TMI Blog1998 (9) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant, they are maintaining a Godown at 4, P.T.R. Siding, Coal Depot, Shalimar, Howrah and the second appellant, Shri Dinesh Kumar Goyel is the authorised representative of the said business. 2.2. The first appellants firm has been registered as a wholesale dealer in terms of Rule 174 of the Central Excise Rules, 1944 read with Section 6 of the Central Excise Act, 1944. Shri Mahesh Kumar Goyel was maintaining RG-23D Register in the ordinary course of his business and as a registered dealer was receiving excisable goods on purchase along with the duty paying documents (invoice) and bringing them into his registered godown and was selling the same to his customers under the company s own invoices in terms of the provisions of Rule 57GG of the Central Excise Rules, 1944. Based upon the invoices issued by the first appellant firm, the purchasers of the materials having been sold by it, were availing the benefits of the Modvat credit. 2.3 The appellant s office premises was searched by the Officers of Directorate General of Anti-Evasion (C.E.) along with the Officers of the Commissionerate who recovered and seized various statutory records maintained by the first appellant-firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and a personal hearing was also conducted before the Commissioner of Central Excise, Calcutta-II. Before the Order could be passed, the appellants moved a Writ Petition in the High Court of Calcutta, challenging, inter alia, the legality and validity of the said search and seizure of the documents and the Indian currency of Rs. 17,80,000.00. The Hon ble High Court vide their Order dated 15-4-1997 directed the adjudicating authority to pass the Final Order in the proceedings initiated on the basis of the said show cause notice and to indicate the same to the appellants within a period of 3 weeks from the date of communication of the Order. Accordingly, the Commissioner of Central Excise, Calcutta-II vide his Order dated 7-5-1997 released the Indian currency of Rs. 17.80 lakhs and imposed a personal penalty of Rs. 15.00 lakhs on Shri Mahesh Kumar Goyel under the provisions of Rule 173Q(bbb) of the Central Excise Rules, 1944 for the contravention of Rule 57GG ibid. Penalty of Rs. 2.00 lakhs was also imposed upon the second appellant, Shri Dinesh Kumar Goyel under Rule 209A of the said Rules. The said amount of Rs. 17.00 lakhs was also appropriated and recovered from the released amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder, should be held to be illegal and invalid. 3. Countering the arguments, learned S.D.R., Shri T. Premkumar submitted that the earlier Order dated 7-5-1997 was passed by the Commissioner in terms of the Hon ble Calcutta High Court s Order and the Commissioner was bound by the same. There was nothing wrong or illegal in honouring the High Court s direction and then passing a detailed Order subsequently. 4. After giving our careful consideration to this limited point raised by the appellants herein, we find that though such a practice of passing two different Orders by the adjudicating authority is not appreciable, nevertheless, we take note of the circumstances under which the two separate Orders were passed by the Commissioner. There was a High Court s Order directing the Commissioner to pass the adjudication order within a period of three weeks from the date of receipt of the High Court s Order. Honouring such direction, the Commissioner had passed the operative part of the Order and had very clearly observed that a detailed reasoned Order would be passed subsequently. Such a practice may cause inconvenience to the appellants, but cannot be a ground for setting aside the O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of facts, various evidences have been disclosed, which show that no activity of receipt and despatch of the iron and steel articles was being carried out in the registered godown premises of M/s. C.T.C. at 4, P.T.R. Siding, Shalimar, Howrah. The said godown was inspected by the officers of the D.G.A.E.(C.E.) in presence of Shri Dinesh Kumar Goyel on 25-3-1995 and a verification report was prepared, which was jointly signed by the officers. It has been alleged that the said godown has a space measuring about 60 x35 having tin-sheet fencing and the main gate used for loading and unloading purposes was found rusted on the ground of prolonged non-use. It was, further, alleged that on the date of visit only 15 to 20 M.T. of Steel Rounds (Defective) was found lying at one side of the space. The remaining surface of the soil shows no sign of keeping any steel material on it. The soil surface was clean and greenish in colour. It was further alleged that the man living in the room at the side of the godown is just a guard/darwan and there was no sign of using the room for the purposes of issuing challans or for keeping any other paper/register of stock, etc. The godown was not having any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtment, West Bengal. Some of the vehicles even had not existed and some of them were not even trucks/lorry capable of carrying more than 10 to 15 M.Ts. of iron and steel materials. It was alleged that some of them were found to be Matadors or even Three-Wheelers or vehicles belonging to Calcutta Municipal Corporation. No evidence of payment to these transporters had been produced by the appellants. No transport challans by the transporters had been produced by the appellants. Further, in Para 3.9, it had been alleged that in some cases, the goods had been procured at a higher price and sold at the depreciated value whereas it is a common knowledge of fact that iron and steel being non-perishable commodities has a tendency to grow in value over the years and as such, there cannot be any compelling reasons for the appellants to sell the goods at the depreciated value. From all these, it had been concluded by the Commissioner that the appellants had been engaged in the purchase and sale of iron and steel materials on paper without actual receipt of the same and the goods covered under the bills/invoices were sold to different buyers against cash and the buyers reflected in the invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the departmental clarification which is to the effect that sales to non-modvatable persons need not be entered in the RG-23D register. 