2024 (10) TMI 9 - HC - Central Excise

Rejection of rebate claim of the petitioners against the export of goods - penalty imposed u/s 11AC of the Central Excise Act, 1944 read with Rules 25 and 27 of the Central Excise Rules, 2002 - limitation for issuance of the SCN - HELD THAT - It is not in dispute that during the course of investigation it was found that the petitioners and other co-noticees have filed a rebate claim with forged documents like shipping bills and form ARE-I which is a mandatory requirement to claim the rebate claim - it is mandatory for the claimant to file original copy of ARE-I. The Form ARE-I is the export document which is prepared in quintuplicate five copies which are similar to erstwhile Form AR-4. Such Forms bear running Serial Numbers beginning from the first day of the financial year. From the prescribed procedure for claim of the rebate claim for the goods exported for the duty paid goods exported, it is apparent that the petitioners and the other co-noticees have not complied with the same. On the contrary, they have committed fraud and forged the Forms which is found during the course of investigation as per the concurrent findings of fact arrived at by the three Authorities below. In such circumstances it is opined that the respondent-Authorities have rightly rejected the rebate claim of the petitioner and no interference is called for. Levy of penalty - HELD THAT - In the show-cause notice as contemplated under Section 11A of the Act, time period is prescribed as five years from the date of knowledge. However, in the facts of the case, as the original documents were lying with the Court of Sessions and the reminders were sent which were provided by the respondent-Authorities in 2008 to the Police Authorities for investigation and the same were not made available till 2014, show-cause notice was thereafter issued in 2014 cannot be said to be beyond the period of limitation. However, the petitioner has never raised the issue of limitation before the Adjudicating Authority nor the Adjudicating Authority have therefore had any occasion to deal with such a contention raised by the petitioners. However, as the petitioners have raised such contentions before the Revisional Authority and before this Court, as the question of limitation is mixed question of facts and law, we have permitted the petitioners to raise such contention and is accordingly, dealt with. Thus, no interference is called for in the impugned orders rejecting the rebate claim and levy of penalty upon the petitioners while exercising the extra-ordinary jurisdiction under Article 227 of the Constitution of India and the petitions therefore being devoid of any merit are accordingly dismissed.

Summary

Issues Involved:

1. Rejection of rebate claims.
2. Allegations of document tampering and forgery.
3. Imposition of penalties under Section 11AC of the Central Excise Act, 1944, and Rules 25 and 27 of the Central Excise Rules, 2002.
4. Limitation period for issuing the show-cause notice.
5. Applicability of penalties to merchant exporters.

Issue-wise Detailed Analysis:

1. Rejection of Rebate Claims:

The petitioners challenged the rejection of their rebate claims under Article 227 of the Constitution of India. They had submitted four rebate claims totaling Rs. 9,86,303/-. The investigation revealed that the petitioners and co-accused tampered with documents like shipping bills and created forged statutory documents like ARE-I Forms. Statements from various individuals confirmed the tampering and forgery. The Assistant Commissioner of Customs, Nhava Sheva, confirmed that manual corrections on EDI shipping bills are not allowed. The Adjudicating Authority rejected the rebate claims and imposed penalties, which were upheld by the Appellate Authority and Revisional Authority. The Revisional Authority found that the petitioners had tampered with statutory documents to fraudulently avail of the rebate. The High Court concluded that the petitioners did not comply with the prescribed procedure for claiming rebates and committed fraud, justifying the rejection of their rebate claims.

2. Allegations of Document Tampering and Forgery:

The investigation revealed that the petitioners tampered with ARE-I Forms and shipping bills to claim rebates fraudulently. Statements from individuals involved confirmed the tampering and forgery. The Assistant Commissioner of Customs, Nhava Sheva, and two Superintendents of Customs confirmed that their signatures on the shipping bills were forged. The Revisional Authority found that the petitioners, in connivance with their legal consultant and agents, tampered with statutory documents to fraudulently claim rebates. The High Court upheld the findings of the authorities, concluding that the petitioners committed fraud and forgery, justifying the rejection of their rebate claims.

3. Imposition of Penalties Under Section 11AC of the Central Excise Act, 1944, and Rules 25 and 27 of the Central Excise Rules, 2002:

The Adjudicating Authority imposed penalties equivalent to the total amount of the four rebate claims on the petitioners and personal penalties on the proprietors and partners. The petitioners argued that the penalties were not applicable to merchant exporters. The Appellate Authority and Revisional Authority upheld the penalties, finding that the petitioners tampered with statutory documents to fraudulently claim rebates. The High Court concluded that the penalties were justified based on the petitioners' fraudulent actions and rejected their contention that the penalties were not applicable to merchant exporters.

4. Limitation Period for Issuing the Show-Cause Notice:

The petitioners argued that the show-cause notice issued in 2014 was beyond the limitation period prescribed under Section 11AC of the Act. The Revisional Authority and High Court found that the original documents were with the Court of Sessions, and the respondent-authorities sent reminders for their return. The show-cause notice was issued after the documents were made available in 2014. The High Court concluded that the show-cause notice was not beyond the limitation period, considering the circumstances.

5. Applicability of Penalties to Merchant Exporters:

The petitioners argued that the penalties under Section 11AC of the Act and Rules 25 and 27 of the Rules were not applicable to merchant exporters. The Appellate Authority and Revisional Authority found that the petitioners tampered with statutory documents to fraudulently claim rebates. The High Court concluded that the penalties were justified based on the petitioners' fraudulent actions and rejected their contention that the penalties were not applicable to merchant exporters.

Conclusion:

The High Court dismissed the petitions, upholding the rejection of rebate claims and imposition of penalties. The Court found that the petitioners committed fraud and forgery, justifying the rejection of their rebate claims and imposition of penalties. The show-cause notice was not beyond the limitation period, and the penalties were applicable to merchant exporters based on their fraudulent actions.