-, noting that ACPL had a habit of suppressing clearances, indicating intentional evasion of duty.

For the year 2002-03, the appellant admitted to the duty liability for clearances of ?28,45,027/- from M/s. Apollo Packers but disputed the clubbing of clearances from six other units, claiming they only performed job work. The tribunal rejected this argument, finding that these units were "dummy" units created to evade duty, thus upholding the duty demand for 2002-03.

For the year 2003-04, the appellant admitted duty liability for duplicated invoices amounting to ?16,16,181/- but disputed the denial of SSI exemption. The tribunal upheld the denial of SSI exemption, confirming the duty demand of ?14,71,729/-, as the turnover for 2002-03 exceeded the ?3 crore limit.

2. Clubbing of Clearances from Alleged "Dummy" Units:

The tribunal found that the seven units were "dummy" units created by ACPL to evade excise duty. The investigation revealed that the purported proprietors of these units were either relatives or individuals with no capacity to run such businesses. The tribunal noted that these units were set up and closed within the same financial year and that the purchase invoices for stitching machines were fictitious. The tribunal concluded that these units were created on paper to spread out ACPL's actual production and clearances, thus evading duty.

3. Eligibility for SSI Exemption for the Year 2003-04:

The tribunal held that ACPL was not eligible for SSI exemption in 2003-04 as the total clearances for 2002-03, including those from the "dummy" units, exceeded the ?3 crore limit. This disqualification for SSI exemption led to the confirmation of the duty demand for 2003-04.

4. Imposition of Penalties:

The tribunal upheld the imposition of penalties under Section 11AC and Rule 26 of the Central Excise Rules, 2002. The tribunal found that the appellants, particularly Shri Umed Raj Jain and Shri Ajith Raj Jain, were the masterminds behind the creation of the "dummy" units and the evasion of duty. The penalties imposed on these individuals were justified as they had full knowledge of the evasion scheme.

For the other appellants, the tribunal found that they knowingly allowed their names to be used for the "dummy" units and were aware of the evasion scheme. The penalties imposed on them were also upheld.

For Smt. Lata Jain, the tribunal found that while she was not a key player, she could not claim complete ignorance. The penalty imposed on her was reduced to ?10,00,000/- from ?45,00,000/-.

Conclusion:

The appeals filed by the main appellant, M/s. Appollo Corrugators Pvt. Ltd., and other appellants were largely dismissed, with the exception of a partial allowance for Smt. Lata Jain. The tribunal upheld the duty demands and penalties, confirming the findings of the adjudicating authority regarding the creation of "dummy" units and the evasion of central excise duty.

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