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TMI Blog2004 (9) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... n 11A(a) of the Central Excise Act, 1944. 3. I demand interest at appropriate rates for the above duty amounts under Section 11AB of the Central Excise Act, 1944. 4. I impose a penalty of Rs. 23,26,451/- (Rupees twenty-three lakhs twenty-six thousand four hundred and fifty-one) on M/s. Komalagoure Textiles (Proprietor Shri V. Madhu @ C.V. Maathesh) under Rule 173Q of erstwhile Central Excise Rules, 1944 enforceable under Section 38A of the Central Excise Act, 1944 read with Section 11AC ibid. 5. I impose a penalty of Rs. 41,92,460/- (Rupees forty-one lakhs ninety-two thousand four hundred and sixty only) on V. Madhu @ C. V. Maathesh and M/s. Selvaganapathy Textiles (Proprietor Shri C. Devaraj) under Rules 173Q of Central Excise Rules, 1944 enforceable under Section 38A of the Central Excise Act, 1944 read with Section 11AC ibid. 6. I impose a penalty of Rs. 5,00,000/- (Rupees Five Lakhs only) on Sri P. Dinesh under Rule 209A of the Central Excise Rules, 1944 enforceable under Section 38A of the Central Excise Act, 1944. 7. I impose a penalty of Rs. 5,00,000/- (Rupees Five Lakhs only) on Shri C. Devaraj under Rule 209A of the Central Excise Rules, 1944 enforceable under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oods were being transported from M/s. Selvaganapathy Textiles ("SGT" for short) and M/s. Sree Vignesh Textiles. In a follow-up action, the Superintendent of Central Excise, Pollachi Division interrogated Shri V. Madhu, Technical Advisor of M/s. SGT, on 3-2-2000. Shri. V. Madhu stated that M/s. SGT were running the cotton mill under a lease agreement with M/s. Komalagoure Textiles ("KGT" for short); that the mill was functioning in the name and style of KGT during 1998-99: that it was taken over by SGT from 1-4-1999: that they had sold cotton yarn on cones mainly to M/s. Sree Vignesh Textiles: that they had effected sales of cotton yarn to other parties as well: that they had effected clearances directly to M/s. Siddharth Yarn Traders without issuing any documents: that it was M/s. Sree Vignesh Textiles who issued invoices in respect of such clearances which were not accounted in the mill: that the goods seized by the officers had been cleared under invoice No. 68 dated 1-2-2000 and that no duty had been paid on the said clearance. The seized goods were provisionally released to SGT on execution of B-11 Bond on 4-2-2000. This bond was executed on behalf of SGT by Shri V. Madhu. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Sree Vignesh Textiles and M/s. Sree Ganapathy Textiles. He admitted having purchased cotton yarn on cones from KGT and SGT and sold the same to M/s. Siddharth Yarns, M/s. Vijay Yarn Corporation and M/s. Ganesh Yarns. He also corroborated the earlier statements of Shri V. Madhu and Shri M. Ganesh. On 29-6-2000, a further statement was recorded from Shri V. Madhu, wherein he deposed that on 1-4-1998, he obtained Central Excise Registration in the name of KGT and was running a mill: that there were no firms in the name of M/s. Padmavathy Textiles and M/s. Vignesh Textiles and these names were used only for the purpose of obtaining electricity service connections to KGT premises: that the cotton yarn on cones manufactured in KGT were sold to yarn dealers, namely, M/s. Ganesh Yarns, M/s. Siddharth Yarn Traders, and M/s. Vijay Yarn Corporation using the invoices of M/s. Sree Ganapathy Textiles and M/s. Sree Vignesh Textiles : that Sree Ganapathy Textiles and Sree Vignesh Textiles were bogus firms floated by him : that, during the years 1998-99 and 1999-2000, the sales proceeds of cotton yarn on cones manufactured by KGT were used for the purposes of KGT only: that the name of KGT wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n cones, of 40s count, per day. It further appeared that M/s. KGT had not accounted for their actual production but suppressed their production, that the suppressed production was removed without payment of duty to various yarn dealers by using the invoices of M/s. Sree Ganapathy Textiles and M/s. Sree Vignesh Textiles: that the sale proceeds were used only for M/s. KGT, its proprietor Shri V. Madhu and Smt. M. Premselvi: that Sree Ganapathy Textiles and Sree Vignesh Textiles were only dummy units floated by Shri V. Madhu only for the purpose of removing cotton yarn on cones manufactured in KGT without payment of duty during 1998-99 and 1999-2000. The Department also believed that the lease deed 1-4-1999 was made only for the purpose of suppressing the factum of manufacture of cotton yarn on cones by M/s. KGT. On the basis of the above investigative findings, the Department issued a show cause notice to the appellants. The impugned order was passed by the Commissioner in adjudication of this show cause notice. 4. Heard both sides and considered their submissions. The appellants' Counsel submitted that M/s. KGT had obtained CE registration on 1-4-1998 and it carried on the activit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... released on the strength of a B-11 Bond executed by Shri V. Madhu on behalf of M/s. SGT. Therefore, the provisional release of the goods had been made to M/s. SGT and not to M/s. KGT or its proprietor Shri V. Madhu. These arguments of the ld. Counsel have not been successfully contested and, therefore, we have to accept them. Consequently, the challenge in Appeal Nos. 317/2004 (by Shri V. Madhu) and 318/2004 (by M/s. SGT) against the demand of duty raised in Clause 2, and the penalty imposed in Clause 5 of the impugned order is sustainable. Similarly, the challenge in Appeal No. 317/2004 against the confiscation and redemption fine ordered in Clause 8 of the impugned order has also to be sustained. However, the challenge of M/s. SGT in Appeal No. 318/2004 against confiscation and redemption fine does not appear to have succeeded inasmuch as the seized goods which had admittedly been cleared without payment of duty were found to have been manufactured and cleared by M/s. SGT and the same were provisionally released to them on execution of B-11 Bond by Shri V. Madhu on behalf of M/s. SGT. In the result, Appeal No. 317/2004 filed by Shri V. Madhu succeeds, and the same is allowed. Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find that, as rightly pointed out by the Counsel, the only evidence gathered by the Revenue is what is contained in the statements of the appellant as well as S/Shri Dinesh, Vijay Kumar and Siddharth who were second-stage dealers and allegedly received consignments of cotton yarn from M/s. KGT during 1998-99. The appellant wanted to cross-examine these dealers so as to test the veracity of their statements. He made a specific request in this behalf in his reply to the show cause notice. We find that this request was not considered by the adjudicating authority. The finding of clandestine removal is not based on any corroborative independent evidence. We think, it was incumbent upon the adjudicating authority to have allowed the appellant to cross-examine the dealers, who gave statements against him. In this view of the matter, we are inclined to remand the case to the lower authority. The penalty imposed in Clause 4 of the impugned order under Rule 173Q read with Section 11AC is in relation to the demand of duty confirmed against the appellant for the period 1998-99 and, therefore, the penal liability also requires to be examined afresh by the Commissioner. In the result, we set ..... X X X X Extracts X X X X X X X X Extracts X X X X
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