TMI Blog2016 (1) TMI 1051X X X X Extracts X X X X X X X X Extracts X X X X ..... stage, we do not make any observation on the applicability of extended time period under Section 28 (1) of the Customs Act. However this matter shall also be considered by the Commissioner after fixing the duty liability. Imposition of penalties on the High Sea Sellers. - varying amounts of penalty imposed on the various high sea sellers depending on their role in availment of Cenvat Credit on the goods sold by them on high sea basis. - The contention of the counsels is that penalty cannot be imposed on the appellants under Rule 26 as they have not dealt with excisable goods. - Held that:- the goods which are still on high seas cannot be held to be liable to confiscation in terms of Rule 25 above. It has not been shown, in terms of the above Rule that the High Sea Sellers have contravened any provisions of Central Excise Rules with intent to evade payment of Central Excise duty when the goods are still on High seas. It cannot be held that because the goods will be diverted and not used by the companies after clearance from Customs, the offence already stands committed on the sale of the goods on High seas. - the question of imposition of penalty under Rule 26 of the Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs in ICD Dashrath on 26.02.2004 which were cleared from M/s Cosmos Chemicals and Intermediates, Vadodara. They were found to contain a low value liquid/waste but declared in the export documents as Fenthion Tech, a costly insecticide, with an intention to avail undue benefit of DEFB scheme. On testing the samples taken from the consignments and after recording the statement of the concerned persons, DRI seized the said 3 containers on 15.03.2004. They also found that the samples drawn by the concerned Central Excise officers supervising the factory stuffing of the said containers tested positive (i.e. found as 'Fenthion Tech'. During the course of further investigation it was found that one Mr. Asif Abdul Karim Bidiwala and Mr. Afzal Fazal Dalal floated the above firms which were used for exporting misdeclared low value chemicals. Statement of Shri Afzal Dalal recorded on 06.04.2004, inter alia, disclosed that he used to replace the samples drawn by the Central Excise Officers with his own samples in the factory premises itself, that after drawing the samples from the export consignments, the officers gave him the samples for sealing in the blank envelope duly signed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... zed person/proprietor of the unit and merchant exporter where ever applicable and excise officers were appended to the envelopes. That all the particulars of ARE1, Central Excise invoices, packing list, commercial invoices were checked and verified, that thereafter stuffing of the container used to be allowed. 3. Commissioner of Customs (Export) Nhava Sheva was appointed Common Adjudicator, who vide order F. No. S/10-4305-06-Adj/DRI/SRU/INV-1/2004 dated 31.01.2013/10.04.13 adjudicated the case and ordered as follows: (i) In the matter of export of the goods, Commissioner, confiscated the export goods under sections 113 (d) and (i) of the Customs Act,1962 with option to redeem the goods on payment of redemption fine. Commissioner also re-determined the FOB value of the export goods. He imposed penalty under Section 114 of the Customs Act, 1962 on the exporters, their partners, proprietors and Central excise officers. (ii) In the matter relating to import of goods under DEPB Scheme from various ports, Commissioner confiscated the imported goods under Section 111(o) of the Customs Act, 1962 with option to redeem the goods. He confirmed the demand of duty jointly and sever ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vasheva (8) C/88242/13-Mum K. N. Parmar Vs CC (Export) Nhavasheva (9) C/88612/13-Mum Neel Kamal Verma Vs CC (Export) Nhavasheva (10) C/88717/13-Mum S. S. Chaudhary Vs CC (Export) Nhavasheva List B - Importers (1) C/87785/13-Mum Bhuwaneshwar Refineries Pvt. Ltd. Vs CC (Export) Nhavasheva (2) C/87839/13-Mum Jmd Oils Pvt. Ltd. Vs CC (Export) Nhavasheva (3) C/87866/13-Mum N S Trading Corporation Vs CC (Export) Nhavasheva (4) C/87879/13-Mum J. R. Agro Industries Ltd. Vs CC (Export) Nhavasheva (5) C/87902/13-Mum American Almonds Corp Vs CC (Export) Nhavasheva (6) C/87933/13-Mum Oxygen Carbide Gas P. Ltd. Vs CC (Export) Nhavasheva (7) C/87934/13-Mum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited Vs CC (Export) Nhavasheva (3) E/87772/13-Mum Indokem Limited Vs CC (Export) Nhavasheva (4) E/87775/13-Mum Popawala Co.Vs CC (Export) Nhavasheva Also High Sea