16. He, further, submitted that the sale-bills were seized by the Officers. at the time of seizure of the documents from their office. This fact is also clear from the initial deposition of Shri M.K. Goyel made in his statement tendered on 21-1-96. 17. As regards the statements he submitted that all these statements were given by the appellants while they were in jail custody and the same had subsequently been retracted by the appellants. The statement of Shri R.N. Dubey of M/s. C.T.C. is not reliable inasmuch as the said deponent was not offered for cross-examination. 18. As regards the departmental allegation in respect of the Invoice No. 647, the Explanation Chart correlating the said invoice to M/s. Mechano Paper Machines Ltd. has been put on record by the Appellants, starting from the procurement of the materials from S.A.I.L. and sending of the same to the De-coiler, M/s. New India Metal Works Howrah, for the purpose of de-coiling and further transport to M/s. Mechano Paper Machines Ltd. to whom it had been sold. The papers showing mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M.Ts, the appellants stand that the same has been sold to non-modvatable optees and the bills raised are in the custody of the Department, is not correct inasmuch as no cash memos were seized from the office of the appellants as is clear from the list of seized records appearing in the seizure memo. The appellants have also not made any efforts to inspect the records and the said bills from the records. The show cause notice has clearly mentioned that seized records were not containing any cash memo or sale bill. In spite of that, the appellants have not tried to inspect the records and prove the Department wrong by taking such cash memos, etc., from the seized records. He submits that in fact, the appellants changed their stand after the seizure of 40 M.Ts. stock from the De-coiler, M/s. New India Metal Works, Howrah. But, however, inspection of records was not asked for, in spite of the fact that para 5 of the show cause notice specifically asked for documents required by them. Referring to the various evidences disclosed in the show cause notice and relied upon by the adjudicating authority, he submits that the size of the godown by itself shows that the same was insuffic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord. Mere retraction of the statements without any evidence of duress or coercion, do not reflect upon the evidentiary character of the statements which were recorded under Section 108 of the Customs Act, 1962. We also find that the appellants have been changing their stand in various statements. The Hon ble Supreme Court in the case of Surjeet Singh Chhabra reported in 1997 (89) E.L.T. 646 (S.C.) = 1996 (17) RLT 331 (S.C.) has laid down that if the statements are retracted, Court is required to examine whether it is obtained by pressure or duress and if found to be voluntary, the same is to be relied upon for conviction. In other words, it has been laid down by the Hon ble Supreme Court that the mere fact of retraction of the confessional statement by itself, is not sufficient and if, on examination, nothing is found to hold that the statements have been given under coercion or duress, the same can be made the basis by holding the appellants guilty. Apart from this, we also find that Shri R.N. Dubey, Accountant of M/s. C.T.C. in his statement had deposed that though he was maintaining RG-23D register he was not aware of the physical receipt of the goods or despatch of the same. En ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt; impractical over-weights carried by some vehicles out of which some belonged to the Public Works Department like Calcutta Municipal Corporation etc.; absence of any evidence of payment of any freight to the transporters - are sufficient enough to hold against the appellants. We also find that this question came up for consideration before the Tribunal in the case reported in 1998 (97) E.L.T. 342 (Tri.) = 1997 (23) RLT 548 (CEGAT), in more or less similar state of facts and circumstances. It was held that the vehicles as mentioned in the invoices have been found to be other than trucks inevitable for carriage of the sizes of consignments in question and there was no freight shown to have been paid to the transporters the non-use of the vehicles was established. All these evidences would lead to the inevitable conclusion that the goods in question were never transported. Accordingly, we find that there is sufficient material on record against the appellants herein to prove that the appellants have been engaged in mal practice of issuance of bogus invoices without the actual despatch of the goods, so as to enable the consignees to avail the Modvat credit, which actually was not du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Smt. Archana Wadhwa, Judicial Member, but I regret, with respect, that I do not agree with her conclusions on the evidence on record. 29. Facts have been largely set out in the order proposed by the ld. Judicial Member. It is not necessary to set out the same again. I will set out, wherever necessary in the course of my discussion, those facts which have not come on record. 