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TMI Blog2019 (4) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... who is Group B Central Government Employee. The penalty imposed is his highly disproportionate to the means of the person on whom it has been imposed, might be equivalent to all his life earnings. In our view taking into account all the facts and the fact that Appellant-2 could have been the innocent victim of the conspiracy of Shri K K Gupta, we are of the view that ends of justice will be met if penalty amount on Appellant-2 is reduced to ₹ 10,00,000/-. Appeal allowed in part. - APPEAL Nos. E/697,734/2010 - A/85656-85657/2019 - Dated:- 2-4-2019 - Mr. S.K. Mohanty, Member (Judicial) And Mr. Sanjiv Srivastava, Member (Technical) Shri Alok Yadav, Advocate, for 1st appellant, Shri Ashok Singh, Advocate, for 2nd appellant Shri Ajay Kumar, Additional Commissioner (AR), for respondent ORDER Per: Sanjiv Srivastava These appeals are filed by the Appellant against the order in original No 03/BR-03/Th-1/2010 date 29.01.2010 imposing a penalty of ₹ 1,00,00,000/- (Rupee One Crore) on them under the provisions of Rule 26 of the Central Excise Rules, 2002. 2.1 Muni Group of Companies viz Muni Trade Pvt Ltd, M/s Apex Corporation, M/s Mansa Trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... {Kalyanpur Cements Ltd {2008 (221) ELT 544 (T-Kolkata)] ii. Cross examination as requested by them has been disallowed. iii. In the present case Appellant was an merchant exporter and he had received the goods under cover of valid ARE-1 and legible invoice. The goods received were also duly sealed. The relevant ARE-1 were duly certified as correct by the jurisdictional range officer. In view of the above there was no occasion for the appellant to believe that manufacturer supplying the goods had committed some illegality. {Ramesh P Batna [2007 (220) ELT 880 (T-Mum)]} iv. Appellants have while exporting the goods complied with all the legal formalities and then exported the goods. Custom authorities at the port had duly verified the goods as per law and permitted the export. v. Since cross examination was essentially required to establish that he had no role to play in the fraud committed by the Muni Group of Companies, such denial results in violation of principle of natural justice as has been held in following decisions- a. Anil Pannalal Sarogi [2009 (241) ELT 219 (T-MUM)] b. S Mamasivayam [2009 (240) ELT 255 (T-Chennai)] c. Patriot Freight Logistics System ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order in original is one of dereliction of duty during the material period of time and has nothing to do with dealing in excisable goods, as required for penal consequence under Rule 26. Thus order imposing penalty under Rule 26 is contrary to the provisions of rule itself. iv. The order is contrary to liberal policy declared by the Government for Textile Sector and hence needs to be set aside. 4.1 We have heard Shri Alok Yadav, Advocate for Appellant 1, Shri Ashok Singh, Advocate for Appellant 2 and Shri Ajay Kumar, Additional Commissioner, Authorized Representative for the revenue. 4.2 Arguing for the Appellant-1 learned Advocate submitted that in the present case penalty has been imposed on their client under Rule 26 while establishing that ingredients as required for imposition of penalty are present in the case against them. They relied upon the decision of Bombay High Court in case M/s Bansal Steel Corporation and Others [Order dated 12th September 2017 in Central Excise Appeal No 108 of 2007]. They stated that Commissioner has in his order imposed penalty on them under Rule 26 of Central Excise Rules, 2002 without establishing that they were ever concerned or ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urces and these goods along with the invoices of the Muni Group of Companies were exported and rebate was claimed. It was the contention of the learned counsels that Commissioner has not indicated as to how and under which provisions of law the goods allegedly procured from the market and exported are liable to confiscation. 8.1 We have given considerable thought to the submission. We reproduce Rule 25 and 26 of the Central Excise Rules, 2002 as under: RULE 25. Confiscation and penalty. - (1) Subject to the provisions of section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer, - (a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or (b) does not account for any excisable goods produced or manufactured or stored by him; or (c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or (d) contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Muni Group of Companies through account payee cheques. However, immediately, thereafter, Muni Group of Companies have issued cheques in the name of some other entities. These cheques were, in turn got discounted by the merchant exporter/appellants. In some cases, the amounts were paid by crossed bearer cheques to Muni Group of Companies. However, these cheques were, in reality, not deposited in the accounts of Muni Group of Companies, but were deposited either in the name of certain dealers or got discounted from various bill discounters/shroffs. In nutshell, the money which was purported to have been paid to Muni Group of Companies for purchase of material was not paid to them but either was taken back by the appellants-merchant exporters, or in some cases, some amount was paid to certain dealers in fabric. (Perhaps, some fabrics might have been purchased from them.) Thus, it is evident that the invoices of Muni Group of Companies and the goods purported to be covered by such invoices were dealt by the merchant exporter-appellants. There can be no doubt, that these goods are liable to confiscation under Rule 25(1)(d) of the Central Excise Act, 1994. In view of the above said p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) are equally applicable. 