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TMI Blog2013 (11) TMI 1472X X X X Extracts X X X X X X X X Extracts X X X X ..... in order to encash the cenvat credit, M/S. CIPL had purchased the cheap goods from the market and exported the same under rebate claim or under draw back claim - they had over declared the value of their export consignment to the tune of 50 to 40 times - M/S. CIPL have committed a huge fraud by availing cenvat credit on the basis of bogus invoices without actually receiving any materials or have availed cenvat credit in respect of certain goods imported by them which were illicitly diverted and were never used for manufacture of the goods for export - substantial amount of fraudulently taken cenvat credit has been encashed in form of rebate claims in respect of the exports made under the rebate claims - A countrywide web of dummy companies has been woven for defrauding the Revenue and this case is only a tip of the iceberg of a much bigger cenvat credit fraud - The main Appellants and their Directors are not eligible for waiver from the requirement of pre-deposit – Pre-deposits were ordered to be submitted - Thus, goods are liable for confiscation and the Penalty also needs to be imposed - Partial stay granted. - E/1739,1740,1743,1741,1742, 1747,1745,1746,1763,1744 of 2011 - - - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt manner on the basis of raw material invoices issued by a number of persons, sought recovery of this cenvat credit from them along with interest and also imposition of penalty on them under Rule 15(2) of the Central Excise Rules, 2004 read with Section 11 AC of the Central Excise Act. 1944. Besides this, the show cause notice also sought imposition of penalty under Rule 26 of the Central excise Rules, 2002 on other noticees. The parties, who are alleged to have issued bogus invoices to M/s. CIPL and thereby enabled them to avail wrong cenvat credit and on whom, for this reason, penalty under Rule 26 of the Central Excise Rules was sought to be imposed by the show cause notice are M/s. Amit Sales Corporation, Ludhiana; M/s. Apex Corporation, Bhiwandi, Thane; M/s. Duggal Exports, Industrial Area, Baddi, M/s. Braun Textile Processors, 863, Industrial Area A, Ludhiana (BTP); M/s. Sejal Overseas, Surat; M/s. Kavita International Agencies, Ludhiana; M/s. Mansa Traders, Bhiwandi; M/s. Paro Textile, City Light, Surat; M/s. Pooja Fashions, Surat; M/s. Rameshwar Silk Mills, Surat, M/s. Shirdi Overseas Import and exports. 853, Industrial Area, Ludhiana; M/s. Silvasa Industries Pvt. Ltd., Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner, these appeals have been filed along with stay applications. 2. Heard both sides. 3. Shri Rupender Singh, Advocate, ld. Counsel for the appellants, pleaded that M/s. CIPL is a main appellant facing the cenvat credit demand, that M/s. CIPL had machines in their factory, which is clear from the facts narrated in the Panchnama which showed that 72 workers were present on the date of the officers' visit to the factory, that M/s. CIPL are engaged in the manufacture of acrylic and woollen yarn and various kinds of woollen garments, that substantial portion of the goods manufactured had been exported during the period of dispute, that the allegation of availing cenvat credit without receiving the goods and showing manufacture and clearance of the goods is without basis, that in this regard, the appellant had sought cross examination of certain witnesses which has not been allowed, that in some cases, where the cross examination was allowed, as against the Appellant's request for cross examination of specific individuals, their authorized representative like Chartered Accountant, etc. came for cross examination and, therefore, the appellant's counsel refused to cross examine su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) in the factory of the main appellant, M/s. CIPL except for machinery for manufacture of small quantity of ready made garment - 77 sewing machines, 46 socks making machines- 6 power press, 15 oven loaning machines, 13 folding machines etc. had no capacity to manufacture the quantity of finished goods claimed to have been manufactured and exported by them; (b) the job workers through whom the goods are claimed to have been got manufactured have either denied to have manufactured any goods or have absolutely no capacity to manufacture the goods claimed to have manufactured by them; (c) the factory was closed on 15.09.2004 and no stock was lying on the date of visit by the investigating officers; (d) various input suppliers from whom M/s CIPL claim to have received the inputs are either non-existent or have denied having supplied the goods; and (e) there was no electricity consumption in the factory of M/s. CIPL from 15.5.2004 and M/s. CIPL had absolutely no capacity to process the bulk of the raw materials received by them for manufacture of readymade garments and the processing claimed by them to have got done by the job workers has been denied by those job ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Textile and M/s. Saraswati Textile, Surat, all of which were found to be fictitious entities. (b) Cenvat credit of Rs.83,20,815/- has been availed by M/S. CIPL in respect of Polyester fabrics claimed to have been received from M/s. Mansa Traders, Bhiwandi with Shri K.K. Gupta as proprietor (para 1.108 of the impugned order) and M/s. Mansa Trader, Bhiwandi, in turn, claimed to have purchased the goods from M/s. Shiv Trading which on enquiry was found to be a fictitious firm. (c) Cenvat credit of Rs.54,85,095/- has been availed by M/s. CIPL on the basis of invoices regarding supply of fabrics issued by M/s. Apex Corporation, Bhiwandi with Shri K.K. Gupta as proprietor (para 1.108 to 1.118 of the impugned order) and M/s. Apex Corporation, Bhiwandi, in turn, claimed to have received those goods from M/s. Mukta Sales, Surat, M/s. Star Fabrics, Surat, M/s. Noble Traders, M/s. Sagar Textiles, Surat and all these companies on inquiry were found to be fictitious. In fact, in respect of M/s. Mukta Sales, Surat, M/s. Star Fabrics, M/s. Noble Traders and M/s. Sagar Fabrics, Surat, Surat-I Central Excise Commissionerate after conducting a comprehensive inquiry had issued an alert