Seller (5) E/87925/13-Mum B. R. Enterprises Vs CC (Export) Nhavasheva List D - High Sea Sellers (1) C/87746/13-Mum Gaurav International Vs CC (Export) Nhavasheva (2) E/87948/13-Mum Devanshi Impex Pvt. Ltd. Vs CC (Export) Nhavasheva (3) E/87601/13-Mum Viraj International Vs CC (Export) Nhavasheva (4) E/87602/13-Mum Shree Raghav Enterprises Vs CC (Export) Nhavasheva (5) E/87603/13-Mum Bronze Chem Enterprise Vs CC (Export) Nhavasheva (6) E/87719/13-Mum Uniway Trading Pvt. Ltd.Vs CC (Export) Nhavasheva ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (15) C/87961/13-Mum CC (Export) Nhavasheva Vs Ketan Chemicals Corpn. (16) C/87961/13-Mum CC (Export) Nhavasheva Vs Pravi Organics Ltd. (17) C/87961/13-Mum CC (Export) Nhavasheva Vs Pravi Organics Ltd. (18) C/87961/13-Mum CC (Export) Nhavasheva Vs Sabal Packing (19) C/87961/13-Mum CC (Export) Nhavasheva Vs Corporate Chemicals Intermediates, (20) C/87961/13-Mum CC (Export) Nhavasheva Vs Shree Krishna Barriels Pvt.Ltd. (21) C/87961/13-Mum CC (Export) Nhavasheva Vs Anga Specialities Pvt . Ltd. (22) C/87961/13-Mum CC (Export) Nhavasheva Vs Bharat Chemicals (23) C/87961/13-Mum CC (Export) Nhavasheva Vs Advance Packing Pvt. Ltd. (24) C/87961/13-Mum CC (Export) Nhavasheva Vs K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty is imposable under Section 114 on the Officers. 7. Submissions on behalf of High Sea Sellers (i) Ld. Counsels stated that penalty is imposed under Rule 26 of the Central Excise Rules 2002 for availment of Cenvat credit by the High Sea buyers without receiving the goods in their factory and without utilizing the same in the manufacture of final products. Rule 26 deals with excisable goods which are liable to confiscation under the Central Excise Act or Rules. In their case the goods which were sold by the appellant on High Seas were imported from outside India and, therefore not excisable and therefore beyond the purview of Rule 26 of the Central Excise Rules. (ii) Their clients had no knowledge that the high sea buyers were going to wrongly avail the Cenvat Credit. 8. Submissions of Indigenous Suppliers: (i) In the case of Mini Sarvodyog Sira it was submitted that the list of noticees to the show cause notice and Order-in-Original does not include the name of the appellant. Therefore, the demand is invalid in such cases as held by the Hon ble Apex Court in the case of Commissioner of Central Excise Vs. Akay Cosmetics Pvt. Ltd. 2005 (182) ELT 294 (S.C.). Althoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 108 of the Customs Act, 1962 is a valid piece of evidence, hence I hold that the same is reliable, cross examination of the Co-noticee is not going to serve any purpose, hence I reject any such demand. Thus principles of natural justice are violated in not allowing cross-examination. The demand is time barred as they have not suppressed any fact. They relied on the Apex Court judgment in the case of Cosmic Dye Chemicals Vs. Collector of Central Excise 1995 (75) E.L.T. 721 (S.C.). They had sold goods to M/s. Bhagwandas Ramchandra on payment of excise duty on principal to principal basis. The payment was received from Bhagwandas Ramchandra. The name of Qualigance Chemicals was mentioned on the invoice on instruction of Bhagwandas Ramchandra as per the prevailing commercial practice. The name of consignee was written on the invoice as Qualigance Chemicals-Surat A/c. Bhagwandas Ramchandra - Mumbai . They submitted detailed documentary evidence namely all invoices, LR Copies Bank Payment advices, Purchase orders etc. According to them there is no mens rea on their part and, therefore, they should not be penalized under Rule 26 of the Central Excise Rules. That the wor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in para (ii) above are not considered, the involvement of the appellant, assuming the same is considered on the basis of statements of other persons, will come to ₹ 1.09Crores only. Therefore, the plea is that the penalty of ₹ 11 lakhs is harsh and not justified. 