TMI Blog2013 (10) TMI 1303X X X X Extracts X X X X X X X X Extracts X X X X ..... tory of stock which was examined on 28/29-9-1996. Thus we have two sets of clearances, one pertaining to clandestine clearance of about 35 MTs without accountal anywhere as admitted by the appellant’s officials and the other relating to the shortage of 35 MTs vis-a-vis the stock mentioned in the books of accounts. These two together account for about 70 MTs of goods cleared without payment of excise duty. - Therefore, the quantity of clandestine clearance taken at 69.26 MTs has a strong and reasonable basis. Accordingly, we hold that the duty demand on this quantity is clearly sustainable in law. If we apply the rate applicable to clandestine clearance of terry towels from 100% EOUs on par with the rate applicable to domestic units, the rate of duty applicable would be 10% adv. During the impugned period, for licit clearances from 100% EOUs made with the approval of the Development Commissioner, the rate applicable was 50% of each of the aggregate duties of customs leviable on like imported goods into India. During the impugned period, the normal customs duty rates were 25% BCD, 2% SCD and 10% CVD. Aggregate of 50% of each of these duties would work out to 19.175%. Thus it would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the finished goods which have been cleared illicitly. If duty is demanded separately, once on the inputs and again on the finished goods, it would lead to double demand of duty which is not sustainable in law. As regards the confiscation of goods valued at ₹ 7.23 lakhs seized on 1-10-1996, the confiscation is sustainable inasmuch as the goods were cleared without payment of duty and under the cover of bogus documents. An option to redeem the same on payment of a fine of ₹ 2 lakhs has been given by the adjudicating authority and we find that the fine is not excessive and therefore, we uphold the same. However, in respect of the seized vehicle valued at ₹ 3 lakhs, which is confiscated and allowed to be redeemed on payment of fine of ₹ 75,000/-, the amount of fine seems to be much on the higher side. The driver/owner of the tempo cannot be held responsible for the evasion of excise duty by the appellant firm though the vehicle has been used for transportation of duty evaded goods. Therefore, only a nominal fine is warranted and accordingly, we reduce the redemption fine from ₹ 75,000/- to ₹ 10,000 - Decided partly in favour of assessee. - E/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Santogen Textile Mills Ltd., Andheri. Though, the consignee s name was mentioned in the said challan as Professional Textiles, Lokhandwala Complex, Andheri, he was instructed to deliver the goods to a person at Kalbadevi. 2.2 Mr. G.R. Chavan, Supervisor of the appellant firm submitted that he had prepared the invoice No. 402, dated 27-9-1996 for 117 cartons of terry towels weighing 2538.77 kgs on a computerized proforma invoice on which the consignor s name was pre-printed as Santogen Textile Mills Ltd., Chakala, Andheri (E), and he wrote the name of the consignee, description of goods, quantity, value, etc. and he had prepared the said invoice based on the instructions received from Shri Paresh Bhuta, Marketing Officer. He also stated that though the consignee s name was written as Professional Textiles, the consignment was meant for one M/s. Nemichand Shah of Kalbadevi and he had instructed the tempo driver accordingly. He further admitted that he had dispatched 25 such consignments of approximately 120 cartons of terry towels each weighing 12 to 15 kgs, totalling 39 MTs without payment of Central Excise duty. 2.3 Shri Rangilal Hada, President of the appellant firm, subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en Exports Ltd., in his statement dated 4-10-1996 admitted that after expiry of permission to clear terry towels into DTA, they had cleared the goods to DTA on payment of excise duty up to February, 1996 and thereafter without cover of Central Excise invoice and without payment of duty and about 20 such consignments weighing approximately 40 MTs of terry towels were cleared without payment of duty during the period March to September, 1996 and the consignments of 356 kgs lying in their Andheri Office and seized by the department were also cleared without payment of Central Excise duty. 2.6 Shri Paresh Bhuta, Marketing Manager of the appellant firm also confirmed the above facts and further elucidated that they had misdeclared the consignor s and consignee s names for safe transport of terry towels and such clearances were undertaken on the instructions of Shri Rangilal Hada, President of the firm. He also confirmed that they had cleared about 32 consignments without payment of duty during May, 1996 to September, 1996 consisting of 3767 cartons and the weight of each carton varied from 8 to 29 kgs and the prices varied from ₹ 180/- to ₹ 350/- per kg. and in most of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of the goods seized and the tempo used for transportation apart from penalties on all the persons involved in the transactions. 