c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose partners is Shri S.K. Bhatia (para 1.58 1.59 of the impugned order). The cenvat credit of Rs.8,32,809/- has been taken by M/S. CIPL on the basis of invoices for knitted fabrics issued by M/s. Kavita International Agency, Ludhiana, a proprietorship concern of Shri S.K. Bhatia. The total number of invoices issued by M/s. Swastik Trading and M/s Kavita International to M/S. CIPL are 51. Inquiry with Shri Swastik Trading Company revealed that the knitted fabrics had been purchased by them from M/s Kavita International Agency, Ludhiana. However, M/s Kavita International did not have any machinery capable of undertaking the manufacturing on their own. They have shown the manufacturing through job worker-M/s Impact International Agency, Ludhiana but on inquiry with M/s Impact International Agency, Ludhiana, it was found that they had absolutely no manufacturing capacity and only on the instructions of the Directors of M/S. CIPL, they had only fabricated documents regarding manufacturing. (h) Cenvat credit of Rs.16,43,303/- (Rs.2,49,757 + Rs.13,93,550/-) has been taken by M/S. CIPL on the basis of the invoices issued by M/s Duggal Exports regarding supply of polyester spun yarn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nge Polymer, Navapur claimed to have converted the polyester chips into POY on job work basis for M/S. CIPL and sent the same to M/S. CIPL's premises through the transporter M/s. Shriram Transport, Surat, Dhulia, High Way Navapur, inquiry at the transporter's address revealed that there is no such transporter and as such, the transport company is a fictitious entity. Investigations at Surat also revealed that neither any polyester chips had been sent to the unit of M/s Orange Polymer at Surat nor any POY manufactured had been sent to M/S. CIPL. M/S. CIPL have claimed that POY received from M/s. Orange Polymer, Surat/Navapur was converted into stretched yarn through M/s. Pathak Fibres, Ludhiana, but inquiry at that place revealed that unit, during the period of dispute, was non-functional and that unit had absolutely no capacity to process the quantity of POY, which is claimed to have been converted into stretched yarn. (K) M/S. CIPL had imported 5,48,500/- kgs. of polyester chips during March,2006 and May/June, 2006 and had availed cenvat credit of Rs.52,06,597/- in respect of the same (para 1.234 (vi) of the impugned order). Though M/S. CTPL claimed to have got the same conve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed in para-7.1 (J) 7.1. (K) above. (d) Shri Rama Kumar, Proprietor of M/s. KDH Knit Fab and partner of M/s. K.K. Gulati Hosiery in his statement dated 24.05.2007 (para 4.12 4.12.1 of the impugned order) has stated that they have not done any job work for M/s. CIIPL and the transaction mode with M/s.CIPL were only paper transactions done for 2% commission. (e) Shri Raghubir Singh, Proprietor, M/s. R. Knit Fab and authorized signatory of M/s. Perfect Designer in his statement dated 25.5.2007 has stated that his both the firms were engaged in manufacture of knitted fabrics and that during period from October, 2006 to Jan. 2007 his firm had done job work for M/s. CIPL. However, their claim of job work for M/s.CIPL is not backed by their electricity consumption during this period which was found too low (para 4.13 to 4.13.3 of the impugned order). 8. When the inquiry at the supplier's end shows that there was no supply and only cenvatable invoices had been issued, the burden would be on M/s CIPL who had taken cenvat credit on the basis of such invoices, to prove that the goods covered under those invoices had actually been received. No evidence to discharge this burden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .6,65,04,716/- confirmed against them. The facts in the appeal No. E/1953/2012 of M/s Shri Sai Garments and in Appeal No. E/1899/2009 of M/s Shirdi show that on the basis of bogus invoices issued by M/s Shri Sai Garments, cenvat credit of about Rs.5.5 crores has been taken by M/s Shirdi. In the present case there are invoices issued by M/s Shirdi issued to M/s CIPL passing on credit of Rs.2,03,558/- which obviously would be fraudulently taken credit. 10. There is evidence on record showing that in order to encash the cenvat credit, M/S. CIPL had purchased the cheap goods from the market and exported the same under rebate claim or under draw back claim. The Commissioner's findings in para 4.51 of the order-in-original discuss the enquiry conducted through the Directorate General of Revenue Intelligence, which indicates that they had over declared the value of their export consignment to the tune of 50 to 40 times. In respect of the goods claimed to have been exported to Russia to M/s. 000 OLROS Trading, Moscow and M/s. 000 Bunix Trading, Moscow, inquiry in Russia revealed that there were no imports by these consignees. 11. The above evidence, most of which is of clinching nature ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Apex Corporation, for fabricating documents, unfortunately during the period of dispute there were no provisions of imposition of penalty on such persons and sub-rule (2) of Rule 26 for imposition of penalty on such persons and such provision was introduced w.e.f. 1.3.2007 only. 12.3 As regards Shri D.P. Singh, Accountant, M/s. CIPL and Shri Kuldeep Singh, P.A. to Director, the evidence on record prima facie does not indicate any contravention on their part so as to attract the penal provisions under Rule 26 of the Central Excise Rules, 2002 in respect of them. 12.4 M/s. Cannon Industries Pvt. Ltd. (CIPL) are, therefore, directed to deposit an amount of Rupees 5 Crores (Rupees Five crores) towards cenvat credit demand and interest thereon and 50% of the penalty imposed on them within a period of eight weeks from the date of this order. Besides this, the pending rebate claims of Rs.1,27,94,964/- shall remain withheld till the disposal of their appeal. Shri R. K. Goyal and Ms. Geeta Goyal, who prima facie appear to have dealt with the excisable goods which they knew were liable for confiscation and for which they appear to be liable for penalty under Rule 26 of the Central Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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