10. Submissions of Special Counsel on behalf of Revenue (i) The Ld. Special Counsel appearing for Revenue submitted that the Commissioner of Customs (Export), Nhava Sheva has been appointed to act as Commissioner of Customs of various Custom Houses as also Commissioner of Central Excise Customs Vadodara-I, Surat-I Surat-II for adjudicating the matter. Therefore, the Commissioner of Customs (Export) had the power to impose penalty under Rule 26 of the Central Excise Rules. (ii) On the contention of the Ld. Counsels, who represent High Sea Sellers, he submitted that Rule 26 only requires that the goods must be excisable goods and be subject to duty of excise . He relied upon the Apex Court judgment in the matter of Wallace Flour Mills Company Ltd. Vs. Collector of C. Ex. 1989 (44) E.L.T. 598 (S.C.). He also relied on the Hon ble High Court of P H in the case of Hind Rubber Factory Vs. Union of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red at Bhiwandi. The sale was not negotiated with the group companies and the indigenous suppliers were only asked by the agents to raise invoices in the name of group companies. This shows that they are a party to the illegal transactions as there is nothing to show that the goods were actually meant for group companies. (vii) On the contention of B.R. Enterprises that they actually delivered the goods it was submitted that evidence at paras 155.1, 155.2, 155.3 of the Order shows that only invoices were to be delivered to them. (viii) On the contention of Counsel for Shri Liladhar Parekh that they have not dealt with indigenous goods involving credit of ₹ 1.54 Crores, it was submitted that only credit of ₹ 96,2000/- has been taken on basis of transaction between the group companies. As regards remaining amount, role of Shri Parekh is explained in his statement. (ix) It was submitted that the Hon ble P H High Court have held that even prior to 1.3.2007 the supplier of invoices where goods have not been delivered are liable to penalty under Rule 26 of the Central Excise Rules. 11. Submissions of Ld. A.R in respect of Appeals filed by the officers. (i) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lder. At the time of hearing, the plea taken by the Ld. Counsels is that duty liability cannot be fixed jointly and severally on the exporters as well as the importers. We agree with this contention as the Tribunal has been constantly taking this position as in the cases of Rajesh Kumar Agarwal vs CCE 2015(321)ELT 313 (Tri-Del) and Golden Tobacco Ltd. vs CCE 2015(317) ELT 313(Tri-Del) . Therefore we order remand of these cases for fresh adjudication by the Commissioner for fixing the duty liability appropriately. Needless to say, the appellants will be afforded an opportunity of personal hearing and the principles of natural justice will be followed. We also note that it is a settled position in law that goods which are not available cannot be confiscated and redeemed. The Commissioner will no doubt consider this aspect legally. At this stage, we do not make any observation on the applicability of extended time period under Section 28 (1) of the Customs Act. However this matter shall also be considered by the Commissioner after fixing the duty liability. He should keep in mind the aspects of mens rea and the ingredients of proviso to Section 28 (1) for invoking extended time period ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Central Excise Rules cannot be imposed. However, Ld. Special Counsel submitted that what has to be seen is whether the goods per se are specified in the first and second schedule to the Central Excise Tariff and secondly, whether goods so specified are subject to a duty of excise. In other words, the goods should only be leviable to excise duty under the category of excisable goods. But it is not necessary that there should be actual levy of excise duty. He relied on various case laws. We have examined the issue carefully. Firstly, we find that the various case laws cited deal with Central Excise provisions only. Even the judgement in the case of HPCL (supra) was delivered in a different context and not in the context of imposition of penalty on imported goods under the Central Excise Rules as is being sought to done in the present case. Whereas what we have to examine is the situation of goods which are not yet imported under the Customs Act. Referring to the provisions of Rule 26, we find that penalty is imposable if any person deals with any excisable goods which he knows are liable to confiscation under the Act. Even if we accept the contention of Ld. Spl. Counsel it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd, we do not find it necessary to go into the details of the role played by the High Sea Sellers viz-a-viz the Importers. 