9911796707
TMI Blog2024 (12) TMI 666X X X X Extracts X X X X X X X X Extracts X X X X ..... wherever the average consumption of electricity per KG was higher, it indicated the use of DG set for longer period of time. That being so, we note from records that in March 2003, the average consumption of electricity per KG was 810KWH, while the 50 KW generator was made use of for 30.10 hours and 8KW generator for 11.20 hours, likewise in January 2004, average consumption of electricity was 18744 KWH per KG, while both the 50 KW generator and 8KW generator were operational merely for 25 hours. That being the factual position, on record the argument of the appellant is not borne out to be true and is therefore clearly unsustainable and lacking merit. For the reason, the appellant s plea is unacceptable. The premise, therefore that electricity consumption was low and refuting it by claiming consumption of electricity produced by the DG sets is not at all satisfactorily forthcoming. The appellant have not placed any other argument to refute the said contention of the department. The plea of the appellant that they used to work on electricity generated from the DG sets is a bland statement and lacks any evidence/credence in support. The show cause notice clearly makes meticulous re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant despite filing of such returns shall indeed be liable to all consequences in law including that of imposition of penalties. On the principle that fraud vitiates everything and in view of the matter, no illegality surfaces out of the department s action in the matter and the department was completely justified in invoking extended period of limitation. Applicability of Section 11 D of the Central Excise Act - HELD THAT:- There are no hesitation in stating unequivocally that the appellant is certainly guilty of all charges that have been made out against them. The false and manipulated receipt and dispatch entries, cannot plug-in and come to the rescue of the appellants. Such record keeping is ab initio null and void. It stems from falsehood and forgery. There is no merit in the appellant s plea as regards the proposition of Section 11 D of the Central Excise Act as it is established from records that the amount of ₹9560962 was collected by the appellant Koolmint under the guise of Central Excise duty and therefore the provisions of section 11 D ibid are squarely applicable. The goods said to be manufactured were not manufactured, there being no requisite infrastructure to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty from the Account Current, availing no credit of duty paid either on inputs or on capital goods and claiming back the duty so paid, by way of refund in terms of notification number 32/99 CE dated 8 July 1999. As established from records, almost the entire clearances of M/s. Koolmint (nearly 99%) were said to be cleared to M/s Kaizen Organics Pvt. Ltd. (Kaizen for short), who used the said goods as input for final products manufactured by them, availing credit on the basis of invoices issued by Koolmint. The investigations further revealed that the goods were said to be sold to Kaizen on FOB/FOR basis at the factory gate, as also no transportation cost from Goripur to Jaipur, was indicated on the invoices. However, in actuality that was not the case. Investigations also revealed multiple instances of non-transportation of raw material and finished products. Further Koolmint allowed quantity discount by issuing credit notes from the month of April 2003 upto October 2004 on a monthly basis, that was not declared and in the absence of any agreement or contractual support to buttress the same. 3. In support of the primary allegation against Koolmint, it is the case of the revenue that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sable value of the products and the amount paid in excess of the duty liable/payable, therefore cannot be construed as duty of excise payable under the Central Excise Act 1944. For the said reason, even the refund of such excess amount taken by the appellant has been held to be not admissible, in terms of the said notification 32/99 CE, and the amount of refund so taken was computed at ₹4099633. The notice therefore levels grave charges of suppression and misdeclaration in the matter, manipulating the assessable value, manipulating the fake transportation of raw material and showing these, as gone into manufacture, mainly for records; thereby resorting to book clearance and showing transportation of finished goods, playing a fraud with the department with intent to evade payment of Central Excise duty by way of seeking fraudulent refund of excess duty, that was not due. In view thereof the show cause notice was issued invoking the larger limitation period in terms of proviso to section 11A(1) of the Central Excise Act. 4. During the course of searches carried out by the department at the premises of Kaizen, the authorities also noticed unaccounted finished product viz. essent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the farmers located in the states of Uttar Pradesh and Delhi, through agents, and that the raw material attracted nil/no rate of duty and their final product was almost entirely purchased by Kaizen. He submits that they had closed their operations on and from 10 August 2006. While describing the entire process for availing exemption notification benefit under notification number 32/99-CE dated 8/07/1999 as amended, he submits that the jurisdictional officer was required to pass an order for refund upon necessary verification, and that they had been receiving the said refunds on regular basis, which orders for refund had assumed finality. It is his contention that before issuing any demand for recovery of any short payment/non-payment of duty or for alleged erroneous refund under section 11 A of the act ibid, the department was required to consider the orders of refund for review under section 35E of the Central Excise Act. In support of his contention the learned consultant relies on the ratio of law as propounded in the following cases i. CCE, Kanpur Vs. Flock (India) Pvt. Ltd. [2000 (120) ELT 285 (SC)] ii. WEP Peripherals Vs. CCC (Appeals-II), Hyderabad [2007 (213) ELT 18 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the process of recovery of an alleged erroneous refund. 