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2015 (10) TMI 2143 - CESTAT MUMBAI

2015 (10) TMI 2143 - CESTAT MUMBAI - TMI - Clandestine removal of goods - Penalty for abetment - Penalty under Rule 26 - Held that:- imposition of penalty under Rule 26 has been decided based upon the evidences available and the sufficiency of such evidences for imposition of penalty under Rule 26. - Penalty Imposed on 31 applicants is decided on the basis of evidences. - Appeal disposed of. - E/1044/2010, E/1062/2010, E/1075/2010, E/1185/2010, E/1195/2010, E/1208/2010, E/1209/2010, E/1210/2010, .....

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. Ltd., Maya Creationz, Kohinoor Dyeing & Printing Works, Srinathji Yamunaji Enterprises, G.Tex Inc., Vijay Fabrics Pvt. Ltd., Mitesh Brothers, Filgood Exim Pvt. Ltd., Dimond Impex, Navkar Exports, Gulabdas & Company, Parikh Impex Pvt. Ltd., Venus International, Atlas Exports (India), Angoora International, Valiant Glass Works P. Ltd., MRK Impex And K.S. International E/1044/2010, E/1062/2010, E/1075/2010, E/1185/2010, E/1195/2010, E/1208/2010, E/1209/2010, E/1210/2010, E/1221/2010, E/12 .....

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, Shri Vipin Kumar Jain, Advocate , Shri A.V.Naik, Advocate , Shri Rajesh Agarwal, Proprietor, Shri Mayur Shroff, Advocate , Shri D.H. Nadkarni, Advocate , Shri C.S. Biradar, Advocate, Shri N.S. Patel, Advocate , Shri Sachin Chitnis, Advocate, Ms. Anjali Hirawat, Advocate , Shri R.V.Shetty, Advocate Shri Ajay Kumar, Joint Commissioner (AR) : For the Respondent ORDER Per: P.K. Jain: All the 31 appeals listed below are against imposition of penalty under Rule 26 of the Central Excise Rules, 2002/2 .....

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/1221/2010 Nahata Fabrics Ltd., 2,00,000/- 11 E/1223/2010 Sankeshwar Fabrics Pvt. Ltd. 2,00,000/- 12 E/1224/2010 Blue Chip Fabrics Pvt. Ltd. 2,00,000/- 13 E/1237/2010 Ronak Dyeing Limited 2,00,000/- 14 E/1242/2010 S.V. Business Pvt. Ltd. 2,00,000/- 15 E/1244/2010 Maya Creationz 2,00,000/- 16 E/1325/2010 Kohinoor Dyeing & Printing works 2,00,000/- 17 E/1039/2010 Srinathji Yamunaji Enterprises 3,00,000/- 18 E/1103/2010 G.Tex Inc. 3,00,000/- 19 E/1162/2010 Vijay Fabrics Pvt. Ltd. 3,00,000/- 20 .....

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E/1305/2011 K.S. International 3,00,000/- 2. All the 31 appellants can be categorised under two categories, namely, processors who have purported to have received certain grey fabrics, availed cenvat credit on the corresponding invoices, processed the grey fabrics and the processed fabrics was either exported or was given to merchant exporter who in turn exported. Another set of appellants is, where the purported grey fabrics have been received along with the corresponding duty paying documents .....

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ment of duty utilising the credit on yarn. Case of the Revenue is that the yarn itself has not been received and the purported job-workers were either not known or in case of three job-workers, who were known have denied having done any job-work on behalf of M/s. Shreeman Textiles and M/s Sajjan Textiles. Addresses or names of other purported job-workers could not be given by Shri Suresh Raj Purohit, who was the proprietor of the two firms. Further, the two premises of M/s. Shreeman Textiles and .....

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s or merchant exporters were only on invoices, purportedly indicating the payment of duty, were issued to the processors and merchant exporters. Further, the whole purpose of this exercise was to encash the duty in the form of rebate by such processors and merchant exporters. 4. Heard the various counsels on behalf of the various appellants as also the learned AR. 4.1. It will be useful to describe in detail the case of the Revenue. The investigations have revealed that M/s. Shreeman Textiles an .....