12.3 We now deal with the penalties imposed on the indigenous suppliers. The allegation is that only duty paying documents were sent by the suppliers to the companies whereas raw material was sold in the open market. This enabled the suppliers to avail Cenvat credit without receiving the goods. These facts have been admitted by the dealers and stockists as well as the companies who received the documents. These facts are also revealed in the statements of officials of the suppliers. Shri Stany Pias Deputy Manager Marketing of Ms Indokem Ltd stated that they sold consignments to Ms Qualigance and Ms Colosperse but sent all goods to the godown at Bhiwandi. The vehicle used by them belonged to them. Shri D S Kale Assistant Manager stated that they issued modvatable invoices for goods despatched from their godown in their own vehicle which was never used to deliver their goods to the consignees. No goods were ever delivered to the premises of the companies. The vehicle shown to be used by the first stage dealer B R Enterprises in its invoices was their vehicle a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The Commissioner recorded in the order that It is on record that all the high seas sellers and indigenous suppliers in their statements as detailed in paras 391 (1) to 391(V) above, have admitted the fact that they received the sale amounts in drafts from the group companies and returned the same cash to them through the broker Mr. Liladhar Parekh. This fact is admitted by the broker also. That the statements were retracted by some. In absence of any evidence of threat/coercion/physical force, the statement under Section 108 of the Customs Act, 1962 is a valid piece of evidence, hence I hold that the same is reliable, cross examination of the Co-noticee is not going to serve any purpose, hence I reject any such demand . We find that denial of cross-examination to partner of Shri Bhagwandas Ramchandra is not material when the offence can be established on the basis of documents . It appears that the goods were supplied to the companies without ensuring actual supply of the goods. We also note that during the material time under the Central Excise Rules, it was not mandated under Rule 11 that the mode of transport and vehicle registration number was required to be mentioned o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be adjudicated. Shri Afzal Dalal also stated that he was doing the substitution with the knowledge of the officers. Due to lack of any concrete evidence against the officers who handled past consignments, it is difficult to sustain the case against them. Another allegation is that in some cases there was no manufacturing at all in the factories where containers were sealed and the officers should have been aware of this. We find that in some cases there are statements from factory staff that the factory was in existence. The point to be seen is whether the goods exported were actually manufactured. As regards Revenues contention that the officers attending to exports should have verified the factory premises and machinery, the Ld. Counsel showed us that the inquiry report of the department in the disciplinary proceedings submitted vide F.No.II/10(A)/CON/2012-2013 dt. 13.11.2014 and vide F.No. II/36-4/VIG/WD/2013-14 dt. 12.11.2014 which held that the Inspectors are not required to verify plant and machinery while following the export procedure for drawal of samples. This report also goes in favour of the appellant officers. (ii) Fact is that samples were drawn and the resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s Popawala Co. and statement dated 10.01.2005 of Smt. Bharti B. Popawala, Prop, of M/s Hero Dye Chem Inds. and on perusal of the same he stated that the facts stated therein in respect to his role were true and correct and he accepted the same: that in token of having acceptance, he appended his signatures on the last page of all the statements; that he was shown statement dated 15.12.2004 and 05.02.2005 of Shri Bharat Himmatlal Shah of M/s Karan Monomer P. Ltd. and statement dated 12.01.2005 of Shri Bharat Mehta; Chemical Broker and stated that the facts stated by Shri Bharat H. Shah regarding his role were correct;' that with regard to statement dated 12.01.2005, of Shri Bharat Mehta he stated that he had never met Shri Bharat H. Shah in the subject deal and all the transactions on behalf of M/s Karan Monomer were done by Shri Bharat Mehta; that the fact stated by Shri Bharat Mehta that he had introduced him to Shri Bharat Shah was wrong; that in token of the above he-appended his signature on the last page of the said three statements shown to him; that he was shown the statement dated' 12.01.2005 of Shri Kaushal Shah of M/s Rose Chemicals and on perusal of the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eptance he appended his signature on last pages of these statements; that he was shown statement dated 31.12.2004 of Shri Jagdish Singh Arora, Director_of_M/s. D. K. Foods Chemicals P. Ltd. and on perusal of the same he stated that it was a fact that he approached Shri Jadish Singh Arora for showing the sales on HSS basis to M/s Chevrolet, M/s Cosmos