TMI Blog2019 (3) TMI 972X X X X Extracts X X X X X X X X Extracts X X X X ..... ch as statements of the person concerned, it has discharged its burden and it is for the Appellant to show that charge of clandestine clearance is not true in their case. From the records of cross examination it is quite evident that the shoes were supplied to these shop owners through one Mr Raju and were the goods supplied were from the M/s Start Rite Shoes. Most of the dealers have even during the cross examination before the adjudicating authority, with the pre43 ponderence of probability admitted that shoes received by them were manufactured and cleared by M/s Start Rite Shoes against the invoices issued by the cooperative society. Extended period of limitation - Held that:- Since the issue is in respect of duty evasion by committing fraud etc., the extended period of limitation under proviso to Section 11A(1) will be applicable in the present case. Cum duty value benefit - Held that:- There are no merits in that submission as the issue is one involving fraud and clandestine clearance. Penalties - Held that:- The penalty imposed by the adjudicating authority under rule 173Q of the erstwhile Central Excise Rules, 1944 is upheld - Shri Ashok Mane was responsible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Cooperative Society Ltd. (iii) Shri Dinkar Shankar Shinde, Chairman, Bhartiya Charmakala Gramodyog Sahari Sangh Ltd. Ltd. (iv) Shri Ravikant Dhondiram Pawar, Secretary, Bhartiya Charmakala Gramodyog Sahari Sangh Ltd. 2.1 Appellants are engaged in manufacture of leather footwear falling under Chapter Heading 6401.11 of the Schedule to Central Excise Tariff Act, 1985 primarily for exports. 2.2 As a sequel of investigation undertaken by sales Tax Department, a Show Cause Notice dated 4.1998 has been issued to them proposing to demand Central Excise duty of ₹ 2,9387,013/- towards alleged clandestine clearance of leather foot wears during the period January 1993 to October 1996. The demands were raised relying on the following evidences: i. 26 statements of various persons recorded during investigation. ii. Xerox copies of some private records surrendered to sales tax authorities on 19.10.1996 by Shri Ramachandra Mane, Managing Director of SRSPL. iii. Various statutory records maintained and returns filed by SRSPL, for complying with Central Excise Law and Procedures. iv. Xerox copies of records of two co-operative societies namely, Navyug Footwea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the two societies as alleged and held by the Commissioner. iv. Appellants have not received an amount from the two societies, for the supply of goods to retail shop owners. v. Entire case has been made on the basis of the photocopies of the documents obtained from the sales tax department. Central Excise department could not have proceeded against them on the basis of photocopies received from the sales tax department. vi. The author of so called relied upon private records recovered has not been found or established. Tribunal decisions in following cases relied upon- a. LML Ltd [1997 (94) ELT 519 (T)] b. Balbir Steels [2003 (161) ELT 281 (T)] c. Shradha Forge [2005 (179) ELT 336 (T)] vii. Department has not established details of description of goods allegedly manufactured and cleared. viii. No evidence has been produced to show that these goods were manufactured by the appellants, and no evidence as to raw materials, manpower, electricity, transporter etc has been put forth. Following decisions relied upon- a. Arch Pharmalabs [2005 9182) ELT 413 (T)] b. Chemco Steels [2005 (191) ELT 856 (T)] c. Mohan Steels [2004 (177) ELT 668 (T)] d. Deena Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 68 (T)] xi. Deena Paints [2001 (43) RLT 805 (T)] xii. M M Dyeing and Finishing [2002 (139) ELT 143 (T)] xiii. Rajasthan Petro Synthetics [2003 (160) ELT 297 (T)] xiv. Someshwara Cements [2005 (191) ELT 1062 (T)]. d. Receipt of consideration by the appellants for goods alleged to be manufactured and sold clandestinely, not proved by revenue. i. Continental Cement Company [2014 (309) ELT 411 (ALL)] ii. Sunrise Food Products [2017 (357) ELT 599 (T)] iii. Shree Nathjee Industries [2011 (267) ELT 241 (T)] e. Loose papers alleged to be Balance Sheet Profit Loss statement of the appellants are not substantiated. i. Goldy Engineering Works [2017 (345) ELT 149 (T)] ii. Sharadha Forge Pvt Ltd [2005 (179) ELT 336 (T)] iii. Kuber Tobacco Products Ltd [2013 (290) ELT 545 (T)] f. Directors have retracted their statement hence their statements cannot be relied upon. Further the charge of clandestine removal cannot be sustained only on the basis of Director s statements held in following cases i. Magnum Steels Ltd [2017 (357) ELT 226 (T)] ii. Mittal Pigment Pvt Ltd [2018 (360) ELT 157 (T)] iii. Davinder Sandhu Impex Ltd [2016 (337) ELT 99 (T)] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts by sales tax department and police, have observed as follows: 24. It appears that during the relevant period there was exemption from sales tax on all purchases and sales of leather effected by co-operative societies. If any person was buying leather goods from co-operative societies they did not have