2.12 The notice was adjudicated vide the impugned order and the adjudicating authority confirmed an excise duty demand of ₹ 67,84,507/- on the clandestine removal of terry towels weighing 69,261.21 kgs. during 1-4-1996 to 27-9-1996. Further a duty demand of ₹ 9,21,795/- was confirmed in respect of 78,563.09 kgs of terry towels, fents rags and waste yarn effected during 1995-96 without permission of the Development Commissioner. The said order also confiscated goods valued at ₹ 7,23,693/- seized on 1-10-1996 and gave an option to redeem the same on payment of fine of ₹ 2 lakhs in lieu of confiscation. Seized vehicle No. MH-06-G-370 was confiscated with an option to redeem the same on payment of a fine of ₹ 75,000/- in lieu of confiscation. A penalty of ₹ 75 lakhs was imposed on the appellant under Rule 209 of the Central Excise Rules, 1944 and a penalty of ₹ 10 lakhs imposed on Shri Ramnaresh Deora, Vice-Chairman and a penalty of ₹ 1.00 lakh each was imposed on S/Shri Rangilal Hada, U.J. Khadilkar, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing for the Revenue on the other hand made the following submissions : 4.1 This is a case of clandestine clearance of terry towels by M/s. Santogen Exports Ltd. After detailed investigations, a show cause notice was issued and the case was adjudicated vide O-I-O No. 122/2005, dated 12-5-2005. While the appellants have filed an appeal against the demand of duty, interest, penalty, etc., the department has also filed an appeal against the said Order against dropping of duty demands on inputs procured duty free and used in the manufacture of goods clandestinely cleared. 4.2 During the hearing before the Tribunal, the appellant has admitted to a clandestine clearance of 35 to 40 MTs of terry towels. The department has quantified the clandestine clearance at 69,267.31 kgs. and has confirmed the duty demand against the said quantity. This quantification is based on the details mentioned in the note books maintained by the security guards of the appellant firm. The appellant could not provide any documentary evidence showing clearance on payment of duty in respect of the goods mentioned in the note books maintained by the security guards. Shri Rangilal Hada, President (Works), has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of finished goods lying prior to de-bonding. The Supreme Court held the words allowed to be sold in India in the proviso to Section 3(1) means sales up to 25% of the production of 100% EOU in the DTA with the permission of the Development Commissioner. The question whether sales made by an EOU while it continued as an EOU but in excess of the permission granted would be outside the proviso to Section 3(1) was not before the Supreme Court. 4.6 This issue was examined by a Larger Bench of the Tribunal in the case of Himalaya International Ltd. v. Commissioner of C. Ex., Chandigarh-I - 2003 (154) E.L.T. 580 (Tri.-LB). After considering the judgment of the Supreme Court in the case of SIV Industries Ltd., it was held by the Tribunal that the rate as per the proviso to Section 3(1) would be applicable for assessing all the excisable goods which were cleared by 100% EOU to DTA whether in terms of the permission granted or in excess of the permission granted. 4.7 After this judgment, the Ministry issued Circular No. 1/2004-Cus., dated 5-1-2004 accepting the decision of the Tribunal and recalling the earlier Circular No. 618/9/2002-CX, dated 13-2-2002. 4.8 This issue was again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tal anywhere as admitted by the appellant s officials and the other relating to the shortage of 35 MTs vis-a-vis the stock mentioned in the books of accounts. These two together account for about 70 MTs of goods cleared without payment of excise duty. These clearances are also corroborated by the entries in the register maintained at the security which indicated a total clearance of 3796 cartons weighing 69,267.31 kgs. (including the goods seized on 28-9-1996 from the intercepted tempo). Therefore, the quantity of clandestine clearance taken at 69.26 MTs has a strong and reasonable basis. Accordingly, we hold that the duty demand on this quantity is clearly sustainable in law. 5.2 As regards the value of the goods which has been taken at ₹ 250/- per kg., the appellant has disputed this value. However, we find that Sri Paresh Bhuta, Marketing Officer of the appellant firm in his statement dated 29-11-1996 has confirmed that the value of terry towels cleared without payment of