TMI Blog1994 (8) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... s giving M/s. Reliance Industries a clear chit with regard to allegation of fraud, collusion, wilful misstatement etc. and failure to consider the evidences and case laws properly on account of which lower penalty has been imposed, which calls for enhancement. 1.3 The facts, in brief, are that M/s. Reliance Industries are alleged to have taken false credit to the extent of Rs. 1.17 crores during July, 1983 and the false credit was detected on receipt of specific information. In the course of investigations with the concerned staff of the factory maintaining the record, it was revealed that the credit was deliberately taken without any authority under the instructions of their Director and one Shri Pai, assisting Shri N.H. Ambani in financial matters. Statements of a number of persons connected with finance management, audit of the accounts, excise in charge of the unit, were recorded and it was alleged that the wrong credit was taken deliberately with intention to evade duty on the final products and proposed to impose penalty. Since Reliance admitted of wrong credit and paid up the duty to the extent of Rs. 1.17 crores, this payment made was proposed to be confirmed. Hence show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved that the amounts brought forward at page 81 are double the amounts indicated on the previous page and the excess credits are not supported by any entries in the corresponding columns for indicating the particulars of duty paid GP1s. At entry No. 2399 on page 80, the balance of credit (col. 10) was shown as under :- B.E.D 12,60,380.59 S.E.D 1,26,037.87 Additional Duty (in Rs.) 5,64,216.16 Below the above entry, an entry without any S. No. has been made, when the above closing balance was shown as opening balance and additional credits as indicated below were entered. B.E.D 93,88,014.44 S.E.D 9,38,801.44 Additional Duty (in Rs 14,08,202.23 Thus a total of Rs. 1,17,35,018.11 is found to have been entered in the register without cover of any duty paying documents or Assistant Collector s order permitting credit. The above credit has been utilised towards payment of duty from 12-7-1983 to 15-7-1983 leaving a marginal balance of Rs. 1,178.78 under B.E.D., Rs. 117.84 under SED and Rs. 179.78 under A.E.D. The above position is noticed on scrutiny of the RG 23 Part II register produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s position after taking into account all the evidences produced and has come to the conclusion that this is not a case of fraud, collusion or suppression. In the context of these findings, he could not have imposed a penalty of Rs. 1/- crores. He could have accepted their offer to pay interest and collected this amount as interest, which he would now urge for acceptance before the Tribunal. 7.1 The above arguments prima facie appear reasonable and could find ready acceptance, but for the appeal filed by the Revenue, which challenges the very same findings of the Collector on fraud, suppression etc. and seeks for enhancement of penalty. This requires us to go into the details of the evidences and the allegations made by the Department in the show cause notice and reappreciate the evidences. 7.2 Before going into the question of mens rea, we are to consider the question, whether instead of penalty, offer of interest could be accepted and the matter finalised by the Collector or by us. The Supreme Court have clearly held that the authorities functioning under the statute are to go by what is prescribed in the Statute. Though Tribunals have some inherent powers, such powers can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 173Q(i)(d) only. When the rules make a clear distinction as above, there is not scope for bringing `Mens rea into this case, when the admitted position is that excess credit was taken unauthorisedly and it was utilised resulting in clearance of final products without payment of duty. Hence we are to hold that even assuming that there is no mens rea or there is no fraud/suppression etc, penalty is legally justifiable under Rule 173Q(1)(a). We also find that the same view was taken by the South Regional Bench, relying on the decision of the Supreme Court - vide para 25 and 26 of the decision reported in 1985 (22) E.L.T. 413. 8.1 Now we come to the Department s appeal pleading that there is a deliberate/misstatement by inserting a credit in a deliberate manner for purposes of evasion of duty and hence calls for increased penalty. 