to pay further sales tax on it. Further during the relevant period bank finance at concessional rate of interest was being made available to co-operative societies recognized by KVIB. So it appears that certain co-operative societies were set up for availing bank loans at concessional rate of interest and to save sales tax. These societies were not genuine but a sham created by certain individuals who were actually acting in the name of the societies. The proceedings initiated by Sales Tax Authorities have not yet concluded. The proceedings initiated by police have resulted in filing of charge sheet in court and the matter is pending in court. Against this back ground it may be proper to have a look at the charge sheet filed by the police in this regard. The charge sheet reads as under:- ALPHA (MANE) GROUP CHARGE SHEET NO.23 BHARTIYA CHARMAKALA SAHAKARI SANST ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch Maharashtra State Khadi and Village Industrial Commission with the application for registration of the said society as an eligible society producing leather goods which could claim the concession of exemption from collection and payment of sales tax on sale and purchase of the leather goods supposed to have been produced by the poor cobbler members of such society and thereafter to apply for and obtain exemption of sales tax from sales tax department on the strength of certificate issued by Maharashtra State Khadi and Village Industrial Board, and then to avail of such exemption from collection and deposit of the sales tax which they were in fact supposed to collect. C. To fabricate and manipulate the record of sale and purchase such as 1) Sales Bills, 2) Sales Registers, 3) Cash Book, 4) Purchase Registers, 5) Purchase Vouchers and other allied documents of leather goods at both the ends i.e. society s record on one hand and companies record on other hand to serve the purpose of camouflaging the transaction of actual sale and purchase from individual cobblers and other institution in open market (emphasis supplied) D. To fabricate and manipulate the records to su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of cheating and using the forged documents as genuine, punishable u/s. 465,467,468,471 IPC r/w. 120(b) IPC and or 34 IPC and or 114 IPC. THIRDLY That in pursuance to the aforesaid criminal conspiracy and in furtherance of common intention of all the accused in the course of same transaction at the aforesaid date, time, place and duration, accused namely 1) Ramchandra Bandhu Mane, 2) Shivram Bandu Mane, 3) Ashok Ramchandra Mane and 4) Anil Ramchandra Mane the office bearers of aforesaid companies, in their respective capacities caused fabrication of the documents, which were required for showing diversion of sale and purchase of leather goods from open market as allegedly manufactured by the members of society with purpose to avoid collection and payment of sales tax otherwise required to be collected and paid by 1) Startrite Shoes Company, 2) Mane Company 3) K.K. Enterprises, 4) Eros Services and 5) Alpha Footwear and Bhartiya Charmakala Society, such as purchase of raw materials bills, sales bills, sales registers, raw material distribution registers, labour charges payment registers, ledger and cash books as mentioned in detailed in the list annexed as A and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accused numbers 2 to 4 and for that purpose cause to falsify the books, papers or securities and other valuable documents belonging to the society and thereby committed the offences punishable u/s 147 (e-l) (p) of the Maharashtra Co-operative Societies Act, 1960. 25. The reasons for stating this background is that while for sales tax authorities it is enough to prove sale of goods and evasion of sales tax payable on the sale involved for demanding excise duty from SRSPL, there is a need to prove manufacture of goods by SRSPL. The main argument raised in defence is that no proof of manufacture of the impugned footwear by SRSPL is adduced. So the evidence has to be appreciated to see whether there is any evidence of manufacture by SRSPL of the goods for which duty is demanded in the SCN from SRSPL. 5.3 In respect of the recovery of documents relied upon for alleging the clandestine clearance Commissioner has in para 28 to 30 of his order recorded as follows: 28. The major objection that remains to be dealt with is that the alleged private records are not seized under any panchnama and they do not indicate the name of SRSPL in any way. Another issue raised is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h document; (ii)that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the Court may reasonably assume to have been signed by, or to be in the handwriting of, any particular person, is in that persons handwriting, and in the case of a document executed or attested, that it was executed or attested by the person by whom it purports to have been so executed or attested; (b) admit the document in evidence, notwithstanding that it is not duly stamped, if such document is otherwise admissible in evidence. SECTION 36B (1) Notwithstanding anything contained in any other law for the time being in force, - (a) a micro film of a document or the reproduction of the image or images embodied in such micro film (whether enlarged or not); or (b) a facsimile copy of a document; or (c) a statement contained in a document and included in a printed material produced by a computer (hereinafter referred to as a computer print out ), if the conditions mentioned in sub-section (2) and the other provisions contained in this section are satisfied in relation to the statement and the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions made to the effect that revenue has proceeded on the basis of the photocopies of document obtained from Sales Tax Department. 