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TMI Blog2008 (7) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the other importers (firms) were his creation. All the related Bills of Entry for import of photocopier sub-assemblies were seen to have been assessed under CSH 9009.90 i.e. photocopier parts/components. The brands included Canon, Modi Xerox and Agfa. Printouts of data retrieved from the CPUs seized from CFI premises showed details of transactions in photocopier parts and photocopiers by CFI during 2001-02 and 2002-03 (12/01 to 1/03). The data showed transactions by CFI in the names of dummies also. Various statements recorded from Shri K.A. Shabu, Managing Director of CFI revealed that CFI had thus imported subassemblies and components of second-hand photocopiers of various brands through Chennai port. The photocopiers were assembled in the godowns of CFI at Saidapet and Anna Salai. The photocopiers were sold to dealers at Delhi, Mumbai, Calcutta, Bangalore etc. The proceeds were received in the names of CFI and other dummy concerns. Transactions were entered in computers under names such as CFI, ABC, Abci, PCB, RAD and RAM. Shri K. A. Shabu used to be Managing Director of CFI prior to 1998 officially. Shri Mujib Rahim took over from him as M.D after that. Actually Shri K.A. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary funds for meeting expenses towards clearance of the imported goods. He would be funds which were deposited in his name and his wife's name in banks for obtaining DDs in various firms' names towards duty on the goods imported and for making payments to Steamer Agents. After completing investigation, a Show Cause Notice was issued proposing to confiscate the seized photocopiers and another (No. 3/06 dated 24-1-06) proposing to demand duty of Rs. 9,84,39,315/- for the period 1/2001 to 12/2002 under Section 11A(1) of Central Excise Act, 1944 (CEA), the interest thereon in terms of provisions of Section 11AB of CEA and imposing penalties. The above Show Cause Notice was addressed to CFI SCN was issued to Shri K.A. Shabu proposing to penalize him under Rule 209A of the CER '44/ Rule 26/25 CER for his dealings in goods he had reason to believe were liable to confiscation. Similar notices as issued to Shri K.A. Shabu were issued to S/Shri Mujib Rahim, M.A. Nishad and P.D. Jobin of CFI. 4. In the adjudication proceedings, CFI had contended that Shri K.A. Sabhu had no dealings with CFI and Shri Mujib Rahim was functioning as Managing Director. Transactions of firms said to have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different stages of assembly were found. The computer printouts showed transactions of various concerns recorded in a systematic and meticulous manner. Shri D.Padmarajan had in his statement (though retracted in cross-examination) admitted that all impugned imports were for CFI. Import documents showed that goods imported were parts of photocopier machines falling under CSH 9009.99. All the goods had been stored in CFI premises also at Saidapet and Madhavaram. Officers seized two containers of photocopier machines in packed condition without proper transport documents and without proper invoices. The imported goods were stored in a common pool. However, receipts of imports made by CFI were accounted separately in their books of accounts maintained under the heading "Copier Force India Pvt. Ltd". Shri S. Krishnakumar deposed that photocopiers were accounted as "GEARS". He explained in his statement dated 19-4-2000, that all the transactions were entered under fictitious names like Abci, RAM RAD etc. in CFI's computers with Tally Accounts Package. He explained that the seized documents showed the sale values in the invoices and computer printouts at one per cent of the actual value. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into account. The Commissioner found sufficient evidence to hold that all the transactions were conducted at the behest of Shri K.A. Shabu by the employees of CFI. CPUs were seized from the CFI premises. The data could be accessed only with the password known to Ms. Radha, who was an Accounts Assistant of CFI. Statements of the staff of CFI confirmed transactions under fictitious names like Abci, RAM, RAD which were actual transactions of CFI. They agreed that 'Gears' represented assembled photocopiers. CPUs were operated and printouts taken in the presence of CFI staff under mahazar. Corroborations of transactions by buyers lent authenticity to the transactions found in the computer records. 