9. The learned advocate further submitted that the show cause notice actually duplicated the demands for the said amount both under section 11A as well as Section 11 D of the Central Excise Act, which again is impermissible in law and therefore render the show cause notice untenable. It is his case that once an amount of duty allegedly refunded is not liable to be recovered under the provisions of Section 11A, no demand can be raised in respect of the same duty under section 11 D which deals with such amount of duty as is collected in the name of the Central Government. In support of his argument, he relies on the case of Thandava Cooperative Sugars Ltd versus CCE Visakhapatnam 2006 (205) ELT 1020 (T). It is the respondent s contention that in terms of the exemption notification and by virtue of provisions of Rule 10 of Cenvat Credit Rules, 2002 and Rule 12 of the of the Cenvat Credit Rules, 2004, they were entitled to pass on the incidence of duty to their buyers, who in turn were entitled to avail Cenvat Credit thereon. The learned consultant submits that the mechanism and operation of the exemption notification is such that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justified. As for Cenvat Credit availed by M/s Kaizen Organics Private Limited, the Learned Counsel submits that the law mandated availment of credit on duty paid inputs, and so there was nothing wrong in availment of the same. 10. On the aspect of limitation, the consultant submitted that the show cause notice for the period, March 2002 to December 2004 was issued on 19.10.2006 invoking the extended period in terms of proviso to section 11 A (1) of Central Excise Act and as the ingredients of the proviso were not attracted in the matter, the entire show cause notice was barred by limitation. In support of his stance, he relied on the following case laws:- (i) Lakshmi Engineering Works Vs. CC 1989 (44) ELT 353 SC (ii) Pushpam Pharmaceuticals Company Vs CC 1995 (78) ELT 401 SC On this aspect, the learned Counsel finally submitted that as they were filing regular returns with the jurisdictional authorities, the invocation of the longer period of limitation was bad in law. Pleading not guilty, it was therefore their case that no penalties could be imposed on them under the circumstances. 11. The Learned AR appearing for the department submits on the other hand that the question of ava ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... great length. Pursuant to the hearing, the appellant was directed to file sample copies of ER1 returns filed alongwith other supporting documents. They were also directed to submit sample copies of refunds received by them for the PLA payments made by them on a monthly basis. They were given time till 30th October 2024. The department was also given time to make further submissions if any. In pursuance of the said directions, M/s. Koolmint filed copies of certain Refund sanction Orders as well as ER-1 returns. M/s Kaizen in response submitted that there was a fire incident at their premises on March 15, 2008 and enclosed certain testimonials as evidence thereof alongwith a copy of their intimation letter written to the departmental authorities sent on March 17, 2008, adding that ER-1 returns for the period under appeal were all destroyed. 14. A perusal of the ER-1 returns and refund orders filed by Koolmint, points out nothing deviating from what is aforestated and the fact of sanction of the refund of the duty paid through PLA, in the ordinary course of things as envisaged in terms of notification No. 32/99-CE dated 8.07.1999. Moreover, periodical refund claims bear the same langu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter dated 17/03/2008 to Jurisdictional AC A cursory reading of the two communications above however nowhere indicates a word about the destruction of records. Moreover, the fire reportedly was at the work place and not in the administrative block. 16. Thus what is required to be considered by us in respect of Koolmint Manufacturing Company is: -Whether the appellant actually manufactured excisable goods, and if they not so did, are they liable for appropriate action under section 11 D of the Central Excise Act, read with the provisions of rule 25 /or rule 27 of the Central Excise Rules 2002, read with section 11 AC of the Central Excise Act, 1944. In the alternative, if the appellant did actually produce finished goods and cleared the same in terms of notification number 32/99-CE dated 8 July 1999, would Section 11 D apply to the excisable goods so produced and cleared by them, and if so, whether any duty was paid by them in excess. 17. As for the appellant Kaizen Organics Pvt. Ltd., the moot question for consideration is whether the appellant actually received the excisable goods from Koolmint at its factory on which credit was availed and whether they could be subjected to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 50 KW generator and 8KW generator were operational merely for 25 hours. That being the factual position, on record the argument of the appellant is not borne out to be true and is therefore clearly unsustainable and lacking merit. For the reason, the appellant s plea is unacceptable. Moreover, not only there are very significant variations but the chasm between the two is also unbridgeable and unexplainable. It is also noted from records that the process of installation of 63KVA DG set, initiated only on 13 September 2002, when an application to the appropriate authority was extended under the provisions of the Indian Electricity Act and for which the sanction was received only on December 24, 2002 implying, thereby that the said DG set was inoperable during the material period. The premise, therefore that electricity consumption was low and refuting it by claiming consumption of electricity produced by the DG sets is not at all satisfactorily forthcoming. The appellant have not placed any other argument to refute the said contention of the department. The plea of the appellant that they used to work on electricity generated from the DG sets is a bland statement and lacks any ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abour, have been produced by Koolmint to buttress their claim. No records of payments made by way of salary payments/ statutory deductions like GPF etc. are presented in support of the said contention. This thereby establishes that the plea made out by the appellant is false, hollow and a tall claim, simply dished out for sake of self defence lacking corroboration. In this connection, the adjudicating authority has also indicated that it was not their case that the machines were automatic, therely emphasizing the need for manpower deployment to operate and utilize the same. This clearly suggests that in effect scarce or no manufacturing acts were undertaken by the appellant. This factual piece of information, therefore, lends significant strength, value and credibility to the charge of the department that the appellant had no adequate resource or infrastructure to manufacture such large quantities of finished goods, as allegedly recorded in the books of accounts and merely entered into paper transactions to seek inadmissible pecuniary gains. 