8.6 The learned counsel for the appellant has also submitted certain judgments wherein hon ble Supreme Court and other courts have held that the goods purchased from the market are deemed to be duty-paid. We have gone through the said judgments. We find the facts in the present case are very different. In fact, if the goods were duty paid, there was no reason for the appellants to approach Muni Group of Companies and procure the fraudulent invoices. In that situation, the appellants could have got the invoices from the seller of the goods and could have claimed the rebate. The very fact that this fraudulent exercise has been done indicates that the goods which were exported and procured from the market were non-duty paid goods. In case of some appellants, the goods were produced in their own unit and if in their own unit they would have paid duty, there was no reason for them to procure the invoices from Muni Group of Companies. 8.7 Various counsels have submitted that Rule 26 was amended w.e.f. 01/03/2007 wherein dealers were also become liable to penalty and thus, prior to 01/03/2007 no penalty could have been imposed on the dealers. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Show Cause Notice as follows: 79. The merchant exporters involved in the case have knowingly purchased bogus Application for Removals for Exports (ARE-1s), from Muni Group, showing units of Muni Group, as the supporting manufacturer and these respecti8ve Merchant Exporters, as exporters, with an intention to claim and collect the Central Excise Duty shown in the respective ARE1s, just by presenting these ARE1s to the Customs authorities at the time of export at the port of export, along with the non-duty paid and bought out textile fabrics, procured by the Merchant Exporters from the open market, locally. The submission of the Merchant Exporters that they have received the goods mentioned in the respective ARE1s and Excise invoices, of Muni Group, is totally false and baseless due to following observations a) The supplier units, their owners on record, have all been found fake, bogus and non existent. Thus the units of Muni Group had availed CENVAT credit on the strength of bogus CENVAT invoices, wherein the goods mentioned in the said CENVAT invoices have never existed and never received. Such bogus CENVAT credit has been used by units of Muni Group, for issuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayments have been made to Muni Group for claimed purchase of fabrics. This pattern of financial flow indicates the very bogus/fake nature of the entire transaction. In fact in this way the Merchant Exporters would get the amount back in cash. d) None of the Merchant Exporters or their representatives have stated to have visited the premises of units of Muni Group. e) The exporters, whose statements were recorded, have stated to have purportedly carried out the textile purchases through brokers, many of which were contacted by them on mobile and no addresses of these brokers were available with the exporters, indicating that these brokers named by the respective exporters are nothing but fictitious persons. In cases where the brokers could be traced by the investigation, they have refused point blank that they had arranged delivery of the goods originating from units of Muni Group at Bhiwandi at the exporters premises and have stated that they had merely brought two parties in contact and the transactions were finalized and carried out by them individually. The contradiction shows that in none of the cases, the goods had originated from the units of Muni Group and the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be traced out, no records were found at his residence, or the residence of Shri K.K. Gupta or even the office at 111, Champaklal Industrial Estate, Sion shown by them on the registration. The entire proceedings indicate that no records were maintained in the manner prescribed under the central excise act, 1944 and merely documents suitable to the exporters and the persons interested in availing fraudulent Cenvat credit were created and apparently sold at commission to facilitate the purchasers of the documents to earn undue benefits. 