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in operations. Investigation have also revealed that in a short period of 6 to 7 months (August 2004 to January 2005) M/s. Shreeman Textiles and M/s Sajjan Textiles has purported to have produced more than 1 crore L.meters of grey fabrics. During investigation Shri Purohit produced certain documents which indicated that 98% of the grey fabrics got produced on job-work basis in other weaving units. However, Shri Purohit could not give the details and address of such weaving units. Name and addre .....

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of M/s. M/s. Shreeman Textiles and M/s Sajjan Textiles in Pratap Co-Operative Bank, Mumbai. The bank statements indicated that the money received for the purported sale of grey fabrics was siphoned off from the account within a few days of such deposit. In respect of certain merchant exporters i.e. M/s. Vijay Fabrics and M/s. G. Tex, even though the details were appearing on the ledger of M/s. Shreeman Textiles and M/s Sajjan Textiles no such entries were found in the bank statements. Further, .....

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units and transportation was their responsibility and hence no transport documents are available with them. Further, by and large no such details were written in the invoices. On the other hand, merchant exporters as also the processors, in their statements have stated that the goods were delivered to the processing unit or to the merchant exporters godown and transportation was the responsibility of M/s. Shreeman Textiles and M/s Sajjan Textiles or of the merchant exporters in the case of proc .....

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personal hearing. Now we discuss each appeal separately. 5. Appellant No.1: Appellant No.1, M/s Weizmann Ltd., is a processing house located at Ahmedabad. Their explanation is that they have purchased the goods through a broker Shri Ramesh R. Shah. Appellant have also given the details of the broker. It is their submission that the goods were received through a transport company, namely, National Transport Corporation and that they have paid for the transportation through cheque details of which .....

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eman Textiles and M/s Sajjan Textiles did not indicate the vehicle number. However, we find that since the appellant have indicated the details of LR and made the payment through cheque. Investigation could have perhaps unearthed the real source of grey fabrics. Similarly, even broker Shri Shah has not been questioned. No investigation has been done by the Revenue on these aspects. Non-mentioning of the vehicle number alone cannot be a reason to impose penalty under Rule 26. Under these circumst .....

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ted that they have received invoices of M/s. Shreeman Textiles and M/s Sajjan Textiles but these fabrics were on account of merchant exporter Movement Impex Trading Co., Parikh Impex Pvt. Ltd., and M/s. Manhattan Exports and M/s. Srinathji Yashraj Enterprises who exported the processed fabrics. In the statement he has also indicated that the goods were received along with LR and they have made payment to the transporter through cheques. It is also claimed that they have recovered the transportat .....

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cated in the show cause notice and the order-in-original, it cannot be said that the appellant was having the knowledge that the goods being received by them are liable to confiscation. Under the circumstances, in our view, no penalty can be imposed under Rule 26. The penalty imposed is set aside and the appeal is allowed. 7. Appellant No.3: Appellant No.3, M/s. Diamond Textile Mills Pvt. Ltd., is a processing house. In their submission before the adjudicating authority they have submitted that .....

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is only covered under para 80.3 of the show cause notice and similarly conclusions are also covered under para 143 to 152 of the impugned order and the said para/order is without any specific details against the appellant. From the investigation it is not even clear as to how many consignments were received by the appellant. Moreover, appellant have not been asked how the goods were transported and how they paid for it. In the absence of any such details it is not possible to conclude that the a .....

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No.4: Appellant No.4, M/s Maharashtra Dyeing & Printing Works, is a processing house and they have received certain gray fabrics from M/s. Shreeman Textiles and M/s Sajjan Textiles. However, the same grey fabrics was received on behalf of M/s K.S. International, a merchant exporter. In his statement Shri Hakim Ahmed Ansari stated that they had no direct contact with M/s. Shreeman Textiles and M/s Sajjan Textiles and they have done the job-work on behalf of M/s. K.S. International who had del .....