duty during May, 1996 to September, 1996 ranged from ₹ 180/- to ₹ 350/- per kg. and in most of the cases, the rate charged was ₹ 250/- per kg. This position is also corroborated by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounted for in the statutory records and have been effected without payment of duty. No permission had been obtained from the Development Commissioner for effecting such clearances nor any sought before effecting such clearances. Further the clearance documents prepared were fake/bogus inasmuch as the consignor s and consignee s name were misdeclared to avoid detection. Thus it is a case of pure and simple fraud. Therefore, the ratio of the decisions of the Larger Bench of this Tribunal in the case of Jaipur Golden Transport Co. Pvt. Ltd. and Himalaya International Ltd. should apply. The relevant portion from the former judgment is extracted verbatim below :- 14. We have considered the submissions. We find that the wordings of proviso to Section 3(1) of the Central Excise Act and Notification 125/84 which we have been called upon to interpret are similar and the basic dispute is as to how the words allowed to be sold in India are to be interpreted. After going through the various submissions made by both sides, we find that 100% EOUs were allowed to be established with the sole purpose of exporting 100% of their production as is evident from the words 100% EOUs. However, on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation which helps us solve the difficulties like the mimansa of principle of interpretation which lay down that when there is the conflict between the purpose and the material, purpose is to prevail because in the absence of the prescribed material a substitute can be used, for the material is subordinate to the purpose. If a subordinate idea clashes with the principal idea, the former must be adjusted to the latter or must be disregarded altogether. Further when there is a conflict between the use and the substance, greater regard should be paid to the use. Following these principles, we find that the purpose all along has been to treat 100% EOUs differently from domestic units other than 100% EOU and therefore we hold that so long an hundred per cent EOU continues as an EOU, it will be within the proviso to Section 3(1) of the Central Excise Act and a mere violation of the permission in the matter of sale to DTA will not take it outside the proviso to Section 3(1) of the Central Excise Act and Notification 125/84-C.E. Any other interpretation will mean that while the law abiding assessee will be liable to pay duty on domestic clearances, others violating the law can conveniently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of duty, whether under main Section 3(1) or under proviso to Section 3(1) and whether the goods stood exempted under Notification 125/84 or not although it was not required to do so. It has therefore given findings on 2-3 issues whereas once it was held that there has been no clandestine removal the question of demand of any duty would not arise. It cannot therefore be said that the appeal filed by the Revenue has been dismissed by the Supreme Court solely on the grounds that the clandestine removal itself has not been established or on all the three grounds. Therefore in the absence of a simple dismissal without a word about reasons it cannot be said that it would amount to declaration of law when 2-3 issues were involved and no findings have been given. Some observation to this effect has also been made by the Apex Court in the case of S. Shanmugavel (cited supra) that it is a speech express or necessarily implied which only is the declaration of law within the meaning of Article 141 of the Constitution. We, therefore, hold that the decision rendered by the Tribunal in Modern Denim case against which an appeal was dismissed by the Supreme Court cannot be considered as a decl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey best harmonise with the object of the statute and which effectuate the object of the Legislature . This point is further elucidated in p. 124 of the said book as follows : (b) Rule in Heydon s case; purposive construction; mischief rule - When the material words are capable of bearing two or more constructions the most firmly established rule for construction of such words of all statutes in general (be they penal or beneficial, restrictive or enlarging of the common law) is the rule laid down in Heydon s case which has now attained the status of a classic. The rule which is also known as purposive construction or mischief rule enables consideration of four matters in construing an Act : (i) What was the law before the making of the Act, (ii) what was the mischief or defect for which the law did not provide, (iii) what is the remedy that the Act has provided, and (iv) what is the reason of the remedy. The rule then directs that the courts must adopt that construction which shall suppress the mischief and advance the remedy . 