2015 (1) TMI 680 - AT - Central Excise

Clandestine clearance of goods - Bogus invoices - Goods cleared but not exported - Held that - The fact that M/s DFL did not even make an attempt to get the copies of documents submitted by them (as proof of export) authenticated from Customs (when they could not produce the originals thereof) is ample proof that the said copies were not of genuine documents. In these circumstances, M/s DFL clearly attract penal provisions as their action of clearance of goods duty free unauthorisedly and consigning them to Surat to M/s Super Fabrics, made them liable to confiscation, more gravely so in the given circumstances when they also failed to produce the proof of export. Indeed as has been brought out, wilful mis -statement/ suppression of facts with a view to hoodwicking Customs and evade duty are writ large in this case. That M/s DFL claimed to have exported the impugned goods without having done so itself is a huge misstatement to evade duty. Thus there is no infirmity in the impugned order as regard imposing penalty on M/s DFL is concerned. It may incidentally be mentioned though that for recovery of duty on the impugned goods which were cleared without payment of duty but not exported, there is no time-bar as such clearances are covered by the bond which was executed by M/s DFL under which also such duty is recoverable. M/s DFL is a legal person, it is evident from the foregoing that this entire operation was done with the knowledge and connivance of Shri Vijay Vishwaroop , Director . He has not denied this fact at all and has only said that the goods were exported through merchant exporter M/s Super Fabrics. He has admitted that the impugned goods were covered under the B-17 bond executed by M/s DFL, they were cleared without payment of duty under ARE-1s not for transport directly to the port for export as is the requirement, but for transport to Surat for M/s Super Fabrics and M/s DFL/ Shri Vijay Vishwaroop had no reason whatsoever to believe that M/s Super Fabrics had any locus standi to source/receive goods duty free. He allowed the goods to be cleared on ARE-1s of Surat while under ARE-1s the goods have to be directly sent to port. He was aware that S/ Bs were got processed about five months after the date of ARE-1s (i.e. the date of clearance of goods duty free) and he has admitted that he does not have the valid proof of export for the impugned goods. He has not questioned (and rightly so) the documentary evidence of non-export in the form of Export General Manifests which were part of the RUDs (though as made clear earlier, the onus was on the appellants to produce valid proof of export and not on the department to prove that the goods were not exported). Thus while Shri Vishwaroop s involvement and abetment is clearly evident. His submission that the valid proof of export may be with M/s Super Fabrics is also completely untenable, because, as already brought out, M/s Super Fabrics were not, nor did they qualify to be, merchant exporters and Shri Vishwaroop had no basis/ reason to believe them to be so. Thus penalty imposed upon him in the impugned order is unexceptionable keeping in view the gravity and nature of this blatant fraud. Shri Suresh Gupta s (sic) statement is ex- culpatory . No direct evidence of his involvement in this fraud is unearthed. He was a nobody in M/s DFL at the time of clearances of impugned goods under ARE-1s. He has been implicated by Shri Sheikh in his statement but Shri Sheikh s statement cannot be relied upon to hold Shri Gupta guilty as he was not allowed the opportunity to cross-examine him. ( i.e . Mr. Sheikh) Merely because he continued to be an authorised signatory for one of the bank accounts of M/s DFL at Surat , even if true, cannot be stretched to be sufficient evidence of his involvement in the (improper) duty free clearances of the impugned goods under the said ARE-1s and their subsequent non-export. Therefore, we are of the view that sufficient ground/evidence to penalise Shri Suresh Gupta do not exist. Therefore penalty on him cannot be sustained. - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Duty demand and penalties imposed on M/s Dewas Fabrics Ltd. (DFL) and individuals.
2. Validity of proof of export submitted by M/s DFL.
3. Right to cross-examination.
4. Liability and involvement of individuals (Shri Vijay Vishwaroop and Shri Suresh Sharma).
5. Applicability of Notification No.20/2002-CE for duty benefit.

Detailed Analysis:

Duty Demand and Penalties:
The appeals were filed against an order confirming a duty demand of Rs. 76,27,365/- along with interest and an equal penalty against M/s DFL. Additionally, a penalty of Rs. 10 lakhs each was imposed on M/s Super Fabrics, Shri Suresh Sharma, Shri Vijay Vishwaroop, and Mohd. Shoaib Sheikh. The current appeals are by M/s DFL, Shri Suresh Sharma, and Shri Vijay Vishwaroop, and do not affect the penalties on M/s Super Fabrics and Mohd. Shoaib Sheikh.

Validity of Proof of Export:
M/s DFL, a 100% EOU, claimed to have exported polyester dyed and grey fabrics. However, investigations revealed discrepancies such as non-matching seals on shipping documents and the absence of goods at the port. The shipping agent and CHA denied handling the goods or documents. M/s DFL failed to submit original proof of export, relying instead on uncertified copies. The tribunal emphasized that the onus to provide valid proof of export lies with M/s DFL, which they failed to do, making them liable for the duty demand.

Right to Cross-Examination:
The appellants argued that they were not allowed to cross-examine various individuals, making the statements inadmissible. The tribunal acknowledged the jurisprudence that the right to cross-examination is crucial, citing relevant case laws. However, it concluded that the inability to produce valid proof of export itself justified the duty demand, irrespective of the cross-examination issue.

Liability and Involvement of Individuals:
- Shri Vijay Vishwaroop: Admitted the lack of original proof of export and other critical details. He was found to have knowingly allowed the duty-free clearance of goods to M/s Super Fabrics, which had no authorization. His involvement in the fraudulent activity was evident, justifying the penalty imposed on him.
- Shri Suresh Sharma: His statement was exculpatory, and no direct evidence linked him to the fraud. The tribunal noted that he was not in a position of authority at the time of the clearances and was not allowed to cross-examine his accuser. Consequently, the penalty on him was set aside.

Applicability of Notification No.20/2002-CE:
The appellants claimed the benefit of Notification No.20/2002-CE, which applies to domestic clearances of EOUs using indigenous materials. The tribunal rejected this claim, stating that the clearances were made under the pretext of export and did not comply with the relevant provisions of the Export and Import Policy.

Conclusion:
The appeals by M/s DFL and Shri Vijay Vishwaroop were rejected, upholding the duty demand and penalties. However, the appeal by Shri Suresh Sharma was allowed, and the penalty imposed on him was set aside. The tribunal emphasized the importance of providing valid proof of export and the legal consequences of failing to do so.