30. Allegations against the appellants made in the show cause notice (SCN) and which have been upheld are that the appellant No. 1 a dealer of Iron and Steel products registered by Central Excise authorities for issuing modvatable invoices to further traders therein or to manufacturers of excisable goods in order to enable them to take Modvat credit, - (i) purchased Iron and Steel products from TISCO, SAIL and other dealers but did not bring the same to its godown in Calcutta; (ii) disposed of the said products clandestinely without accounting for it in records to such manufacturers who are availing full exemption from Central Excise duty; (iii) duty paying documents (invoices) obtained by the appellants were sold to manufacturers of excisable goods on commission, after showing in record t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artment, Government of West Bengal. (k) some of the vehicles even had not existed and some of them were not even trucks/lorries capable of carrying more than 10 to 15 MTs. Some of the vehicles were found to be matadors or even three wheelers or vehicles belonging to Calcutta Municipal Corporation. (l) no transport challans by the transporters were produced. (m) in some cases goods had been procured at a higher price and sold at a depreciated value even though the products being non-perishable, have a tendency to grow in value over the years. (n) availability of huge cash on the day of seizure supports the allegations inasmuch as no cash is required when all transactions of purchase and sale of the products are made through cheques/drafts. 32. I am of the considered opinion that none of the facts and circumstances, either singly or collectively, mentioned above, even if assumed to be true (although these are strongly rebutted by the appellants and I will revert to them later), brings home the charge that there was no actual transport of material purchased by them to their godown/decoilers, since that, products/materials purchased by the appellants were clandestin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoices of the appellants are without transactions of goods because no goods were brought or transported by him to his godown. It becomes essential for Revenue to bring on record the evidence of driver or owners of vehicles which, as mentioned in undisputed invoices of sale by SAIL, TISCO, etc., transported the goods. Failure to do so leads to the inevitable inference that the state of affairs mentioned in such invoices of SAIL, etc., regarding transportation of goods to the appellant s premises cannot be doubted at all. To doubt such transportation is to doubt the invoices themselves which is not even the case of Revenue. 38. A similar inference is reached when Section 114 of the Evidence Act which incorporates presumption of existence of certain facts, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case is considered. Having regard to the foregoing factors, these rebuttable presumptions of facts are of universal character and partake commonsense. Illustration (g) under Section 114 of the Evidence Act states: (g) that evidence which could be and is not produced would, if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme of Revenue s story and thereby they attain the status of independent witnesses. These charges have further weakness that Revenue has not examined and recorded the statements of persons who, as per modvatable invoices, purchased the goods from the appellant and received them. These person also fall in the category of essential witnesses. Failure to examine and record statements from them injects a serious weakness in Revenue s case. 40. These weaknesses are fatal to the Revenue s case. Consequently the impugned order is liable to be set aside on these weaknesses alone. I order accordingly. 41. Now I revert to the evidences - circumstantial, and some statements, relied upon by the adjudicating authority and termed by the ld. advocate Dr. Debi Pal for the appellants as wild allegations, contrary to records kept in normal course of business by the appellants and drawing totally unwarranted inferences from some irrelevant circumstances, statements and documents. 42. Circumstances (a), (b) and (c) referred to in para 31 above are based on a verification report dated 25-3-1996, more than two months after the search and seizure and when the appellant had surrendered its registra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MTs. were lying at New India Metal Works and the remaining sold to non-modvat optees. Bulk of the quantity was still told as sold to non-modvat optees. Difference of 40.150 tonnes is no doubt due to new facts coming to light subsequently. This quantity had been seized by the C. E. officers in the meantime as having not been entered in R.G. 23D register. I am of the view that reply to such a question requires detailed examination of records. One cannot remember these things, which in any case are a matter of record. Both the appellants had stated that sale bills must be in seized records. Annexure to seizure list, enclosed with the appeal papers refers to, at Sl. Nos. 2, 3, 6, 28, 29, 51, 52 sale bills, files of sale bills etc. C.E. officers did not follow up with this circumstance with any further interrogation of the appellant confronting them the seized record. In any case, the only significance of this circumstance, in my view, in the context of Revenue s allegation is that the balance book stock was only theoretical since goods were not received or brought by the appellant. I agree with the appellant, as rightly pointed out by him in his para-wise reply to the statement of fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation of the appellant is that there is no allegation that these have been sold at less than market price on the date of sale. Further, it is submitted that it does not make any commercial sense to keep the capital idle in a business activity waiting for the time for the market to rise. There is substantial force in the appellant s plea and a purely theoretical approach of the Revenue without understanding the pragmatic consideration of trade and commerce ... Further, I am of the view that a few such examples, out of about 900 modvatable transactions given by the Revenue prove the plea of the appellant rather than of the Revenue. No consistent pleas of manipulation can be read in these transactions. 