M/s Colosperse and informed that only the import documents were to be given to the said three parties and no goods cleared in their name were to be delivered to the respective parties} that he did not accept the fact about the sale of the goods cleared under the name of the said three parties and the arranging of DEPB Scrips, as stated by Shri Jagdish Singh and stated that he also did not take the delivery of the goods from the docks after clearance of the same; that in token of having seen the said statements he appended his signatures on the last page of the said statement; that he had perused the statement dated 12.01.2005 of Shri Satish Sanghvi, Authorized Signatory of M/s Parag International and on perusal of the same he stated that the facts stated by Shri Satish Sanghvi were not correct as the goods shown to have been sold ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c India, Mumbai and on perusal of the same he stated that he did not accept the fact stated by Shri Shivkant Khetan about his role in the said transaction; that he never met Shri Shivkaht Khetan for making the HSS agreement in the name of M/s Chevrolet; that he had never sold any consignment of chemical to Shri Shivkan Khetan and had never suggested Shri Shivkant Khetan to import acrylamide and had not suggested any indenter to Shri Khetan; that for the HSS agreement made between Shri Khetan and M/s Chevrolet one chemical broker Shri Sailesh Mehta having his office at R. No. 15, 51 Dariyasthan street, Vadgadi Mumbai approached him and managed all the transaction on behalf of M/s Alpic !ndia; that Shri Sailesh Mehta could better explain the facts about the sale of the goods pertaining to the HSS agreement between M/s Alpic India -M/s Chevrolet; that he appended his signatures on trie last page of the said statement in token of having perused the same; that he was shown the statements dated 16.12.2004 of Shri Satish Sanghvi, Authorized Signatory of M/s' Parag International, Shri Yogesh D. Shah, Director of M/s Devansi Impex P. Ltd and Shri Bharat Sheth, Proprietor of M/s Bronze ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anium Dioxide was stored by them in one of the warehouses at Bhiwandi; that for the subject deal he had charged brokerage of 1% of the sales proceeds; that they again visited his office and stated that they had manufacturing units In Gujarat and they required the duty paying documents of import consignments i.e. BE, BL, etc and Central Excise Invoices in respect of indigenous consignments on regular basis; that they offered him brokerage of 1% of the transaction value which was subsequently reduced to 0.5 % and at times he was getting 0.25 %; that as per the normal trade parlance whenever any such sales were made wherein any document ie. Duty paying C. Ex. Invoice or bill of entry document showing HSS, were taken by the buyer and the goods were retained and sold by the sellers, the seller had to pay 1% or 2% commission to the buyer because all payments for such sales were made/shown from the account of the buyer; that in the subject deal Shri Afzal Dalai and Shri Asif Bidiwala had informed that they did not want any such commission from the HSS sellers and the parties issuing/arranging the C. Ex. Invoices; that this enabled him to get the subject deal finalized with many HSS seller ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B Holder M/s. Corporate Chemicals and Intermediates which was required to be done as the goods were confiscated. (3) The adjudicating authority confirmed duty against M/s. Cosmos Chemicals and Intermediates to the extent of ₹ 16,73,355/- instead of ₹ 58,02,726/- (Para-S(ii) of the Order). As regards these appeals since we have already remanded the appeals of appellants in respect of duty demand/penalty against DEPB holders/importers we remand these appeals also to the Commissioner for fresh adjudication. (4) Non imposition of penalty under Rule 26 in respect of certain High Sea Sellers and certain Indigenous Suppliers. As regards the high sea sellers we have already held that penalty is not imposable on them. As regards the indigenous suppliers we have upheld the penalty imposed on some indigenous suppliers. Therefore, in the cases where penalty has not been imposed on indigenous suppliers by the Commissioner, we remand the matter back to the Commissioner in re-adjudication after affording an opportunity of personal hearing. (5) The adjudicating authority imposed mandatory penalty of ₹ 3000/- instead of minimum mandatory penalty of ₹ 10,000/- und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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