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ant No. 5, M/s Kunal Textiles, is a processing house. He has processed 48771 L.Meters of grey fabrics received from M/s Shreeman Textiles and M/s Sajjan Textiles under invoice No. 246 dated 08/10/2004. In his statement Shri Murlidhar A. Bachani stated that the said goods had been received on behalf of M/s. MRK Impex and these were received through National Transport Corporation under 4 LRs and they have paid for the transportation and the same were recovered from M/s. MRK Impex. It was also stat .....

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e indicating that the appellant had knowledge that the grey fabrics received by them is liable to confiscation under Rule 26 and therefore no penalty can be imposed under Rule 26. Appeal of the appellant is allowed. 10. Appellant No. 6: Appellant No. 6, M/s. Rameshwar Textile Mills Pvt. Ltd., is a processor. From the show cause notice and the impugned order we do not find any specific allegation against the processor. His role has been indicated in a very general term in para 80.3 of the show ca .....

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hat the goods received by him were liable to confiscation. Appellant also does not seem to be dealing directly with M/s Shreeman Textiles and M/s Sajjan Textile. Under these circumstances, there is no evidence indicating that appellant has reason to believe that goods are liable to confiscation and hence no penalty can be imposed under Rule 26 of the Central Excise Rules. Appeal is allowed. 11. Appellant No.7: Appellant No. 7, M/s Sharda Synthetic Ltd., is a processing house. They had received c .....

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ion certificate for claiming the rebate to such merchant exporter. From the investigation, there is no indication whatsoever, that the appellant were in know how or has any reason to believe that the grey fabrics received by them from M/s Shreeman Textiles and M/s Sajjan Textiles were liable to confiscation and hence no penalty under Rule 26 can be imposed. Appeal of the appellant is allowed. 12. Appellant No: 8: Appellant No. 8, M/s Kagzi Brothers Pvt. Ltd., is processing house who has processe .....

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o indicate that the appellant had reason to believe that the goods received by them are liable to confiscation and hence penalty cannot be imposed under Rule 26. Appeal of the appellant is allowed. 13. Appellant No. 9: Appellant No.9, M/s. Om Fabrics, is a broker dealing in the purchase and sale of cotton yarn. Appellant is neither merchant exporter nor processor. He has neither availed credit nor dealt in any such aspect. From the explanation given by him at the time of investigation, he has in .....

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side and the appeal of the appellant is allowed. 14. Appellant No. 10: Appellant No. 10, M/s Nahata Fabrics Ltd., is a processor of fabrics. During the investigation, statement of Shri Dinesh Nahata, son of the Director was recorded. Shri Nahata was assisting his father in day to day affairs. In the statement it is admitted position that they have placed an order for buying grey fabrics through a broker. It is also admitted position that they were paying for the goods directly to the representat .....

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However, keeping in view the fact that M/s Shreeman Textiles and M/s Sajjan Textiles do not manufacture any grey fabric and the appellant had been buying and dealing with the representative of M/s Shreeman Textiles and M/s Sajjan Textiles, it is difficult to believe that any processor will deal with or buy grey fabrics without knowing anything about the weaver of such grey fabrics and take credit on that basis. It is also seen that after processing of the goods they themselves had sold the goods .....

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sed is reduced to ₹ 50,000/-. 15. Appellant No. 11: Appellant No. 11, M/s Sankeshwar Fabrics Pvt. Ltd., is a processor of the goods. It appears that they have received the goods on behalf of the merchant exporter, M/s. Atlas Exports. No specific material is coming out in the investigation against them or any reason to conclude that the appellant had reason to believe that the goods received by them are liable to confiscation. We find from the show cause notice or from the order-in-original .....

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at the goods received from M/s Shreeman Textiles and M/s Sajjan Textiles on account of M/s Atlas Exports were liable to confiscation and hence no penalty under Rule 26 can be imposed. The appeal is allowed. 16. Appellant No: 12: Appellant No. 12, M/s Blue Chip Fabrics Pvt. Ltd., is a processing house located in Pali, Rajasthan. In their statement recorded on 08/05/2008, Shri Prakash Gundecha, Director had explained that they have processed the goods on behalf of M/s. Atlas Exports (India) and th .....