49. A very important circumstance according to Revenue cited by it in support of its allegations, is the recovery of huge cash of Rs. 17.80 lakhs since the transactions, according to the records, are carried out through cheques/drafts, thereby implied inference is that the cash has been received from persons who have been received from persons who have been sold the goods clandestinely without accounting for in the books. On the other hand appellant s case is that the cash belonged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der per : C.N.B. Nair, Member (T)]. - The point of difference stated above occasions this opinion. These appeals mainly relate to imposition of penalty under Rule 173Q (bbb) of the Central Excise Rules on a registered dealer of excisable goods. Rule 173Q (bbb) is reproduced below for convenience of discussion of the issues involved :- Rule 173Q (bbb) If any manufacturer, producer, registered person of a warehouse or registered dealer - enters wilfully any wrong or incorrect particulars in the invoice issued for the excisable goods dealt by him with intent to facilitate the buyer to avail of credit of the duty of excise in respect of such goods which is not permissible under these rules. 53. The impugned order relates to the issue of modvatable invoices involving Central Excise duty of over Rs. 2.3 crores during 1994-1995 and 1995-1996. It holds that the appellant M/s. Calcutta Traders Corporation did not effect any purchase or sale of steel materials and yet issued invoices to different customers without actually transacting the goods under the cover of the invoices so as to extend benefit to those customers to avail of Modvat credit on the strength of those invoices. Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y explained in their statements that shortage on the date of stock taking was on account of goods being sold to non-modvat buyers. There was no contradiction or inconsistency. Regarding the sales at less than purchase prices, they explained that sale price had to be seen in comparison to market price at the time of sale and not the purchase price. And there was no allegation of sale below market price. It was submitted that they had not been allowed cross-examination of their accountant Shri R.N. Dubey and Shri D.K. Goyal though their statements had been relied upon against them. The appellants also had submitted that since the allegation relates to misuse of Modvat facility, it was for the department to identify the cases of such misuse and this has not been done at all and no instance shown of any buyer of the materials from the appellants using the invoice issued by the appellant for the purpose of taking ineligible Modvat credit. 54. During arguments, Dr. Debi Pal, ld. Sr. Advocate submitted that the findings are totally untenable, and the action taken is contrary to law. He submitted that in order to attract punishments under Rule 173Q (bbb) it has to be first established th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies and they had been paid through banking channels. He emphasised that it is inconceivable that such companies would issue false invoices providing wrong particulars in the invoices (including transport). No evidence has also been produced by the investigation to show that the transporters had taken the goods to parties other than the appellants or that the appellant had disposed of the goods to persons other than the consignees mentioned in the invoices. In fact investigation is silent on all these vital aspects. Therefore, the finding that the appellant had neither purchased nor sold the goods or that the invoices were issued without receiving the goods lacks evidence to support it. 55. Dr. Debi Pal also submitted that the imposition of penalty is quasi-criminal in character and therefore penalty can be imposed only in the face of sufficient evidence to bring out wilful nature of the offences and also the intention to facilitate/abet the committing of an offence. 56. Shri N.C. Roy Chowdhury submitted on behalf of the respondents that the RG23D register showed on the date of search that there was a stock of 1049.685 M.T. Rule 57GG casts the duty on the dealer to maintai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... E.L.T. 1546 (S.C.)]. He also submitted that proceedings under the impugned order were not a criminal trial, and in a civil proceeding relating to violation of tax laws, the nature of evidence required is different from the evidence required in a criminal proceeding. He also submitted that mens rea is not required in a revenue matter like this. He relied upon the Hon ble Supreme Court s decision in AIR 1984 SC 273 in support of the submission that principles of natural justice will depend on facts and circumstances of each particular case and the absence of opportunity for cross-examination does not invalidate or vitiate the decision arrived at fairly. 57. In his reply Dr. Pal reiterated that Rule 173Q is quasi-criminal in nature and mens rea is a necessary ingredient for attracting penalty. The adjudication order in no way has shown the violation of Rule 173Q(bbb) inasmuch as it had not shown that credit had been taken wrongly based on the invoices of the appellant. It has also not indicated what are the false entries made in the invoices and how they could be construed to be wilful and done with an intent to enable the consignee to avail himself of wrong or incorrect credit. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorrect particulars in these invoices. The penal provision in the Rule is, therefore, subject to satisfaction of mala fide intent and wilful entry of wrong or incorrect particulars. In the instant case it has not been shown as to what entries made in which of the invoices are found to be wrong or incorrect on verification. It has also not been shown that entry of such wrong or incorrect particulars was wilful and done deliberately to facilitate fraud on Revenue by the consignees. The investigation did not address itself to these requirements of the Rule. Therefore, imposition of penalty was not justified. The evidence collected on several circumstantial aspects like godown facilities, handling facilities, particulars of transport mentioned in the invoices, lower sale price in some cases etc. casts a dark shadow on the accounts kept by the appellant dealer and raises valid suspicions. But they do not go beyond that. The appellant has met these bits of circumstantial evidence with plausible explanations, that the godown was inspected two months after the investigations started and the appellant had stopped the business which renders the observations about soil etc. invalid, that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