6. Shri S. Krishnakumar, Accountant and Ms. Radha, Accounts Assistant who handled electronically generated data in CFI computer had certified the correctness of such data and explained the manner of accounting followed. All the clandestine activities were reflected in the computer printouts. The Commissioner justified the computer printouts as evidence. The bank statements further established that the fictitious firms were a front for CFI. Imports in the name of fictitious concerns were to ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 001 and Rule 25 of CER, 2002. (vii) Appropriated Rs. 17 lakhs towards the duty due of Rs. 9,84,39,315/- (viii) Imposed penalty of Rs. 80 lakhs each on S/Shri Mujib Rahim, M.A. Nishad and P.D. Jobin and Rs. 90 lakhs on Shri K.A. Shabu under Rule 209A of the CER, 2004, Rule 26 of CER (No. 2), 2001/Rule 26 of CER, 2002. 7. In the captioned appeals filed against the impugned order, the individuals challenge the penalty imposed on them as not justified. In the appeal of CFI, grounds are discussed under the following three major headings. (a) Illegality of Show Cause Notice (b) Admissibility of evidence (c) Denial of manufacture. (a) Illegality of Show Cause Notice : No Show Cause Notice had been issued to any of the alleged dummy units whose value of clearances had been clubbed with the value of clearances of CFI. The proceedings were therefore illegal. A catena of decisions was relied on in support. They particularly highlighted the decision of the Tribunal in the case of Poly Resins v. CCE [2003 (161) E.L.T. 1136] which held that non-issuance of Show Cause Notice to the alleged dummy units proposing clubbing of their clearances with those of the principal unit would vitiate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri Shabu's godowns. (c) Denial of Manufacture Shri S. Krishnakumar deposed during cross-examination that he did not have any computer knowledge and that one Ms. Rathi had entered data using Tally Computer Software. Investigation did not collect evidence from Ms. Rathi. Therefore computer printouts could not be relied on. All the sub-assemblies imported by various dummy units came to the godowns of CFI was a finding based on the statement of Shri D. Padmarajan, who had retracted the same. Shri G. Somasundaram who had given a statement to the effect that CFI had engaged in assembling/manufacturing photocopiers could not be produced for cross-examination by the authorities. Several case law were cited to the effect that failure of witnesses to appear for cross-examination would not be a ground to penalize the appellant when the appellant was entitled to an opportunity of cross-examination of third party on whose statements reliance was placed as held in Arsh Castings Pvt. Ltd v. CCE [1996 (81) E.L.T. 276]. The buyers who were examined had deposed that they had not kept accounts of the transactions. Therefore the transactions could not be relied on. Further S/Shri V. Ekambaram, T.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned by parties not related to CFI. Their imports worked out to 586. Reducing this number, the material imported worked out to 2651. They had submitted a certificate dated 17-2-08 of M/s. Moody International (I) (P) Ltd., Chartered Engineers who certified that 14 numbers of various sub-assemblies and parts were required to make a complete photocopier. Therefore, with 2651 sub-assemblies, only 189 photocopiers could be assembled. 8.2 There was no evidence to show that the seized photocopiers had been assembled out of the sub-assemblies imported by the various concerns. Those photocopiers were not shown in the name of any fictitious concerns. There was no evidence of manufacture of photocopiers by the appellants. The Commissioner found that the sub-assemblies imported required other parts to make a complete photocopier. The department did not establish purchase of such parts by CFI. 8.3 Shri K.A. Shabu was not competent to speak about the transactions of CFI. Even according to his statement, the number of photocopiers removed did not tally with the figures of the imported sub-assemblies. He was not questioned about the number of sub-assemblies imported. His statement could not be re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had to be accepted as a person in charge of all activities of CFI. Appellants did not dispute the modus operandi followed. Show cause notice was not issued to the various firms as they were not involved in the case as manufacturers. Assembly of photocopiers took place at Saidapet and Anna Salai where CFI office was located. Sale proceeds were realised mostly in cash. Whenever sale proceeds were realised by DDs or cheques, Shri K.A. Shabu instructed to take them in the name of other firms. Further, ld. Spl. Consultant submitted that CFI and other firms imported only components of photocopiers (CSH 9009.90) and they did not import full machines. The goods imported by CFI were brought to Saidapet for manufacture. He further submitted