8.2 The Department s case is mainly based on the following evidences :- (i) Shri Dilip Kumar Ranchodbhai, Excise Clerk of the factory admitted that it was not a clerical mistake but was done intentionally under the instructions of one Shri Suman T. Patel, Dy. Excise Officer of the factory. (ii) Shri Suman T. Patel admitted and confirmed the facts s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the extent of Rs. 1.17 crores was included in this. Shri Manubhai Patel, who had signed the R.T. 12 returns had not raised any objection, presumabley because he might have been told about false credit by Shri Pai. He also deposed that he did not have any ill will or enemity against Shri V.T. Pai. (iii) Shri Dilip Kumar, again gave a statement on 3-6-1987, wherein he reiterated his earlier statement and confirmed that Shri Pai visited the office on the day, when the wrong credit was taken and Shri Pai had talked to Shri Suman Patel on some matters. Though Shri Dilip Kumar was not willing to make the wrong entry, Shri Suman Patel had told him that somehow they had to make this entry and thereafter he made the false entry in the register. (iv) Shri Manubhai Patel, Excise In charge of the unit in his statement admitted that he signed the RT 12 returns but had not checked the details and he was aware of the credit allowed by Assistant Collector on 7-7-1983. Even though he had knowledge that the closing balance at the end of June 1983 was a nominal amount and no fresh credit was allowable in July, 1983. and the only credit allowed was under Assistant Collector s letter dated 7-7-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, which was utilised on 13th, 14th and 15th July, 1983. Credit of Rs. 1.13 crores was utilised in just 2 days and an amount of Rs. 56 lakhs had been debited from the credit on each day on 13th and 14th July, 1983. Shri Meshwani would have talked with Shri N.H. Ambani organising funds. He did not remember whether any such discussions took place on the above dates. (vi) Shri Pai also confirmed his stay in Cama Hotel from 11-7-1983 to 13-7-1983. However after going through the statements of S/Shri Suman J. Patel and Dilipkumar he stated that though he stayed in Ahmedabad during those days and visited office on that day, he never gave instructions to them and he does not know why they made such entries in RG 23 Part II. His company has already paid Rs. 1.17 crores in June 1987 and the company had not gained anything in this matter excepting the interest element from 1983 to 1987 and he would discuss the matter with the management and might pay interest in case, it was so decided. (vii) The statements of others connected with finance management and audit of accounts of the unit were recorded and they do not bring out any direct nexus to the wrong credit taken on 12-7-1983. The Audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has been made by someone else. On query by the Bench, during the hearing, this aspect was not pressed by the Counsel. 8.5 Though contradictions and improbabilities in the statements of Suman and Dilip are pleaded, the admitted position is that the deponents have not retracted from their various statements given before the Central Excise Supdt. and it was also revealed to us, that the affidavits were filed by these two employees after proposed enquiry against those Officers, by the management. Even the Collector has held that their deposition during cross-examination cannot be given much credence, and has held that in so far as the adjudication is concerned, their original statements stand. But the Collector has held that there is no further evidence to support the contentions of Suman and Dilip. Since Suman and Dilip are coaccused in the prosecution launched by the Department, the Collector chooses to hold that the evidences are not acceptable in the absence of corroboration. The assessees also rely on this position, as held by the Collector to plead that mens rea has not been established. 9.1 We have carefully considered the pros and cons of the above arguments. Though pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of maintenance of RG 23. It is significant that the wrong entry was admittedly made on 12-7-1983 and Shri Pai admits to have visited the office on that day. Moreover, Shri Suman s version that Pai assured him that nothing serious will happen, and if false credit is detected, the amount will be paid up, is also supported by Pai s statement to the effect that duty has already been paid and there is no loss to the Govt. and if need be, he will consult his management for paying interest. Hence Pai s denial of having given instruction for making false entry, stands out as lone exception, as compared to other parts of his statements, substantially corroborating the version of Suman. It also reveals that he controls the person who might have been instrumental for the offer of interest later made by the management. 