2017 (11) TMI 50 - AT - Customs

100% EOU - diversion of duty free goods imported by it, into the local market - SCN was issued on 16.12.2004 making allegation of involvement of appellants in the aforesaid activities. They failed to defend on the allegations leading any cogent or credible evidence to the contrary. Therefore adjudication resulted in duty demand of ₹ 75,37,420/- for violation of condition of import. Penal consequence also arose in adjudication. Held that - Investigation result brought out the premeditated design of Pinkesh Jain in connivance with Rakesh Jain, Dinesh Chunilal Parmar and Mangilal Jain to defraud the Government. Appellant firm misused the exemption notification meant for EOU and defeated the requirement of export of finished product from India. Although appellant firm was required to use the imported duty free goods cleared by it, in its EOU for manufacture of finished product and export the same, it diverted such goods to the local market and caused serious prejudice to Revenue. Penal provisions are enacted to suppress the evils of defrauding Revenue which is an anti-social activity adversely affecting the public revenue, earning of foreign exchange, economic and financial stability of the economy. Therefore such provisions are construed in a manner to suppress the mischief and to promote the object of the statute, preventing evasion, foiling artful circumvention thereof. Thus construed, the term fraud within the meaning of these penal provisions is wide enough to take into its fold any one or series of acts committed. Such act or acts when demonstrate to be reasonably proximate to the diversion of duty free imported goods fraudulently they should face adverse consequence of law. In view of the cogent and credible evidence came to record proving malafides of appellants as discussed above, result of investigation brought out their hand in glove to cause subterfuge to Revenue as well as adjudication findings remained unchallenged by them leading any evidence to the contrary, appellants fails to succeed in their appeal having caused detriment to the interest of public revenue. They could not rule out their ill will. Pre-ponderance of probability came to the rescue of Revenue lending credence to its case. Evidence gathered by Revenue provided reasonable basis for adjudication which could not be demolished by appellants by any means. They failed to lead any cogent evidence to rule out their role in commitment of the offence alleged when they failed to come out with clean hands, no immunity from penalty can be granted to them. Therefore irresistible conclusions that can be drawn is that Revenue having proved its case very successfully bringing out malafides of the appellants and their willful commitment of breach of law. Appeal dismissed - decided against appellant.

Issues Involved:
1. Diversion of duty-free imported goods into the local market.
2. Manipulation and fabrication of records.
3. Admission and corroboration of illegal activities by partners and associates.
4. Recovery of documents and evidence supporting the diversion.
5. Examination and cross-examination of witnesses.
6. Legal consequences and penalties for fraudulent activities.

Detailed Analysis:

1. Diversion of Duty-Free Imported Goods into the Local Market:
Revenue discovered that M/s Umaji Overseas, a 100% EOU, was diverting duty-free imported goods into the local market. A search was conducted at various premises, including those of the CHA, M/s Concord, and its transporter M/s Prathik Cargo. The physical inventory revealed a stock discrepancy between the physical stock and the stock recorded in the RG-16 Register.

2. Manipulation and Fabrication of Records:
Sri Pinkesh Jain, a partner of M/s Umaji Overseas, admitted to selling imported goods in the local market with the help of yarn brokers and manipulating factory records to cover up the diversion. The RG-16 Registers were fabricated, and entries were manipulated under his direction. The firm recorded disproportionate consumption and wastage of yarn to conceal the diversion.

3. Admission and Corroboration of Illegal Activities by Partners and Associates:
Pinkesh Jain did not retract his admissions, which were corroborated by Rakesh Parasmal Jain, the other partner, and Dinesh Chunilal Parmar, the supervisor. Statements from various individuals, including the proprietor of CHA M/s Concord and its employees, confirmed the diversion of goods to private godowns instead of the factory.

4. Recovery of Documents and Evidence Supporting the Diversion:
Documents recovered during the search, including challans from the transporter, indicated that the imported goods were diverted to private godowns. Statements from the drivers and the owners of the godowns confirmed the storage and subsequent sale of the goods in the local market.

5. Examination and Cross-Examination of Witnesses:
The appellants claimed that they were not allowed to cross-examine witnesses. However, the adjudicating authority conducted an elaborate examination of material facts and evidence, both oral and documentary, and concluded that the appellants' modus operandi proved their oblique motive and undue enrichment at the cost of Revenue.

6. Legal Consequences and Penalties for Fraudulent Activities:
The adjudication resulted in a duty demand of ?75,37,420/- for violation of import conditions, with corresponding penalties on the appellants. The investigation revealed a premeditated design by Pinkesh Jain and associates to defraud the Government. The firm misused the exemption notification meant for EOU and diverted imported goods to the local market, causing significant revenue loss.

Judgment:
The Tribunal upheld the adjudication findings, stating that the appellants failed to provide any credible evidence to counter the allegations. The evidence gathered by Revenue provided a reasonable basis for adjudication, and the appellants could not rule out their ill will or malafides. The appeals were dismissed, and the penalties imposed were upheld.

Conclusion:
The judgment emphasized the seriousness of fraud against Revenue and the need for stringent measures to prevent deceptive practices. The Tribunal concluded that the appellants' fraudulent activities and breach of law were proven beyond doubt, leading to the dismissal of their appeals and the upholding of penalties.

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