5.7 If we apply the above principle to the facts of the present case, Section 3 of the Central Excise Act as far as it relates to goods prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obvious that such illegal or unwarranted order cannot be made the basis of issuing a writ compelling the respondent authority to repeat the illegality or to pass another unwarranted order. The extraordinary and discretionary power of the High Court cannot be exercised for such a purpose. Merely because the respondent authority has passed one illegal/unwarranted order, it does not entitle the High Court to compel the authority to repeat that illegality over again and again. The illegal/unwarranted action must be corrected, if it can be done according to law indeed, wherever it is possible, the Court should direct the appropriate authority to correct such wrong orders in accordance with law but even if it cannot be corrected, it is difficult to see how it can be made a basis for its repetition. By refusing to direct the respondent authority to repeat the illegality, the Court is not condoning the earlier illegal act/order nor can such illegal order constitute the basis for a legitimate complaint of discrimination. Giving effect to such pleas would be prejudicial to the interests of law and will do incalculable mischief to public interest. It will be a negation of law and the rule of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed based on the production and exports made during 1-4-1995 to 31-3-1996 and was valid till 31-3-1997. This permission thus relates to clearances to be made after the grant of permission on 18-10-1996 until 31-3-1997. It does not in any way relate to clearances already made during 1995-96 prior to the grant of permission. It is an admitted position that the appellant did not apply for any permission for clearance into DTA after the earlier permission granted expired in March, 1995. Therefore, it cannot be said that clearances were effected pending grant of any permission. Inasmuch as there is no permission granted by the Development Commissioner for the clearances made during 1995-96, the appellant would not be eligible for the benefit of Notification No. 2/95-C.E. as the concessional rate provided therein is in respect of clearances made in accordance with the permission granted by the Development Commissioner. Thus the demand of differential excise duty of ₹ 9,21,795/- is clearly sustainable in law and we hold accordingly. 5.10 Revenue has filed an appeal against the impugned order inasmuch as the adjudicating authority has dropped the duty demand of ₹ 22,47,360/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions contained in Section AA or AAA of Chapter V of these rules; or (bbb) 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; or (c) engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or (d) contravenes any of the provisions of these rules with intent to evade payment of duty, then all such goods shall be liable to confiscation and the manufacturer, producer, registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (bb) or clause (bbb) or clause (c) or clause (d) has been committed, or ten thousand rupees, whichever is greater. Explanation. - For the purposes of clause (bb) of sub-rule (1), a person availing of credit of duty on inputs received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se duty by the appellant firm though the vehicle has been used for transportation of duty evaded goods. Therefore, only a nominal fine is warranted and accordingly, we reduce the redemption fine from ₹ 75,000/- to ₹ 10,000/-. 5.13 As regards the penalties imposed on the officials of the appellant firm, only penalty on the managing director or the main person responsible for the affairs of the company is warranted. The other officials were only acting as per the instructions of the main person. From the records, it is seen that Mr. Ramnaresh Deora, Vice-Chairman of the appellant firm has owned the responsibility for violation of the various provisions of law and the penalty of ₹ 10 lakhs imposed on him under Rule 209A is justified and would suffice. Accordingly, we set aside the penalties imposed on Mr. Rangilal Hada, Mr. U.J. Khadilkar, Mr. Paresh S. Bhuta and Mr. N.B. Toshniwal, the other officials of the appellant firm. 5.14 As regards the penalty of ₹ 5 lakhs on Santogen Silk Mills Ltd., they were also a party to the fraudulent transactions and they allowed the appellant to use their bills as a cover for clandestine removal of the goods and hence, p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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