80. From the foregoing paras, it is conclusively established that a conspiracy was hatched by Shri K.K. Gupta, in conjunction with Shri M.K. Patel, the Superintendent, in charge of the Range, the so called manufacturers at Surat who supplied input invoices to him, the exporters at Surat to whom he supplied ARE1s and Central Excise invoices, the so called manufacturers to whom he supplied central excise invoices for availing Cenvat credit, without actually supplying any goods, showing therein duty payment, which was either not done or done from the fraudulent Cenvat credit availed on invoices obtained (from the so called manufacturers of Surat), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his order discussed the role of Appellant 2 stating as follows: Further, it is clear from the evidence on records that, Shri M.K. Patel, who was Superintendent in charge of the Range- IV, Kalyan-I Division in the jurisdiction of which the units of Muni Group had obtained central excise registration for manufacturing and trading, misstating the facts about activity to be carried out there had actively participated in the entire scheme of fraudulently availing rebates, by using the ARE1s and invoices issued by units of Muni Group. The scheme could succeed only because of his active participation in which he attempted legalizing the documents so issued by Muni Group and authenticating the duty payment shown by the units, by misusing his official position and government machinery. He, while verifying and certifying post verification of premises of M/s. Muni Trade Pvt Ltd, misstated in the report the position of the registered premises in such a way as if to indicate that the factory actually existed when there was no such facility there, wording it as Premises Exists, Factory Building Exists . After reply from Muni Group now, in which they have conceded that there were no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1s, he had put a new confirmatory signature, by visiting the Range Office after transfer to confirm that those were his signatures only. The contradictory statements indicate that he was lying about it and all the ARE1s were signed by him. By these acts of commission/omission supported by evidences in the form of ARE1s, duty payment certificates bearing his signature, the impugned Return of M/s. Apex Corporation viz-a-viz duty payments certificates issued in excess of duty shown in the Returns, Shri M.K. Patel is liable to penalty under Rule 26 ibid. 5.6 Appeal No E/697/2010: i. From the facts as state above in para 5.4 that facts leading to imposition of penalty on the Appellant 1 were considered by the Tribunal while considering the appeals No E/879, 910, 929, 1621/2010. Since tribunal has dismissed the appeals filed in those case. ii. In our view the appellant has exported the goods based upon the invoices and ARE-1 of M/s Apex Corporation (one of the Companies in Muni Group of Companies) while the goods were procured from different sources and claimed rebate on the basis of such fraudulent documents. Claim of the Appellant-1 that he was not the beneficiary of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion made by him, it binds him and, therefore, in the facts and circumstances of this case the failure to give him the opportunity to cross-examine the witnesses is not violative of principle of natural justice. It is contended that the petitioner had retracted within six days from the confession. Therefore, he is entitled to cross-examine the panch witnesses before the authority takes a decision on proof of the offence. We find no force in this contention. The Customs officials are not police officers. The confession, though retracted, is an admission and binds the petitioner. So there is no need to call Panch witnesses for examination and cross-examination by the petitioner. v. In case of Naresh J Sukhwani [1997 (83) ELT 258 (SC)]], Apex Court has held that- 3. The Joint Secretary to the Government, the revisional authority, has held that the evidence and the statement given by Mr. Dudani incriminates the petitioner. This was established with reference to the photographs and other intrinsic material. On that basis, he concluded that Mr. Dudani incriminated himself and the appellant in passing off foreign currency out of India, i.e., to Hong Kong. It was accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal. 5.7 Appeal No E/734/2010. i. Role of the Appellant and findings of the Commissioner against him has been stated in para 5.5 above. ii. In para 97, Commissioner has again observed that role of the Appellant 2 was not limited but he was roped in as part of the conspiracy conceived and hatched by the Shri K K Gupta. He while performing his duties had certified duty payments without verification and issued positive reports of CENVAT credit whenever referred by other jurisdictions. iii. Thus Appellant -2 has knowingly or unknowingly became party to the conspiracy and fraud committed by Shri K K Gupta and his Muni Group of Companies. Accordingly we have no hesitation in holding that penalty under Rule 26 of Central Excise Rules, 2002 is justified. iv. Commissioner has imposed a penalty of ₹ 1,00,00,000/- on Appellant-2, who is Group B Central Government Employee. The penalty imposed is his highly disproportionate to the means of the person on whom it has been imposed, might be equivalent to all his life earnings. In our view taking into account all the facts and the fact that Appellant-2 could have been the innocent victim of the conspiracy of Shri K K Gupta, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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