9.3 It is not the case of R.I.L. that S/Shri Suman and Dilip are their disgruntled employees and they were out to malign the fair name of the institution. Their plea is only to the effect that these two employees statements were obtained under threat and contain improbabilities and inconsistencies and the true position is revealed only in their subsequent affidavits and in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ercise commenced, only after issue of S.C.N. to the firm and defence was built up in the form of these documents apparently under legal advice. They are bereft of credibility and also appear to have been taken under duress, on the threat of Departmental action being taken against them, if they did not explain within two days. They appear to have no option but to say as desired by the Management to save their jobs. (vi) Thus we find that S/Shri Suman and Dilip are placed in an unenviable position for telling the truth in their original deposition. It is a pity that they have drawn flak from both the sides, by way of prosecution by C. Ex. Dept and by way of Departmental action by their management. (vii) In any case, even after considering these documents, we are satisfied that their original versions stand the test of credibility as compared to their subsequent versions, which appear to be solicited and made up under legal advice. 9.4 We also find that Shri Manubhai Patel, Excise in charge of the unit, who has signed the R.T. 12 returns confirms that he was aware of the legal position that no credit could be taken in respect of receipts of inputs after 1-7-1983 and he was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of which proforma credit has been allowed under Rule 56A. (iv) This would mean that stocks of texturised yarn manufactured by them, out of proforma credit allowed filament yarn lying in stock has to be cleared on payment of duty. The evidences point out that they had a huge stock of such texturised yarn, which had to be cleared on payment of duty. Their RG 23 credit balance as at the end of 30-6-1983 was not substantial. Credit allowed on 7-7-1983 was to the extent of Rs. 1.17 crores only, which would suttice for 125 tonnes, as stated by their own staff. Hence if a credit has been taken on 12-7-1983 out of the blues and vanished within a period of two or three days at the average rate of nearly Rs. 56/- lakhs per day, the motive could be to use this credit for clearance of such stock of texturised yarn manufactured out of proforma credit input, for which exemption cannot be availed of and they had a fairly huge stock of such texturised yarn with them. 10.2 Thus in the ultimate analysis, we are to hold that there is a wilful mistatement with regard to the credit taken on 12-7-1983 to the extent of about Rs. 1.17 crores. The Supreme Court in the case of Camphor Drugs Lini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted position is that Government s loss on account of non-recovery of this amount in time (part of the blame for this is to be shared by the Departmental Agencies) has been more than compensated by the penalty imposed and recovered. Moreover, we are told that prosecution proceedings against Reliance Industries Ltd. have been initiated and any further corrective/punitive action is best left to be taken care of by the court in accordance with law. 11.2 Though under the law, there is scope for going upto the maximum limit permitted under Rule 173Q, for imposing penalty, we are also to take note of the post-detection conduct of the assessee in this case, by making the payment within a few days of detection and their offer to pay such sums as interest to compensate the revenue for the loss caused on account of their action. Their aspect cannot be totally ignored, even in a case where we have come to the conclusion accepting the plea of revenue on the ground of mens rea against Reliance Industries Ltd. We agree with Revenue that there is a palpable false credit taken and do not get convinced of the plea of Reliance Industries Ltd. that it is bona fide clerical error. All the same, we ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds. Apart from any other aspects, which have been discussed by the Ld. Member (T) in extenso, a glance at various pages of the said Register (xerox copies of which have been produced) leads to indicate that the disputed entry could not have emerged as sheer clerical error. 14.2 Going through the xerox copies of pages 79 to 83 of RG 23 Register produced, it appears that a uniform method was being followed for filling in various columns. Whereas each entry was being serially numbered as required vide column 1, on all pages the last line was being left unutilised, for mentioning the figures of the relevant columns which were required to be carried forward for proper accounting, on the next page and as is evident from the entries on pages 79 to 83, such figures were being clearly indicated on the first line on each next page. Unlike the usual practice followed and deviating therefrom, on page 80, in the last line, entries have been made so far as column No. 3 is concerned, without filling in column No. 1, which is for giving serial number. If the entry in the last line was put inadvertently, which allegedly resulted in clerical lapse, the same would have been at least, serially ..... X X X X Extracts X X X X X X X X Extracts X X X X
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