2019 (3) TMI 972 - AT - Central Excise

Clandestine removal - leather footwear - bogus transactions - admissibility on the statements - extended period of limitation - cum-duty benefit - penalties - Held that - The real actors behind the both the bogus co-operative societies were Shri Ashok Mane and Shri Ramchandra Mane the Directors of SRSPL. Further the fact of supply of goods by Appellant to various shop owners in the name and against the bills of Cooperative Societies has been admitted by various shop owners in their statements - The issue in respect of admissibility of the statements recorded under Section 14 of Central Excise Act, 1944 is well settled and the depositions made in the statements cannot be discarded - The shop owners have admitted receiving the goods from Appellant and invoice from the society, and such admission is itself enough to hold that the goods were manufactured and cleared by the appellants clandestinely. Once revenue is able to make allegation of clandestine clearance on the basis of records and circumstantial evidence such as statements of the person concerned, it has discharged its burden and it is for the Appellant to show that charge of clandestine clearance is not true in their case. From the records of cross examination it is quite evident that the shoes were supplied to these shop owners through one Mr Raju and were the goods supplied were from the M/s Start Rite Shoes. Most of the dealers have even during the cross examination before the adjudicating authority, with the pre43 ponderence of probability admitted that shoes received by them were manufactured and cleared by M/s Start Rite Shoes against the invoices issued by the cooperative society. Extended period of limitation - Held that - Since the issue is in respect of duty evasion by committing fraud etc., the extended period of limitation under proviso to Section 11A(1) will be applicable in the present case. Cum duty value benefit - Held that - There are no merits in that submission as the issue is one involving fraud and clandestine clearance. Penalties - Held that - The penalty imposed by the adjudicating authority under rule 173Q of the erstwhile Central Excise Rules, 1944 is upheld - Shri Ashok Mane was responsible for causing the duty evasion by resorting to the fraud through fictitious cooperative societies and the penalty on him is upheld. Appeal dismissed - decided against appellant.

Issues Involved:
1. Confirmation of Central Excise Duty demand.
2. Imposition of penalties on Start Rite Shoes Pvt. Ltd. and its Director.
3. Validity of documents and evidence used for demand.
4. Applicability of extended period of limitation.
5. Quantification of duty.
6. Applicability of cum-duty value benefit.
7. Imposition of penalties under Section 132 of the Finance Act, 2001.

Issue-wise Detailed Analysis:

1. Confirmation of Central Excise Duty Demand:
The Commissioner confirmed the demand of Central Excise Duty amounting to ?66,52,254/- against Start Rite Shoes Pvt. Ltd. for the period January 1993 to October 1996. The demand was based on evidence such as 26 statements, private records surrendered to sales tax authorities, statutory records, and records from two co-operative societies. The Commissioner held that the societies were sham entities used for issuing sale bills without actual manufacturing or supplying goods. The sales shown from these societies were clubbed with the clearances effected from the appellant company.

2. Imposition of Penalties:
The Commissioner imposed a penalty of ?16,00,000/- on Start Rite Shoes Pvt. Ltd. under Rule 173Q of the Central Excise Rules, 1944, and ?4,00,000/- on Shri Ashok Ramchandra Mane, Director, under Rule 209 of the Central Excise Rules, 1944. The penalties were based on the findings that the company and its director were involved in evading Central Excise Duty by using fictitious societies.

3. Validity of Documents and Evidence Used for Demand:
The appellants argued that the demand was based on assumptions, presumptions, and unauthenticated documents. The Commissioner, however, justified the reliance on these documents, stating that the records were recovered from the premises of Start Rite Shoes Pvt. Ltd. and were considered secret records maintained by the company. The Tribunal upheld the admissibility of these documents under Sections 36A and 36B of the Central Excise Act, 1944, and previous judicial precedents.

4. Applicability of Extended Period of Limitation:
The Tribunal held that the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944, was applicable in this case due to the fraudulent activities and evasion of duty by the appellants.

5. Quantification of Duty:
The appellants contested the quantification of duty. However, the Tribunal found that the Commissioner had clearly stated the principles for quantification in his order and upheld the demand as quantified by the Commissioner.

6. Applicability of Cum-Duty Value Benefit:
The Tribunal rejected the appellants' claim for cum-duty value benefit, citing that the issue involved fraud and clandestine clearance. It referred to previous judicial decisions where cum-duty benefit was not allowed in cases of tax evasion.

7. Imposition of Penalties under Section 132 of the Finance Act, 2001:
The appellants argued that no penalty was imposable under Section 132 of the Finance Act, 2001. The Tribunal rejected this argument, referring to the Supreme Court's decision in Chandpaklal Ramanlal Shah Vs Reliance Industries, which upheld the imposition of penalties even after the omission of procedural rules.

Conclusion:
The Tribunal rejected the appeals filed by the appellants, upholding the demand of Central Excise Duty, the imposition of penalties, and the validity of the evidence used. The Tribunal also upheld the applicability of the extended period of limitation and rejected the claim for cum-duty value benefit. The penalties imposed under Section 132 of the Finance Act, 2001, were also upheld.

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