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TMI Blog2019 (3) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... tinely. 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 aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Society Ltd. (iii) Shri Dinkar Shankar Shinde, Chairman, Bhartiya Charmakala Gramodyog Sahari Sangh Ltd. Ltd. (iv) Shri Ravikant Dhondiram Pawar, Secretary, Bhartiya Charmakala Gramodyog Sahari Sangh Ltd." 2.1 Appellants are engaged in manufacture of leather footwear falling under Chapter Heading 6401.11 of the Schedule to Central Excise Tariff Act, 1985 primarily for exports. 2.2 As a sequel of investigation undertaken by sales Tax Department, a Show Cause Notice dated 4.1998 has been issued to them proposing to demand Central Excise duty of ₹ 2,9387,013/- towards alleged clandestine clearance of leather foot wears during the period January 1993 to October 1996. The demands were raised relying on the following evidences: i. 26 statements of various persons recorded during investigation. ii. Xerox copies of some private records surrendered to sales tax authorities on 19.10.1996 by Shri Ramachandra Mane, Managing Director of SRSPL. iii. Various statutory records maintained and returns filed by SRSPL, for complying with Central Excise Law and Procedures. iv. Xerox copies of records of two co-operative societies namely, Navyug Footwear Industrial Co-op Society and B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner. iv. Appellants have not received an amount from the two societies, for the supply of goods to retail shop owners. v. Entire case has been made on the basis of the photocopies of the documents obtained from the sales tax department. Central Excise department could not have proceeded against them on the basis of photocopies received from the sales tax department. vi. The author of so called relied upon private records recovered has not been found or established. Tribunal decisions in following cases relied upon- a. LML Ltd [1997 (94) ELT 519 (T)] b. Balbir Steels [2003 (161) ELT 281 (T)] c. Shradha Forge [2005 (179) ELT 336 (T)] vii. Department has not established details of description of goods allegedly manufactured and cleared. viii. No evidence has been produced to show that these goods were manufactured by the appellants, and no evidence as to raw materials, manpower, electricity, transporter etc has been put forth. Following decisions relied upon- a. Arch Pharmalabs [2005 9182) ELT 413 (T)] b. Chemco Steels [2005 (191) ELT 856 (T)] c. Mohan Steels [2004 (177) ELT 668 (T)] d. Deena Paints [2001 (43) RLT 805 (T)] e. M M Dyeing and Finishing [2002 (139) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xiii. Rajasthan Petro Synthetics [2003 (160) ELT 297 (T)] xiv. Someshwara Cements [2005 (191) ELT 1062 (T)]. d. Receipt of consideration by the appellants for goods alleged to be manufactured and sold clandestinely, not proved by revenue. i. Continental Cement Company [2014 (309) ELT 411 (ALL)] ii. Sunrise Food Products [2017 (357) ELT 599 (T)] iii. Shree Nathjee Industries [2011 (267) ELT 241 (T)] e. Loose papers alleged to be Balance Sheet & Profit & Loss statement of the appellants are not substantiated. i. Goldy Engineering Works [2017 (345) ELT 149 (T)] ii. Sharadha Forge Pvt Ltd [2005 (179) ELT 336 (T)] iii. Kuber Tobacco Products Ltd [2013 (290) ELT 545 (T)] f. Directors have retracted their statement hence their statements cannot be relied upon. Further the charge of clandestine removal cannot be sustained only on the basis of Director's statements held in following cases i. Magnum Steels Ltd [2017 (357) ELT 226 (T)] ii. Mittal Pigment Pvt Ltd [2018 (360) ELT 157 (T)] iii. Davinder Sandhu Impex Ltd [2016 (337) ELT 99 (T)] iv. Mahavir Metals Industries [2014 (313) ELT 581 (T)] v. Shivam Steel Corporation [2016 (339) ELT 310 (T)] g. Case of sales ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chases and sales of leather effected by co-operative societies. If any person was buying leather goods from co-operative societies they did not have to pay further sales tax on it. Further during the relevant period bank finance at concessional rate of interest was being made available to co-operative societies recognized by KVIB. So it appears that certain co-operative societies were set up for availing bank loans at concessional rate of interest and to save sales tax. These societies were not genuine but a sham created by certain individuals who were actually acting in the name of the societies. The proceedings initiated by Sales Tax Authorities have not yet concluded. The proceedings initiated by police have resulted in filing of charge sheet in court and the matter is pending in court. Against this back ground it may be proper to have a look at the charge sheet filed by the police in this regard. The charge sheet reads as under:- "ALPHA (MANE) GROUP CHARGE SHEET NO.23 BHARTIYA CHARMAKALA SAHAKARI SANSTHA CHARGES IN G.B., C.B. CID, C.P. NO.95/96, U/Sec., 465, 467,468,471,403,406,409,420 IPC r/w. 120(b) IPC and or 34, 114 IPC & 147(e-1) & (p) of Maharashtra Co.op. Soc. Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption from collection and payment of sales tax on sale and purchase of the leather goods supposed to have been produced by the poor cobbler members of such society and thereafter to apply for and obtain exemption of sales tax from sales tax department on the strength of certificate issued by Maharashtra State Khadi and Village Industrial Board, and then to avail of such exemption from collection and deposit of the sales tax which they were in fact supposed to collect. C. To fabricate and manipulate the record of sale and purchase such as 1) Sales Bills, 2) Sales Registers, 3) Cash Book, 4) Purchase Registers, 5) Purchase Vouchers and other allied documents of leather goods at both the ends i.e. society's record on one hand and companies record on other hand to serve the purpose of camouflaging the transaction of actual sale and purchase from individual cobblers and other institution in open market (emphasis supplied) D. To fabricate and manipulate the records to support the fictitious production of leather goods shown to have been produced by the aforesaid society out of the so called raw material purchased from out of State for purpose of such productions, and also, showing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ention of all the accused in the course of same transaction at the aforesaid date, time, place and duration, accused namely 1) Ramchandra Bandhu Mane, 2) Shivram Bandu Mane, 3) Ashok Ramchandra Mane and 4) Anil Ramchandra Mane the office bearers of aforesaid companies, in their respective capacities caused fabrication of the documents, which were required for showing diversion of sale and purchase of leather goods from open market as allegedly manufactured by the members of society with purpose to avoid collection and payment of sales tax otherwise required to be collected and paid by 1) Startrite Shoes Company, 2) Mane & Company 3) K.K. Enterprises, 4) Eros Services and 5) Alpha Footwear and Bhartiya Charmakala Society, such as purchase of raw materials bills, sales bills, sales registers, raw material distribution registers, labour charges payment registers, ledger and cash books as mentioned in detailed in the list annexed as "A" and thereby committed the offences of forgery, forgery of valuable securities, forgery for purpose of cheating and using the forged documents as genuine, punishable u/s. 465,467,468,471 IPC r/w. 120(b) IPC and or 34 IPC and or 114 IPC. FOURTHLY That ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. The reasons for stating this background is that while for sales tax authorities it is enough to prove "sale of goods" and evasion of sales tax payable on the sale involved for demanding excise duty from SRSPL, there is a need to prove "manufacture of goods" by SRSPL. The main argument raised in defence is that no proof of manufacture of the impugned footwear by SRSPL is adduced. So the evidence has to be appreciated to see whether there is any evidence of manufacture by SRSPL of the goods for which duty is demanded in the SCN from SRSPL." 5.3 In respect of the recovery of documents relied upon for alleging the clandestine clearance Commissioner has in para 28 to 30 of his order recorded as follows: "28. The major objection that remains to be dealt with is that the alleged private records are not seized under any panchnama and they do not indicate the name of SRSPL in any way. Another issue raised is that the department cannot rely on photocopies. 29. I have considered the objection that these documents are not recovered under a panchnama and the documents do not bear the name of any firm or person who maintained it. But from the receipt given by the sales tax authority to S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f a document executed or attested, that it was executed or attested by the person by whom it purports to have been so executed or attested; (b) admit the document in evidence, notwithstanding that it is not duly stamped, if such document is otherwise admissible in evidence. SECTION 36B (1) Notwithstanding anything contained in any other law for the time being in force, - (a) a micro film of a document or the reproduction of the image or images embodied in such micro film (whether enlarged or not); or (b) a facsimile copy of a document; or (c) a statement contained in a document and included in a printed material produced by a computer (hereinafter referred to as a "computer print out"), if the conditions mentioned in sub-section (2) and the other provisions contained in this section are satisfied in relation to the statement and the computer in question, shall be deemed to be also a document for the purposes of this Act and the rules made there under and shall be admissible in any proceedings there under, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... department is not correct. In case of Girdhari Lal Nannelal, Apex Court was dealing with the issue of determination of liability to sales tax on the basis of income received. In para 7, Apex Court stated - "7. The approach which may be