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TMI Blog2013 (7) TMI 1041X X X X Extracts X X X X X X X X Extracts X X X X ..... Order-in-Original No. 171/Commr. (AH)/05, while Appellant No. 10 is connected with Order-in-Original No. 170/Commr. (AH)/05. In addition miscellaneous applications have also been filed by M/s. S.R. Industries and cross-objections by the Commissioner of Central Excise, Chandigarh and are allowed. 2. In respect of 1st appellant, in four cases duty as also penalty have been ordered while in remaining two only penalty has been ordered in the impugned orders. Appeals are for duty and penalty both. In respect of remaining 9 appellants, issue is relating to penalty only. The details in respect of all the appellants are tabulated as under :- Appellant Order-in-Original No. Appeal No. Duty Penalty M/s. S.R. Industries 167/Commr(AH)/05 E/260/2006 30,18,490 30,00,000 + 17,00,596 M/s. S.R. Industries 168/Commr(AH)/05 E/256/2006 69,35,450 1,00,00,000 M/s. S.R. Industries 169/Commr(AH)/05 E/258/2006 55,64,276 55,00,000 + 29,09,573 M/s. S.R. Industries 170/Commr(AH)/05 E/262/2006 -- 9,00,000 M/s. S.R. Industries 171/Commr(AH)/05 E/254/2006 1,42,67,935 1,50,00,000 M/s. S.R. Industries 17/Commr(AH)/06 E/110/2007 35,00,000 Shri R.C. Mahajan 167/Commr(AH) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tex Ltd., Halol; M/s. Parshava Textiles Pvt. Ltd., Surat; M/s. Sarla Polyester Ltd. Silvasa; and M/s. Baroda textiles Ltd., Mumbai. The PTY/PFY was procured duty free (facility available to 100% EOUs, in this case appellant No. 1) and such duty free PTY/PFY instead of being used in the manufacturing process in the unit of appellant No. 1 was diverted from the earlier mentioned six units in Gujarat/Silvasa directly to Bhiwandi market, with the help of brokers. Further a word "Limited" appearing at the end of the appellant No. 1's name) was floated on paper by appellant No. 1 and its employees and few bank accounts opened under the said name and fake addresses at the instance of management; that the sale proceeds received from the diversion/sale of PTY/PFY in the Bhiwandi market was received by appellant No. 1 through brokers (which includes Appellant Nos. 4 and 5) and deposited in these accounts, thereafter payments were shown to be made to the six earlier mentioned Gujarat/Silvasa based EOU's through demand drafts issued from such accounts. Gujarat/Silvasa based supplier EOUs (other Parshava Textile Ltd.) were generally aware of the fact that goods are not going to the unit of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. I find that each noticee desperately attempted to ward off the blame by claiming that they were unaware of the circumstances of the case. For example, SRIL attempted to deflect culpability and duty liability by stating that the fact of forged certificates/mouds operandi was well within the knowledge of departmental officers and thus attempted to wriggle out of the case on technical grounds of limitation. SPL. Silvassa attempted to deflect responsibility on the ground that they were unaware that SRIL did not have the machinery to utilize PTY/PFY, that they were unaware that CT 3 certificates were forged, that they dispatched the PTY/PFY to transporters nominated by SRIL, that as far as they were concerned, the transaction was complete from their end once they not only received the payment for the goods but also the duly endorsed re-warehousing certificates from SRIL, Shri R.C. Mahajan, MD, SRIL attempted to deflect responsibility by stating that the CT3 certificate was obtained by his employees behind his back, that the bank accounts were also opened by his employees without his knowledge, that he was unaware of the entire exercise, the employees pleaded that their employment was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices out of India into hundred percent. export oriented undertaking (hereinafter referred to as the user industry); or"; (b) ………… (c) ………… from the whole of, (i) the duty of excise leviable thereon under section 3 of the Central Excises and Salt Act, 1944 (1 of 1944), and (ii) the additional duty of excise leviable under sub-section (1) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), subject to the following conditions, namely :- (1) the user industry, in the case of, (i) hundred percent export oriented undertaking has been approved by the Board of Approval for hundred percent export oriented undertaking (hereinafter referred to as the said Board) appointed by the Central Government in exercise of the powers conferred by section 14 of the Industries (Development and Regulation) Act, 1951 (65 of 1951) and the rules made under that Act; (ii) ……………………… (iii) ……………………… (b) the user industry brings the excisable goods directly from the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as such may be permitted to remove ...................(quantity) of ..................