23. As to the next leg of allegation concerning non-receipt of raw materials by M/s Koolmint and the thereby drawing obvious conclusions of no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consumption, thereby confirming their stance. 24. We further note that the adjudicating authority in para 5.4 of the order has observed that the goods transported from Delhi to Dubari were required to pass through Baksirhat check post at Assam-West Bengal border. The investigations initiated by the departmental officers with the Commercial Tax Department, Government of West Bengal at Baksirhat, check post revealed that out of the 38 number of trucks stated to have carried materials to the factory of Koolmint, 6 of them actually carried motor parts/motorcycle parts, electrical goods and mentha oil. The amount of mentha oil said to be carried by the said trucks is as much as 38,700 kgs. In respect of the remaining 32 vehicles, the Commercial Tax Department authorities of the Government of West Bengal have confirmed to the department that as per the records of Baksirhat check post, the said trucks carried mixed goods. However, as per the records of the appellant 194430 kgs of menthol oil has been reportedly transited through these 32 trucks. Reasons for non-acceptance of the verification report of the check posts as supplied by the department, have belied any response from the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y is a generalised one and does not lead to any conclusive evidence in support of the arguments as raised by the appellant in its defence. 27. From the aforesaid, the plethora of evidence gathered and the diversity and variety thereof, it is clear that the revenue has gathered enough circumstantial evidence as discussed in forgoing paras to assert that the appellant Koolmint Manufacturing Company, did not actually involve itself at the given premises into any manufacturing activity for the production of finished goods. It is settled law that the department is not required to prove its case of non production and fudging of records to claim undue fiscal benefits, by way of mathematical precision and mere preponderance of probability in such circumstances would suffice to nail the dot. The balance of convenience clearly flows in favour of the assertions made by the department. 28. Another arm of the Department s charge relate to valuation of the purported goods. It is an admitted position of the appellant that the purported finished goods were sold at the factory gate on FOB/FOR basis. That being the case, no transportation cost is required to be added to the assessable value. Contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any quantity discounts are placed on record, particularly so when almost the entire quantity (99%) said to be produced was indicated as sales to only one firm i.e. the appellant Kaizen Organics Pvt. Ltd. The transactions between the two firms Koolmint and Kaizen can therefore not be considered at arms length. There is large amount of evidence to indicate, the perpetuation of fraud with ill intents and designs aimed at hatching maximized financial gains, in the entire scheme of operations. It is thus clear that the entire scheme has been so designed to seek pecuniary benefits by way of fraudulent attempt at availing concession extended by the government for promotion of industrial infrastructure in the Northeast region. While there is no significant and satisfactory evidence, to establish the to and fro movement of raw materials and finished goods, the availment of cash refund and Cenvat credit by the appellant amounts to extreme misuse of policy provisions in good measure. To further accentuate their undue pecuniary gains by way of illegal reflection of quantity and recourse to discounts not backed by a shred of evidence, is a clear pointer to the ill machinations and sinister ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this context, it would be prudent to point out that in view of the schemed manipulation and deceit and that too of a very high order, no amount of legitimacy can be accorded to such reports and returns filed. The fact that the basic foundation of such database was set up on the edifice of fraud and deception, treachery and deception renders such reports/returns as ab initio void and a nullity in law. No shelter can be claimed under the guise of having tendered such returns to the department. For its contumacious conduct the appellant despite filing of such returns shall indeed be liable to all consequences in law including that of imposition of penalties. On the principle that fraud vitiates everything and in view of the matter, no illegality surfaces out of the department s action in the matter and the department was completely justified in invoking extended period of limitation. 32. It may also be noted that the moment the appellant learnt of the fact that their sinister designs had come to light and the department had got whiff of their nefarious designs and fraud being perpetuated, the appellants wound up their activities, closed shop and discontinued their operations in entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinctly evident and well established in the present matter. The present case is one of the classic examples thereof and aptly goes in to support the maxim, highlighting both commissioning of an illegal act as well as existence of a guilty mind. 36. The guilty mind of the appellant also comes to fore from the fact that pursuant to the initiation of investigations carried out by the department, the appellant closed and stopped their operations in the North East for untold and unexplained reasons. The fact for which no reasons are forthcoming, for such a course of action can undisputedly be concluded as to be on account of the mischievous, malafide-laden game plan of the appellant. Having been exposed, they were no longer in a position to carry on their unscrupulous deeds and continue to play a fraud an government exchequer. This fact hammers the final nail into the unholy play hatched by the appellant. 37. Under the circumstances, the plea of the appellant that the refund orders sanctioned were final and not having been appealed against consequently being immune to any recovery is also bereft of any sound legal basis. Once a fraud has been perpetuated and revenue deliberately def ..... X X X X Extracts X X X X X X X X Extracts X X X X
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