TMI Blog2015 (10) TMI 2143X X X X Extracts X X X X X X X X Extracts X X X X ..... d., 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/1223/2010, E/1224/2010, E/1237/2010, E/1242/2010, E/1244/2010, E/1325/2010, E/1039/2010, E/1103/2010, E/1162/2010, E/1178/2010, E/1187/2010, E/1188/2010, E/1194/2010, E/1198/2010, E/1204/2010, E/1205/2010, E/1222/2010, E/1238/2010, E/1243/2010, E/1214/2010, E/1305/2011 Shri P.K. Jain, Member (Technical) And Shri S. S. Garg, Member (Judicial) For the Appellant : Shri Shridev Vyas, Advocate, Shri J. C. Patel, Advocate, Shri N.K. Tiwari, Consultant, Shri M.A. Saiyed, Advocate, Shri K.I.Vyas, Advocate, 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 K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Tex Inc. 3,00,000/- 19 E/1162/2010 Vijay Fabrics Pvt. Ltd. 3,00,000/- 20 E/1178/2010 Mitesh Brothers 3,00,000/- 21 E/1187/2010 Filgood Exim Pvt. Ltd. 3,00,000/- 22 E/1188/2010 Dimond Impex 3,00,000/- 23 E/1194/2010 Navkar Exports 3,00,000/- 24 E/1198/2010 Gulabdas Company 3,00,000/- 25 E/1204/2010 Parikh Impex Pvt. Ltd. 3,00,000/- 26 E/1205/2010 Venus International 3,00,000/- 27 E/1222/2010 Atlas Exports (India) 3,00,000/- 28 E/1238/2010 Angoora International 3,00,000/- 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and M/s Sajjan Textiles were created at two premises which were taken on rent from one Shri Madanlal Gupta. Investigation also revealed that later on M/s. Shreeman Textiles and M/s Sajjan Textiles procured 24 and 28 looms again on rent and these were sent to the two premises which were taken on rent. Further during investigation neither Shri Suresh Purohit, the proprietor of the two companies nor the owner of the premises could produce any electricity bill so as to indicate that the two units were 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 document ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so various other co-noticees i.e. merchant exporters, processors, etc. The main noticees, M/s. Shreeman Textiles and M/s Sajjan Textiles, neither replied to the show cause notice nor appeared for personal hearing, etc. Only the co-noticees replied to the show cause notices and their advocate appeared for 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 were also provided to the investigating officer. The appellant have also provided octroi receipts, etc. From the order-in-original as also from the show cause notice, we do not find any investigation has been done on these aspects. Statement of the broker has not been recorded, even though the full details were provided by the appellant. Moreover, no investigation has been done from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 no statement of any person from the said company was recorded by the investigating officer. Further, no other person has implicated them. It was also further submitted that they have not done any processing on behalf of M/s. Shreeman Textiles and M/s Sajjan Textiles. It is just that their name appears in Annexure IV without detailing their role and without even asking any explanation. We have gone through the show cause notice as well as the impugned order. The allegations against the appellant 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 conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been received. Similarly, no statement of MRK Impex have been recorded. Under the circumstances, there is no evidence 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 cause notice and also findings are in general term in para 143 to 152. Learned counsel for the appellant has explained that the appellant has processed the goods covered by 7 invoices for M/s Shreeman Textiles and M/s Sajjan Textiles on behalf of M/s. Navkar Exports. It is also submitted that the total credit in respect of the 7 invoices was ₹ 45,456/-. No statement of the appellant was even recorded. From the investigation we do not find anything which support that the processor was aware that the goods received by him were liable to confiscation. Appellant al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of investigation, he has indicated that he has sold some yarn to one customer and since the customer was new he has taken the amount in advance and after encashment of amount the yarn was sold. From the investigation, there is no role whatsoever of the appellant even in knowing M/s Shreeman Textiles and M/s Sajjan Textiles or dealing in grey fabrics or in any way connected with the whole fraud. We do not find any justification whatsoever for imposing penalty under Rule 26. Therefore, penalty imposed under Rule 26 is set aside 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 representative of M/s Shreeman Textiles and M/s Sajjan Textiles. From the statements it is clear that the appellants were familiar with M/s Shreeman Textiles and M/s Sajj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the goods were received in two consignments covered by invoice No. 179 and 180 dated 03/10/2004. These invoices were originally prepared in the name of Biyam Dying and Printing Works but later on the name was cancelled by the authorised person of M/s Shreeman Textiles and M/s Sajjan Textiles and their name was written. It was also submitted that the consignment covered by notice invoice No. 179 was returned by them and the other consignment was processed. Thereafter the goods were handed over to M/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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to produce any document as fire had taken place in their factory which was formally informed to the excise department as well as the Police authorities. From the investigation we do not find anything which would indicate that the appellant had any reason to believe that the goods received by them are liable to confiscation. Hence no penalty 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 M/s Sajjan Textiles. However, there are no evidence on record which indicated that the appellant was in contract with M/s Shreeman Textiles and M/s Sajjan Textiles or had any reason to believe that the goods are liable to confiscation and hence penalty under Rule 26 cannot be imposed. Appeal of the appellant is allowed. 20. Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /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 appellant would be unaware about the name of the transporter or other details and who is to pay octroi, etc. Under the circumstances, in our view, the appellants conduct is not above board and they would be aware that the goods are being purchased from somewhere while the invoices are being purchased from M/s Shreeman Textiles and M/s Sajjan Textiles. In these facts and circumstances, we are of the view that the appellant had reasons to believe that goods were liable to confiscation and penalty is imposable 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 sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shna S. Mishra, Excise Incharge of the company, in his statement recorded under Section14 of the Central Excise Act, 1944, has stated that they have purchased 304517 Meters of grey fabrics 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 Shreeman Textiles and M/s Sajjan Textiles and the price charged was inclusive of transportation charges. He also produced copies of various ARE1s along with copies of the invoices of M/s Maya Creationz and the details of exports made by them. Further, during the statement, Shri Mishra was shown various documents purportedly for the weaving of the grey fabrics and from the same and on the basis of weight, etc. he could not correlate the grey fabrics purchased by them with the yarn consumed. Later on, Shri Ramkris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as engaged in the manufacture of grey fabrics on job-work basis and in turn acted as a sub-broker and interacted with Shri Suresh Raj Purohit, proprietor of M/s Shreeman Textiles and M/s Sajjan Textiles and the goods were purchased and the deal was done by Shri Deepak J Kanodia with Shri Suresh Raj Purohit. From the details given in the statement it is clear that the appellant had no idea about M/s Shreeman Textiles and M/s Sajjan Textiles but they interacted with Shri Deepak J Kanodia who himself was in the same business. His father and brother were also in the same business and have 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 grey fabrics from somewhere else, there is no evidence indicating that the appellant is in the knowhow that ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant 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 transportation charges were paid by M/s Balkrishna Textile Pvt. Ltd. and later on recovered from the appellant. We find that no investigation has been done based upon this statement either with the transporter or with the present appellant. In view of this factual situation, it cannot be said that the appellant had any reason to believe that the goods being purchased by them are liable to confiscation and hence no penalty under Rule 26 can be imposed on them. The penalty imposed is set aside and the 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 credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually manufactured by M/s Shreeman Textiles and M/s Sajjan Textiles. He further submitted that they have made payments to M/s Shreeman Textiles and M/s Sajjan Textiles through the said broker by cheque and submitted a copy of the bank statement showing the payments made. We find that the broker was acting on behalf of the appellant. No details about the broker were provided during the statement. Further, 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. Keeping in view the facts and circumstances, the penalty is reduced to ₹ 1 lakh. 33. Appellant No. 29: Appellant No. 29, M/s Valiant Glass Works Pvt. Ltd., is a merchant exporter. From the records, it appears that the appellant purchased the goods from M/s Shreeman Textiles and M/s Sajja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough 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 processors had produced various documents to indicate relating to processing etc. Fro the record we do not find that any statement of any person from M/s K.S. International had been recorded and no explanation from them have been sought. During the hearing, the learned counsel has indicated that they have purchased the goods through a broker. However, we find that no details of the broker has been given and the broker acts as an agent of the appellant and it is for the appellant to ensure that the 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 observati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. Appeal allowed 4 E/1075/2010 Maharashtra Dyeing Printing Works Appeal allowed 5 E/1185/2010 Kunal Textiles Appeal allowed 6 E/1195/2010 Rameshwar Textile Mills Pvt. Ltd., Appeal allowed 7 E/1208/2010 Sharda Synthetic Ltd. Appeal allowed 8 E/1209/2010 Kagzi Brothers Pvt. Ltd. Appeal allowed 9 E/1210/2010 Om Fabrics Appeal allowed 10 E/1221/2010 Nahata Fabrics Ltd. Penalty reduced to ₹ 50,000/- 11 E/1223/2010 Sankeshwar Fabrics Pvt. Ltd. Appeal allowed 12 E/1224/2010 Blue Chip Fabrics Pvt. Ltd. Appeal allowed 13 E/123 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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