permissible for imposing liability for payment of income-tax in respect of the unexplained acquisition of money may not hold good in sales tax cases. For the purpose of income-tax it may in appropriate cases be permissible to treat unexplained acquisition of money by the assessee to be the assessee's income from undisclosed sources and assess him as such. As against that, for the purpose of levy of sales tax it would be necessary not only to show that the source of money has not been explained but also to show the existence of some material to indicate that the acquisition of money by the assessee has resulted from transactions liable to sales tax and not from other sources. Further, whereas in a case like the present a credit entry in respect of ₹ 10,000 stands in the name of the wife of the partner, no presumption arises that the said amount represents the income of the firm and not of the partner or his wife. The fact that neither the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactured through some body else by the person maintaining the accounts. (c) The statements of dealers implied that they had purchased shoes from SRSPL and got bills from two co-operative societies namely Navyug Footwear Industrial Co-op Society and Bharatiya Charmakala Gramudyog Sahakari Sangh Ltd. However in cross examination these witnesses say what they originally stated is their bonafide impression and they do not know anything conclusively to say that the shoes in question were manufactured by SRSPL. (d) The statements of 17 dealers (owners of shoe shops) are relied upon. These dealers stated that they bought shoes from SRSPL as per the books of accounts (allegedly of SRSPL) shown to them, received bills of the societies and issued cheques to the societies concerned. These dealers were cross examined. The main relevant issue that comes out in the cross-examination is that they never used to deal directly with SRSPL. One Mr. Raju and another Mr. Shinde used to contact them with samples and get orders. They used to get shoes without any packing or any indication to show that the goods were manufactured by SRSPL. They used to issue cheques for payments to the concerned soci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s only their bonafide impression based on their dealing with Mr. Raju or Mr. Shinde, the sales persons. They had not directly interacted with SRSPL. This evidence is to be appreciated considering the fact that the dealers are also accused of evading sales tax by routing their transaction through the co-operative societies. (c) The statement of Shri Ashok Mane on 28.2.97 (Para 11 herein above) the salient part of which reads as under: "After going through and scrutinizing the said documents, Shri Ashok Mane immediately agreed and accepted that all the documents/records mentioned in the said letter and acknowledgment receipt belonged to SRSPL; that all the documents shown, to him in his earlier statement were the same records as those mentioned in the said letter. He also accepted and admitted to the fact that SRSPL have cleared leather footwear to all the parties reflected in these private documents/records clandestinely without payment of Central Excise Duty; that he could not identify these records because he was not shown the letter of receipt, indicating his intention of misleading this office as far as possible. On the basis of the above facts he also agreed to pay ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shoe shops; * Only bogus purchases and sales transaction were shown in the records of these societies; * Delivery of footwear were received from Shri Ramchandra Mane and Shri Ashok Mane of SRSPL and other footwear manufacturers; * Footwear from SRSPL were received on the challans of Navyug to the tune of ₹ 80 lakhs; * The payments were made in cash. 5.8 From the scheme of things as emerge from the above statement we find that this is a case wherein bogus transactions were undertaken through the cooperative society to cover the goods clandestinely cleared by the shoe manufacturers. In our view in cases of such type corporate veil needs to be pierced (lifted) and to determine the actual persons who had actually controlled the affair of said societies. Hon'ble Supreme Court has in case of Calcutta Chromtype Ltd [1998 (99) ELT 202 (SC)], held as follows while approving such an approach: 12. The principle that a company under the Companies Act, 1956 is a separate entity and, therefore, where the manufacturer and the buyer are two separate companies, they cannot, than anything more, be `related persons' within the meaning of clause (c) of sub-section (4) of Section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pendent and legal personality distinct from the individuals who are its members, it has since been held that the corporate veil may be lifted, the corporate personality may be ignored and the individual members recognised for who they are in certain exceptional circumstances. Pennington in his Company Law (4th Ed.) states : Four inroads have been made by the law on the principle of separate