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/s. Atlas Exports (India) for exporting the same. It was also clarified by Shri Prakash Gundecha, Director of the appellant-company that the have no direct dealing with M/s Shreeman Textiles and M/s Sajjan Textiles and it is only that M/s. Atlas Exports (India) who had sent the goods for processing. Another invoice No. 547 dated 10/11/2004 in their name issued by M/s Shreeman Textiles and M/s Sajjan Textiles was also shown to him wherein Shri Prakash Gundecha has clarified that they have not rec .....

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after handed over to them. In the statement they have submitted that the goods were handed over to them by M/s. Angoora International and after processing they were taking the goods from their factory. In the statement they have also clarified that they have no idea about M/s Shreeman Textiles and M/s Sajjan Textiles and they were not dealing with them. It was also submitted that the processing charges were received by them through cheques from Angoora International. They produced copies of all .....

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bdas & Company. M/s. Gulabdas & Company have in turn purported to have purchased the goods from M/s Shreeman Textiles and M/s Sajjan Textiles which were delivered to the appellant at their factory and after processing they were delivered to them. Statements of Shri D.N. Naidu, who was Excise In charge of the appellant-company was recorded wherein he explained that they have been doing the processing work for M/s. Gulabdas & Company for more than 20 years and they had supplied the gre .....

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alty under Rule 26 can be imposed and we set aside the penalty. The appeal is therefore allowed. 19. Appellant No. 15: Appellant No. 15, M/s Maya Creationz, is a processing unit. They received the goods from one Filgood Exim Pvt. Ltd. The goods were delivered by the said Filgood Exim Pvt. Ltd. to the appellant for processing of the goods, the appellant after processing the goods, returned to M/s Filgood Exim Pvt. Ltd. The goods were of course covered by the invoices of M/s Shreeman Textiles and .....

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ing the same the goods were returned to M/s K.S. International. Further, they have no direct dealing with the two companies. They have recovered the processing charges from M/s. K.S. International. They produced the copies of the lot register, Form-4 register, Receipt Note, production records, packing list, RG1, ARE-1, etc, and they were found to be in order. From the investigation no evidence is forth coming to indicate that the appellant has any reason to believe that the goods received by the .....

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recorded to understand from where the goods were actually procured and from where the invoices were received and how the goods were transported. It is also not known whether invoices/grey fabrics were directly purchased or through some other intermediary and the role of such intermediary. In the absence of any such investigation, it cannot be said that the appellant had knowledge that the goods were liable to confiscation and hence no penalty can be imposed under Rule 26. The penalty imposed is .....

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mitted that the fabrics were delivered by M/s Shreeman Textiles and M/s Sajjan Textiles from Bhiwandi to Ahmedabad and octroi was also paid by them. He also submitted that they have made payments to M/s Shreeman Textiles and M/s Sajjan Textiles by account payee cheques. We are not convinced that a person will buy goods through Shri Suresh Sharma without knowing his address or his whereabouts. Further, we are not convinced that somebody is sending the goods from Bhiwandi to Ahmedabad and appellan .....

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sable under Rule 26 of the CENVAT Credit Rules. However, it is not coming out from the show cause notice as to the value and the duty involved on such goods. Keeping in view these facts, we reduce the penalty imposed from ₹ 3 lakhs to ₹ 1 lakh. 23. Appellant No. 19: The appellant No. 19, M/s Vijay Fabrics Pvt. Ltd., is a merchant exporter. Shri Ravindran, Export Manager of the appellant, in his statement stated that they have placed order directly to M/s Shreeman Textiles and M/s Saj .....

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M/s Sajjan Textiles without verifying that they have weaving and manufacturing facility or not. The only conclusion that we can draw in such a situation is that the appellant bought grey fabrics from somewhere else and invoices were procured from M/s Shreeman Textiles and M/s Sajjan Textiles. Under the circumstances, we are of the view that the appellants had reasonable belief that the goods being purchased were liable to confiscation and hence penalty under Rule 26 is correctly imposed. However .....

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er, they have no documents relating to transportation and how the goods were transported to Ahmedabad from Bhiwandi and also could not produce any octroi details. Under the circumstances, the only conclusion that can be drawn is that the appellant had purchased the grey fabrics from somewhere else and invoices from some other places. Under the circumstances, we hold that there is reason for the appellant to believe that goods were liable to confiscation and penalty imposed under Rule 26 is in or .....