(excisable goods) from the unit at..........................to their undetaking ........................at............................... (3) That the specimen signatures of his/their authorised agent namely Shri .................................are furnished herebelow duly attested : Specimen Signatures of the owner or his authorised agent. Sd./- Attested Central Excise Officer-in-charge of the 100% Export-oriented Undertaking/ Electronic Hardwarre Technology Park (EHTP) unit/software Technology Parks (STP) unit. Condition (g) in the above notification is to be followed by user industry i.e. Appellant No. 1 in the present case. There is no dispute that in pursuance of the said condition Appellant No. 1 obtained CT-3 certificates and obtained duty free goods under Chapter X procedure of the Central Excise Rules, 1944. Chapter X covers Rules 192 to 196B. Rule 196 of the said Rules/Chapter is as under : "196. Duty leviable on excisable goods not duly accounted for. - (1) If any excisable goods obtained under rule 192 are not duly accounted for as having been used for the purpose and in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are expected to follow procedure as prescribed under the said condition. We find that the procedure prescribed was followed by supplier six EOUs. AR-3A is initially issued at the supplier EOUs and is finally required to be signed by departmental officer to certify that goods have arrived in user EOUs. AR-3A submitted by six EOUs were returned to the six supplier units by appellant No. 1. The AR-3A had signature of the Central Excise officer certifying that goods have been rewarehoused. Thus supplier unit had followed the procedure. What appellant No. 1 did was forged the signature of Central Excise officer on the AR-3As. Investigation does not indicate that supplier units had any idea about the forged signature. In any case appellant No. 1 has done the forgery and therefore cannot claim benefit of the forgery done by him. Moreover, duty liability as per condition (g) does not get absolved by condition (f). We therefore reject the contention of learned advocate and hold that duty liability is of appellant No. 1. 9. The second contention of the ld. Advocate for appellant No. 1 is relating to quantum of duty demanded. Revenue has demanded duty as per proviso to Section 3(1) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such supplies are considered as deemed export for supplier unit under Export Import Policy. The proviso to Section 3(1) provides that the excise duty shall be an amount equal to the aggregate of the duties of customs which would be leviable under Section 12 of the Customs Act, 1962 (52 of 1962) on like goods produced or manufactured outside India if imported into India. Thus, the duty liable will be required to be computed as per proviso to Section 3(1) of the Central Excise Act, 1944. We, therefore reject the appellant No. 1's contention in regard to the computation of duty liability as per main portion of Section 3(1) of the Central Excise Act. Ld. Advocate has quoted following case laws in support of his contention, - (i) Commr. of C. Ex., Visakhapatnam-II v. NCC Blue Water Products Ltd. - 2010 (258) E.L.T. 161 (S.C.). (ii) Sri Varalakshmi Jute Twine Mills P. Ltd. v. C.C.E., Visakhapatnam - 2011 (266) E.L.T. 241 (Tri.-Bang.). (iii) Commissioner of Central Excise, Surat-I v. Favourite Industries - 2012 (278) E.L.T. 145 (S.C.). We have gone through these judgments. The Hon'ble Supreme Court's judgment in the case of Commissioner of C. Ex., Visakhapatnam v. NCC Blue Water Prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment and power of officers", Chapter III is "Levy and refund of, and exemption from duty", Chapter IV is "Unmanufactured products", Chapter V is "Manufactured goods, other than "Salt", Chapter VI was "Salt", Chapter VII is "Registration", Chapter IX is "Export under claim for rebate of duty or under bond", Chapter X is "Remission of duty on goods used for special industrial purposes", Chapter XI is "Entry, search, seizure and investigation", Chapter XII is "Penalties and confiscations". Chapter XIII is since omitted. Chapter XIV is Miscellaneous. From the scheme of drafting/formatting it is very clear that various Chapter deals with particular aspect of manufacturing unit and cannot be considered as self-contained for all aspects of excise law. If we were to agree with ld. Advocate's contention, there is no officer to implement the Central Excise Law in respect of units availing Chapter X, no duty can be levied, or refunded or exemption granted, no investigation can be carried out against a unit misusing Chapter X and whatever wrong the unit may do, goods cannot be confiscated. Not only this, even the appeal provisions (including appeal to this Tribunal) would be inapplicable. Abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not appear to be covered by any clause/sub-clause. Under the facts and circumstances of the present case, we reject this contention. Ld. Advocate has quoted the Hon'ble Supreme Court judgment in the case of Commissioner of Customs, Mumbai v. Toyo Engineering India Ltd. reported in 2006 (201) E.L.T. 513 (S.C.). We find the issue before the Hon'ble Supreme Court was whether certain construction equipments used in initial setting up of plant will get benefit of project import. Certain additional grounds were raised before the second appellant authority, in that context the Hon'ble Supreme Court has said that since these grounds were not mentioned in the show cause notice, department cannot travel beyond the show cause notice. In the present case, we do not find any such thing. No new grounds have been taken at any stage. The second case law quoted in that of Hon'ble Supreme Court in the case of Commissioner of Central Excise, Nagpur v. Ballarpur Industries Ltd. reported in 2007 (215) E.L.T. 489 (S.C.). In this case, issue was relating to applicability of Rule 57CC to goods stock transferred to sister unit. During adjudication proceedings, Commissioner invoked Rule 7 of the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who are co-accused in this case while his own statements have been ignored by the Commissioner. Appellant No. 2 has stated in his statements that whatever has been done was without his knowledge. Similar arguments were advanced by the appellant No. 2 before the Commissioner. The findings of Commissioner in this respect in one of the impugned orders are : - "15. Having decided the liability of payment of duty, my attention is now drawn towards the culpability of each of the cast of characters. In this