legal personality of companies. By far the most extensive of these has been made by legislation imposing taxation. The Government, naturally enough, does not willingly suffer schemes for the avoidance of taxation which depend for their success on the employment of the principle of separate legal personality, and in fact legislation has gone so far that in certain circumstances taxation can be heavier if companies are employed by the taxpayer in an attempt to minimise his tax liability than if he uses other means to give effect to his wishes. Taxation of companies is a complex subject, and is outside the scope of this book. The reader who wishes to pursue the subject is referred to the many standard text books on Corporation Tax, Income Tax, Capital Gains Tax and Capital Transfer Tax. The oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mmercial Tax Officer [(1985) 3 SCC 230 = (1985) 154 ITR 148], this Court examined the concept of tax avoidance or rather the legitimacy of the art of dodging tax without breaking the law. This Court stressed upon the need to make a departure from the Westminster principle based upon the observations of Lord Tomlin in the case of IRC v. Duke of Westminster [(1936) AC 1] that every assessee is entitled to arrange his affairs as to not attract taxes. The Court said that tax planning may be legitimate provided it is within the framework of law. Colourable devices, however, cannot be part of tax planning. Dubious methods resorting to artifice or subterfuge to avoid payment of taxes on what really is income can today no longer be applauded and legitimised as a splendid work by a wise man but has to be condemned and punished with severest of penalties. If we examine the thrust of all the decisions, there is no bar on the authorities to lift the veil of a company, whether a manufacturer or a buyer, to see it was not wearing that mask of not being treated as related person when, in fact, both, the manufacturer and the buyer, are in fact the same persons. Under subsection (1) of Section 4 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is the sole consideration. It is a deeming provision and the two conditions have to be satisfied for the case is to fall under clause (a) of Section 4(1) keeping in view as to who is the related person within the meaning of clause (c) of Section 4(4) of the Act. Again if the price is not the sole consideration, then again clause (a) of Section 4(1) will not be applicable to arrive at the value of the excisable goods for the purpose of levy of duty of excise. 15. In the present case, we do find that the authorities of and the Appellate Tribunal did address themselves to the basic question as to the shareholdings of both, the assessee and the buyer, inasmuch as they found that the Managing Director of both the companies was the same and one more Director was common. It was also found that the shares of both the companies were held by the members of the `Sharma family' but that is quite a vague expression and, therefore, in our view, the Appellate Tribunal was partly right in giving the direction to ascertain the break up of the shares of each member of the family in the two companies. To lift the veil the actual shareholding of both the companies and the persons in control of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 5.10 Some of these dealers were cross examined during the course of adjudication proceedings and they have stated as follows: Examination of Shri Jalaluddinn Noorallah Virji, Partner M/s Regal Shoes Q 18 Whether purchases from Co-operative society were pre-dominant in nature? Ans. A considerable quantity was purchased from Cooperative Society. Examination of Shri Karim Amir Jaffer Q 6 Do you know the source from which Raju used to bring the shoes? Ans. Raju used to mention Mr Mane. Q 6a Is it possible that Raju could have procured from any other source Ans. Yes i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Q.11 But you said Raju used to come to you and show the samples? Ans. Yes that is true. But I have visited the factory of Start Rite Shoes also a few times. Q.12 Is it possible that the shoes supplied from multiple sources? Ans. Logically it is possible. Examination of Shri Haneef Amir Manji Q.6 Do you know the source from which Raju used to bring the samples? Ans. Raju used to say that he was bringing from Start Rite Shoes. Q.7 Is it possible that the goods were made by somebody else? Ans. May be. Q.9 Who used to bring samples and who used to bring the shoes and who used to bring invoices? Ans. Raju was bringing the samples. Raju used to supply through carrier. Invoice was brought by Raju and cash was given to him. Examination of Shri Karim Rehmtulla Tejani Q.7 Do you have any personal knowledge from which you can say the shoes were manufactured by Start Rite? An. Raju used to mention the name. Examination of Shri Rafiq R Tejani Q.6 Do you know the source from which Raju used to bring the shoes? Ans. Raju used to say that the shoes were from M/s Start Rite Shoes. This is my only information in the matter. Q.7 Do you have any personal knowledge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccessfully encountered by the presumption of guilt arising from the recent (unexplained) possession of stolen property," though the latter is only a presumption of fact. Thus the burden on the prosecution or the Department may be considerably lightened even by such presumption of fact arising in their favour. However, this does not mean that the special or peculiar knowledge of the person proceeded against will relieve the prosecution or the Department altogether of the burden of producing some evidence in respect of that fact in issue. It will only alleviate that burden to discharge which very slight evidence may suffice. 