that the evidence of assembling machines at Anna Salai office was available. Shri K.A. Shabu signed as MD before the sales tax officers. Quantification of duty was not challenged in reply by the appellants. There were 10 firms that operated from the same premises and were owned by P.D. Jobin. Section 36B applied only to ready-made printouts and did not apply to printouts taken in the presence of the assessee. Shri S. Krishnakumar's statement signed by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and transported to CFI. This position was evidenced also by the tally for unloading cargo from trucks at Saidapet godown of CFI. Copy of the tally sheets recovered was submitted to us by the Sr. Counsel at the time of hearing. It showed registration number of vehicles, number of containers and the tally sheet for unloading units of certain cargo which had been admitted to be sub-assemblies of photocopiers by appellants. All the nine statements given by Shri K.A. Shabu were given as MD of CFI. He had also given statement to Sales Tax authorities as MD, CFI. In a couple of letters addressed to DGCEI Shri K.A. Shabu described himself as authorised signatory of CFI. He presented himself for examination by DGCEI in response to their summons issued to MD CFI. His retraction from the nine confessional statements was made more than four years later. These retractions are not valid. There is no valid explanation why he gave initial confessional statements and retracted them only after four years. The initial statements given under Section 14 of the Act/Section 108 of the Customs Act are therefore reliable evidence. Statements of S/Shri K.A. Shabu, S. Krishnakumar, M.A. Nishad, Ms. V. Radha, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll meet the requirement of certification in terms of Sub-section 2(d) Section 36B of the Act. They cannot later say that no enquiry was made with the person stipulated u/s 36B(2)(d). Revenue has argued that once the printout is taken in presence of responsible persons who dealt with the data entry in the CPU and retrieval, printouts of such data do not need to comply with the safeguards enlisted u/s 36B(2) of the Act. While this is a reasonable stand, we find that the data retrieved are proved by the bank statements and oral evidence of employees of CFI. Thus the computer printouts are not solely relied on as evidence and the non-fulfilment of conditions under 36B(2) alleged does not affect the printouts being used in proceedings. Relevant extracts of Section 36B are reproduced below : SECTION 36D. Admissibility of micro films, facsimile copies of documents and computer print outs as documents and as evidence. — (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 statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting a single computer; and references in this section to a computer shall be construed accordingly. (4) In any proceedings under this Act and the rules made there under where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say, — (a) identifying the document containing the statement and describing the manner in which it was produced; (b) giving such particulars of any device involved in the production of that document as may be appropriate for the purpose of showing that the document was produced by a computer; (c) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub-section it shall be sufficient for a matter to be stated to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igenously sourced without following the statutory formalities prescribed in the Central Excise law. From the evidences gathered it is obvious that CFI was a corporate facade behind which a few individuals perpetrated a commercial fraud of illicit manufacture and clearance of photocopiers and massive evasion of central excise duty. As rightly argued by the special consultant for the department, when the printouts of data are taken from the assessee's computer in regular use in presence of its employees who operated the said computer, it is reasonable to infer that the requirements prescribed under Section 36B(2) have been met. In any case, the computer printouts are not stand alone evidence in the proceedings. They are corroborated by authentic bank records. Appellants have no case that the printouts are not genuine or that they were collected behind them. The printouts are good evidence. 9.5 The computer data and the corresponding particulars appearing in the bank statements amply establish the evasion indulged in by CFI and its promoters and employees. CFI admittedly obtained IEC code, Sales Tax registration No. and Pan No. in the names of its employees. Sub-assemblies of photoco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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