context, I firstly take up the culpability of Shri R.C. Mahajan, MD, SRIL. Shri. Mahajan sought to dismiss his role in the affair by stating that all the activities were undertaken by the employees of the company, behind his back. However, the active part played by him in the diversion of goods cannot be discounted due to the following facts. It is difficult to believe that persons of the subordinate stature of Shri Y.K. Joshi, Manager (Pers & Admn.), or Devendra Sehgal, Accountant, who were mere employees of the company would go to the lengths described in the notice to indulge in fraudulent procurement of CT3 certificate and forgery of all the AR3A re-warehousing certificates l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imself liable to penalty under Rule 209A of the Central Excise Rules, 1944." Above findings of the Commissioner have not been controverted by the appellant. In fact, we note that in addition to the employees of appellant No. 2, the broker & proprietor of M/s. Priyankit Textiles, Shri S.K. Jain (appellant No. 4) in his statement dated 29-7-1998 and 19-11-1998 deposed that - "Shri Arun Gupta introduced him to Shri R.C. Mahajan, that on discussion, Shri Mahajan, agreed to supply CT-3 certificates for PTY/PFY, that after delivery Shri Arun Gupta was to give him an amount of ₹ 20/- per kg., out of which ₹ 18/- per kg. was for Shri Mahajan and Re. 1/- per kg each was to be retained by himself & Shri Gupta; that Shri Mahajan introduced him to Shri Y.K. Joshi, that he was asked to procure contracts and hand over the same to Shri Joshi; that after making the supplies, he retained an amount equivalent to a share of Re. 1/- per kg. and handed over the remaining amount to Shri Mahajan; that initially the contracts and documents were personally handled and later through post; that the payment amount was handed over to persons sent by Shri Mahajan, who were carrying his visiting ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellant No. 3 has himself or through someone done the forgery relating to the signature of Government officials in AR-3As. Not only this, later on he even forged some of CT-3 certificates. These are criminal acts. Forgery is antithesis to legality and law cannot afford to allow such forger without penalty. We agree with the Commissioner's findings that Shri Joshi (Appellant No. 3) cannot be absolved of culpability since he committed the forgery and actively abetted in the diversion of goods with full knowledge of the illegality of such acts. We also note that Appellant No. 3 was also beneficiary inasmuch as he received lump sum money, for himself for rendering the illegal and criminal activities. We therefore uphold the penalties imposed on the appellant No. 3 and dismiss the appeals. We also hold that penalties imposed are not excessive. Ld. Advocate for the appellant has quoted following judgments of this Tribunal to contend that appellant No. 3 being own employee, no penalty is imposable on him under Rule 209A. (i) Commissioner of Customs, ICD, TDK, New Delhi v. Cyber Express Pvt. Ltd. - 2004 (172) E.L.T. 388 (Tri.-Del.). (ii) Welcure Drugs & Pharmaceuticals Ltd. v. Commr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and documentation. We entirely agree with the findings of Commissioner in one of the impugned order/similar findings exist in other order also. "As regards the culpability of the brokers, S/Shri Arun Gupta, Rajkumar Somani & R.K. Jain (Noticee Nos. 9, 11 & 12), I observe that they were the threads by which the entire web of deceit was woven. Without the stellar role played by them, the entire scheme would have fallen flat on its face. Shri Arun Gupta, not only arranged the contracts with both the chief perpetrators, SRIL & APL, but also went on to facilitate the smooth functioning of the unholy activity by arranging to courier the sales proceeds from Bhiwandi to New Delhi. He also arranged to open a bank account with United Bank of India with Shri G.S. Shekhawat, a taxi-driver as the person authorized to operate the account. Shri Gupta & Shri Jain fictitious accounts, as discussed above, and to arrange for the issue of demand drafts in the name of SPL to dispose of PTY cleared by APL. Shri Somani actively helped in identifying customers for APL to dispose of PTY in the local Bhiwandi market without payment of duty. In spite of the fact that they were aware that SRIL had no use of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... findings of Commissioner are also noted. "Here, I observe that the categorical statements of the transporters belied their stance of innocence and ignorance. In fact, the transporters were clear and lucid in their deposition that Shri Deora used to communicate the exact quantities of PTY/PFY to be supplied to each individual weaver/customer, e.g. 5 to 15 cartons, in their words. Thus, it becomes clear that the customer end of the plot was quite efficiently handled by SPL. Moreover, instead of dispatching the AR3As to the proposed consignee at Derabasi, copies of the same were handed over to unscrupulous brokers, who then carefully arranged to courier the said AR3As to the management of SRIL for false endorsement of the receipt of the PTY/PFY at the factory premises of SRIL. In the haste to get the illegal paperwork completed, SPL had overlooked the fact that the same re-warehousing entry No. was mentioned in each AR 3A!". The above findings of the Commissioner have not been refuted before us. Under the circumstances, we have no hesitation in holding that appellant Nos. 7, 8 and 9 were not only having full knowledge about the clandestine diversion of PTY/PFY, but activity particip ..... X X X X Extracts X X X X X X X X Extracts X X X X
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