33. Another point to be noted is that the incidence, extent and nature of the burden of proof for proceedings for confiscation under the first part of the entry in the 3rd column of clause (8) of Section 167 may not be the same as in proceedings when the imposition of the other kind of penalty under the second part of the entry is contemplated. We have already alluded to this aspect of the matter. It will be sufficient to reiterate that the penalty of confiscation is a penalty in rem which is enforced against the goods and the second kind of penalty is one in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arance. Tribunal has in case of- A. Jay Jalaram Processors [2014 (313) ELT 724 (T-Ahd)] held- 7. If that be so, such value has to be adopted as assessable value for the purpose of quantification of duty. It has to be kept in mind that the clearances were effected by the appellant without payment of any duty and the consideration received by him from merchant manufacturer was without including the element of duty. It is not a simpliciter case of non-payment of duty, in which case the entire realization has to be treated as cum duty price where the duty is being subsequently confirmed against an assessee. It is the case of clandestine removal and the Revenue, while adopting the value of fabrics, has not adopted the cum duty value but has adopted the value at which the finished fabrics were cleared without including the factor of duty. As such, I find no merits in the contention of the learned advocate that the duty is required to be re-quantified. B. Sagar Spun Pipes [2014 (305) ELT 179 (T)] held- "5.2 As regards the cum-duty benefit claimed by the appellant, reliance has been placed by the learned Counsel for the appellant in the cases of Camlin Ltd., Formica India, Srichakra T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtaining in Srichakra Tyres and Maruti Udyog case cited supra. It is a settled position in law facts of a decision relied upon have to be shown to fit the factual situation of a given case. Without such discussion reliance could not be placed on a decision. Circumstantial flexibility one additional or different fact may make a world by difference between conclusions in two cases, as held by the Apex Court in Alnoori Tobacco Products [2004 (170) E.L.T. 135 (S.C.)]" 5.16 Appellants have contended that in view of Section 132 of Finance Act, 2001, no penalty is imposable on them. For ease of reference the said Section is reproduced below: Section 132. Validation of certain action taken. Any action taken or anything done or omitted to be done or purporting to have been taken or done or omitted to be done under any rule, notification, or order made or issued under the Central Excise Act, or any notification or order issued under such rule at any time during the period commencing on and from the 28th day of February, 1944 and ending with the day, the Finance Bill, 2001 receives the assent of the President shall be deemed to be and to always have been, for all purposes, as validly and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applied to omission which was also repeal. It also applies to a Rule. In this regard, reliance has been placed on Fibre Boards Pvt. Ltd. Bangalore versus Commissioner of Income Tax, Bangalore, Shree Bhagwati Steel Rolling Mills versus Commissioner of Central Excise. It was also submitted that retrospective amendment has been made to the Act by the Finance Act, 2001 making it clear that actions taken under a rule will not lapse even if the rule is omitted. The Explanation applied only to future action and not to continuing action. Reliance has been placed on a full Bench Judgment of the Allahabad High Court in Simholi Sugar Mills Ltd. versus Union of India It was also submitted that penalty for wrongly taking credit was upheld by the Tribunal in Reliance Industries Ltd. versus CCE6, which has attained finality. 5. Opposing the above submissions, learned senior counsel for the respondent submitted that Section 6 of the General Clauses Act did not apply omission and applied only to repeal. It did not apply to a rule and applied only to an Act or Regulation as held in Kohlapur Cane Sugar Works Ltd. (supra). He further submitted that in view of Explanation to Section 132 of the Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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