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brics from M/s Shreeman Textiles @ ₹ 46 and ₹ 41 and 172208 meters of grey fabrics from M/s Sajjan Textiles @ ₹ 30, ₹ 41 and ₹ 47. He also stated that the goods were procured directly from Shri Suresh Raj Purohit and the goods purchased were processed at M/s Maya Creationz, Sachin, Surat and out of the said goods 86410 L. Meters of processed fabrics were sold locally. He has submitted that the grey fabrics were delivered at the premises of M/s Maya Creationz by M/s .....

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on, Shri Ramkrishna Mishra stated that at the relevant time he was not working with the company and he would find out the details from his Director and would inform. Statement was again recorded. Later on, it was also found that certain cheques were issued by the appellant which were actually deposited in the account of Shri Sanjay Kathuria, Director of M/s. Filgood Exim Pvt. Ltd., though, on paper it was shown as if the payments were made to M/s Shreeman Textiles and M/s Sajjan Textiles. 25.1. .....

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ods being purchased are liable to confiscation and penalty under Rule 26 is correctly imposed. Keeping in view the over all facts and circumstances of the case and the quantity of grey fabrics purchased by them, we reduce the penalty from ₹ 3 lakhs to ₹ 1.5 lakh. 26. Appellant No. 22: Appellant No. 22, M/s Dimond Impex, is a merchant exporter. Statement of one Shri Ramesh Narayan, Partner of M/s Dimond Impex was recorded, wherein he explained that one representative of M/s Shreeman T .....

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00529. He also explained that they did not visit the premises of M/s Shreeman Textiles and M/s Sajjan Textiles but have received the fabrics under the invoice of M/s Shreeman Textiles and M/s Sajjan Textile. Later on investigations were also made relating to Shri Deepak Bhai and his office was searched and statement was also recorded. From the statement of Shri Deepak Bhai it is clear that Shri Deepak Bhai was engaged in the manufacture of grey fabrics on job-work basis and in turn acted as a su .....

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ve office at Kalbadevi. 26.1. From the details given and found during the search at the office of Shri Deepak J Kanodia, it is clear that the appellant would not be knowing the details of M/s Shreeman Textiles and M/s Sajjan Textiles and the fact that they had no manufacturing facility, etc. Considering the details given in the statement, we are of the view that though Shri Deepak J Kanodia was aware of the fraud, i.e., purchase of invoices of M/s Shreeman Textiles and M/s Sajjan Textiles and gr .....

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processed through M/s. Rameshwar Textile Mills. Further, we find from the investigation no statement of the appellant was recorded. We also note that the total duty involved in the transaction is only ₹ 45,458/- The charges against the appellant is based upon the investigation report relating to M/s Shreeman Textiles and M/s Sajjan Textiles. Keeping in view the investigation details available there is no evidence to indicate that the appellant had any reason to believe that the goods bein .....

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ellant to M/s S V Business, Dombivli, and the goods were supplied by their commission agent such as M/s Bhaveek Synthetics and Chavan Trading Co. From the investigation it appears that Shri Manish H Zaveri dealt with M/s Shreeman Textiles and M/s Sajjan Textiles through M/s Bhaveek Synthetics and Chavan Trading but it is not coming out whether the appellant were aware that the goods supplied by their broker were in turn purchased through any commission agent such as M/s Bhaveek Synthetics and M/ .....

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pellant is a merchant exporter. We find that no statement of any person from the appellant-company was recorded and the allegations are based upon the statement of one Shri Rashid I Chippa, who is the authorised person of M/s Balkrishna Textile Pvt. Ltd. In his statement Shri Rashid I Chippa has stated that they received grey fabrics from M/s Shreeman Textiles and M/s Sajjan Textiles on account of their various merchant exporters which includes the present appellant also. Further, the LRs and tr .....

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he appeal is allowed. 30. Appellant No. 26: The appellant, M/s. Venus International, is a merchant exporter. Learned counsel has submitted that another show cause notice proposing to deny cenvat credit and also imposition of penalty has already been issued to them and the same was adjudicated, and the issue is pending before this Tribunal. It was further submitted that in view of this position this was a duplication of proceedings. We note that the said show cause notice issued to Venus Internat .....

