2017 (7) TMI 160 - AT - Central Excise

Clandestine removal - Impregnated, Coated and Laminated fabrics falling under Chapter 59 of the CETA - job-work - the demand in the present case has been made upon the note book seized from the security person Shri Shukla and chits seized from M/s SRS Synthetics - Held that - The facts of clearance of goods from M/s G.P Textiles to M/s SRS Synthetics are absolutely apparent. Even during the visit of the officers to the premises of M/s SRS Synthetics the consignment of laminated fabrics cleared clandestinely by M/s G. P Textiles was received by M/s SRS Synthetic. Also the same is corroborated by the transport memos and records as well as statements of transporters. The identity of SRS Synthetics as dummy concern floated by Shri Arun Poddar, Proprietor of M/s G.P textiles has been accepted by Shri Arun Poddar and their employee Shri Hemant Shah who was shown as proprietor of M/s SRS Synthetics - the Appellant has disputed the demand on ground of duplication of values or on the ground that the value of goods further cleared by M/s SRS Synthetics has also been included for the purpose of making demand. Thus though I hold that the charges against M/s G.P. Textiles stands proved but the adjudicating authority shall re-quantify the demands in as much as it relates to duplication of demand, inclusion of value of goods from M/s SRS Synthetics since the demand on same already stands confirmed from M/s G.P Textiles - demand upheld. Demand upon assumption that M/s Gaurishankar Textiles during the period January 2001 to July 2001 has supplied grey fabrics to them which was not accounted by them - Held that - possibility of clandestine clearance of laminated fabric processed out of such jobwork goods cannot be ruled out. It is especially in case when the evidence of clandestine clearances has been found from the factory and M/s SRS Synthetic. Thus looking to the overall modus operandi adopted by the Appellant for getting the fabric manufactured on jobwork without any document and clearances made through dummy concern M/s SRS Synthetics, it is clear that the Appellant has used such jobwork fabric in manufacture of laminated/ impregnated fabric and the same was removed without payment of duty. I therefore do not find any lacuna in the order of the adjudicating authority and hold that the demand is sustainable - demand upheld. Demand made on the basis of cash received by M/s Weave Tex which was not accounted by M/s G.P Textiles in their records - Held that - the Appellant has nowhere stated about disposal of fabrics received after jobwork from M/s Weave Tex. Since their account nowhere shows the process adopted by them in respect of such goods coupled with the fact that the fabric was used by them in manufacture of coated/ impregnated fabric, it is absolutely clear that the fabric was used in manufacture of their final product i.e coated/ impregnated fabric which was clandestinely removed. I therefore do not find any reason to interfere with the impugned order and hold that the demand is sustainable - Also the goods found short in the factory of M/s G.P. Textiles were due to the reason of clandestine removal and hence the demand is sustainable. For the same reason the goods seized from premises of M/s S.R.S Synthetics having been cleared from M/s G.P. Textiles are also liable to be confiscated - demand upheld - confiscation upheld. Penalty - Held that - since the duty demand is sustainable and the instant case is of clandestine removal against M/s G.P. Textiles, hence the penalty under Section 11AC is also applicable against them - As regard penalty under Rule 27 and Rule 25 I find that the same are also justified for the above reason. Further the goods seized from the premises of M/s SRS Synthetics being removed clandestinely and non duty paid are liable for confiscation and therefore I uphold the confiscation - penalty and confiscation upheld. As regard penalty upon M/s Weave Tex and its partner Shri Yogesh Kabaria, I find that they have contested the penalty mainly on the ground that the grey fabrics is exempted from duty whether the same is manufactured on own account or on jobwork - Held that - I find that the transactions between M/s Weave Tex and M/s G.P Textiles stands recorded in books and bank passbook of M/s Weave Tex. Further there is no ground to hold that the processed goods shall be used for manufacture of goods which shall be cleared without payment of duty. Also they have in no way handled the dutiable goods. They were not even involved in clandestine transaction in any way. In such case the ingredient of Section 26 does not get attracted to them. I therefore hold that they are not liable for penalty under Rule 209A of erstwhile Central Excise Rules.1944 or Rule 26 of Central Excise Rules,2002. I therefore set aside the penalty imposed upon M/s Weave Tex and its partner Shri Yogesh Kabaria. Appeal allowed - decided partly in favor of appellant.

Summary

Issues Involved:
1. Demand of duty and penalties against M/s G.P. Textiles.
2. Penalty against M/s Weave Tex Synthetics and its partner Shri Yogesh Kabaria.
3. Confiscation of goods from M/s SRS Synthetics.
4. Shortage of PVC Sheeting at M/s G.P. Textiles.

Issue-wise Detailed Analysis:

1. Demand of Duty and Penalties Against M/s G.P. Textiles:
The case revolves around the clandestine removal of goods by M/s G.P. Textiles without payment of duty. The demand of ?12,52,466/- was based on evidence such as notebooks and chits seized from M/s SRS Synthetics, corroborated by transport memos and statements from transporters. The identity of M/s SRS Synthetics as a dummy concern floated by Shri Arun Poddar was established. The adjudicating authority was directed to re-quantify the demands to eliminate any duplication.

For the demand of ?9,53,769/-, it was based on the assumption that M/s Gaurishankar Textiles supplied grey fabrics to M/s G.P. Textiles without accounting. The evidence included statements from M/s Gaurishankar Textiles' employees and dispatch registers. The Appellant's denial of jobwork during January to July 2001 was refuted by seized records and cash transaction details, leading to the conclusion of clandestine clearance.

The demand of ?21,73,754/- was based on cash transactions between M/s G.P. Textiles and M/s Weave Tex Synthetics. Statements from M/s Weave Tex's partner and seized documents confirmed the receipt of dyed yarn for jobwork and subsequent cash payments. The Appellant's argument that some cash receipts were from other parties was dismissed due to lack of evidence.

2. Penalty Against M/s Weave Tex Synthetics and Shri Yogesh Kabaria:
The penalties imposed on M/s Weave Tex Synthetics and its partner Shri Yogesh Kabaria were contested on the grounds that grey fabrics are exempt from duty and they had no malafide intention. The Tribunal found that the transactions were recorded in books and bank passbooks, and there was no evidence of their involvement in clandestine transactions. Hence, the penalties under Rule 26 of the Central Excise Rules, 2002, were set aside.

3. Confiscation of Goods from M/s SRS Synthetics:
The goods seized from M/s SRS Synthetics were found to be clandestinely cleared by M/s G.P. Textiles without payment of duty. The Tribunal upheld the confiscation of these goods as they were non-duty paid and removed clandestinely.

4. Shortage of PVC Sheeting at M/s G.P. Textiles:
The shortage of 6677 meters of PVC Sheeting valued at ?1,86,956/- was attributed to clandestine removal by M/s G.P. Textiles. The demand for this shortage was upheld by the Tribunal.

Conclusion:
The Tribunal upheld the demands and penalties against M/s G.P. Textiles, except for the re-quantification of demands to eliminate duplication. The penalties against M/s Weave Tex Synthetics and its partner Shri Yogesh Kabaria were set aside. The confiscation of goods from M/s SRS Synthetics and the demand for the shortage of PVC Sheeting were also upheld. Appeals of M/s Weave Tex and Shri Yogesh Kabaria were allowed, and other appeals were disposed of accordingly.

(Pronounced in court on 15/06/2017)