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by the present appellant, and also the fact that ingredients to impose penalty under Rule 25 are less stringent than that under Rule 26 we consider it appropriate in the facts and circumstances of the present case as also the evidences available that penalty under Rule 26 need not be imposed. Hence the appeal of the appellant is allowed. 31. Appellant No. 27: Appellant No. 27, M/s Atlas Export (India) is a merchant exporter. It appears that no statement of any of the persons from the appellant .....

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pellant had knowledge or reason to believe that the goods purchased from M/s Shreeman Textiles and M/s Sajjan Textiles are liable to confiscation. In view of this position, no penalty under Rule 26 can be imposed. Penalty imposed is set aside and the appeal allowed. 32. Appellant No. 28: Appellant No. 28, M/s. Angoora International, is a merchant exporter. Statement of one Shri Santosh Nair, Export Manager of the appellant was recorded wherein he submitted that they have purchased grey fabrics t .....

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ther, they were not sure whether the goods were manufactured by M/s Shreeman Textiles and M/s Sajjan Textiles. It is not understood that if they are not sure that who manufactured the goods how they could have accepted the invoices of these firms. Under the circumstances, we are of the view that the appellant had reasons to believe that the goods purchased by them are liable to confiscation. However, from the investigation it is not clear how much quantity of the goods and the duty involved. Kee .....

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aid for the transportation of the goods and octroi, etc. Whether he knew M/s Shreeman Textiles and M/s Sajjan Textiles directly or dealt through some agents, etc. In the absence of any such investigation or evidence it is not possible to conclude that the appellant had reason to believe that the goods are liable to confiscation. Under the circumstances no penalty can be imposed under Rule 26. Penalty is set aside and the appeal is allowed. 34. Appellant No. 30: Appellant No. 30, M/s MRK Impex, i .....

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t they have purchased four consignments from M/s Shreeman Textiles and M/s Sajjan Textiles. It was submitted by them that the consignments purchased through broker Shri Dipak Kanodia. Appellant could not produce any bank statement or anything regarding payments for the goods purchased. Since the appellant has admitted that he has purchased the four consignments from M/s Shreeman Textiles and M/s Sajjan Textiles who do not have any facility to manufacture the goods as is evident from the investig .....

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1 lakh. Except the said modification, the appeal is dismissed. 35. Appellant No. 31: Appellant No. 31, M/s K.S. International, is a merchant exporter. They got their goods processed through M/s Maharashtra Dying & Printing Works, Bhiwandi as also from M/s Kohinoor Dyeing & Printing Works. Both of these processors have indicated they have received the goods from the appellant and after processing these were given back to appellant and also the rebate was claimed by the appellant and the p .....

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e broker is sending the goods under the corresponding invoices correctly. However, since neither the appellant nor the broker has been summoned, it cannot be said that the appellant had knowledge that the goods are liable to confiscation. Hence no penalty under Rule 26 can be imposed on them. Penalty imposed is set aside and the appeal allowed. 36. Before parting with the above observations, we would like to say that in the present show cause notice, the demand for ineligible credit has been iss .....

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enalty under Rule 25. Our observation in the present order should not be taken to imply that there is no case for denial of credit to the appellants or imposition of penalty under Rule 25. Those facts and material has to be examined and decided keeping in view the evidence available on record. In the present case, imposition of penalty under Rule 26 has been decided based upon the evidences available and the sufficiency of such evidences for imposition of penalty under Rule 26. 37. We also note .....

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g of Rule 26 would indicate its applicability to any person who has dealt with the goods in any manner and has reason to believe that such goods are liable to confiscation. We have gone through other case laws. We do not consider it necessary to discuss various case laws quoted by both the sides. 38. In the result, we dispose of the appeals as under: S. No. Appeal No. Appellant Final Order 1 E/1013/2010 Weizmann Ltd. Appeal allowed 2 E/1044/2010 Balkrishna Textile Pvt. Ltd. Appeal allowed 3 E/10 .....

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