5.5 Appellants have relied upon the decision of Apex Court in case of Girdhari Lal Nanne Lal, supra to argue that for making the demand reliance placed on the documents received from the Sales Tax department is not correct. In case of Girdhari Lal Nannelal, Apex Court was dealing with the issue of determination of liability to sales tax on the basis of income received. In para 7, Apex Court stated 7. The approach which may be permissible for imposing liability for payment of income-tax in respect of the unexplained acquisition of money may not hold good in sales tax cases. For the purpose of income-tax it may in appropriate cases be permissible to treat unexplained acquisition of money by the assessee to be the assessee's income from undisclosed sources and assess him as such. As against that, for the purpose of levy of sales tax it would be necessary not only to show that the source of money has not been explained but also to show the existence of some material to indicate that the acquisition of money by the assessee has resulted from tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in private records recovered from Shri Ramachandra Mane, arguments other than those dealt with above are,- (a) Manufacture of the impugned goods by SRSPL is not proved. (b) The private balance sheet shows figures for procurement of raw material as well as conversion charges. This gives strong support to the theory that the goods were got manufactured through some body else by the person maintaining the accounts. (c) The statements of dealers implied that they had purchased shoes from SRSPL and got bills from two co-operative societies namely Navyug Footwear Industrial Co-op Society and Bharatiya Charmakala Gramudyog Sahakari Sangh Ltd. However in cross examination these witnesses say what they originally stated is their bonafide impression and they do not know anything conclusively to say that the shoes in question were manufactured by SRSPL. (d) The statements of 17 dealers (owners of shoe shops) are relied upon. These dealers stated that they bought shoes from SRSPL as per the books of accounts (allegedly of SRSPL) shown to them, received bills of the societies and issued cheques to the societies concerned. These dealers were cross examined. The main rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t by fax in the letter head of SRS Start Rite Shoes Pvt. Ltd. on 21-11-95. All these facts shows that SRSPL was engaged in the manufacture of shows for sale through the societies. (b) The buyers of shoes as per these accounts stated in their initial statement that they had purchased such shoes from SRSPL. During cross-examination it emerged that their initial statement was only their bonafide impression based on their dealing with Mr. Raju or Mr. Shinde, the sales persons. They had not directly interacted with SRSPL. This evidence is to be appreciated considering the fact that the dealers are also accused of evading sales tax by routing their transaction through the co-operative societies. (c) The statement of Shri Ashok Mane on 28.2.97 (Para 11 herein above) the salient part of which reads as under: After going through and scrutinizing the said documents, Shri Ashok Mane immediately agreed and accepted that all the documents/records mentioned in the said letter and acknowledgment receipt belonged to SRSPL; that all the documents shown, to him in his earlier statement were the same records as those mentioned in the said letter. He also accepted and admitted to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, Jai Bharat and Member of Navyug Footwear Industrial Co-operative Society stated thato Jaihind and Jaibharat were controlled by Shri Rafique Malik of Metro Shoes Ltd and herself; Navyug was controlled by SRSPL; These societies did not manufacture any footwear but were used as an instrument for routing the footwear manufactured by other manufacturing units and for supplying bogus bills to the shoe shops; Only bogus purchases and sales transaction were shown in the records of these societies; Delivery of footwear were received from Shri Ramchandra Mane and Shri Ashok Mane of SRSPL and other footwear manufacturers; Footwear from SRSPL were received on the challans of Navyug to the tune of ₹ 80 lakhs; The payments were made in cash. 5.8 From the scheme of things as emerge from the above statement we find that this is a case wherein bogus transactions were undertaken through the cooperative society to cover the goods clandestinely cleared by the shoe manufacturers. In our view in cases of such type corporate veil needs to be pierced (lifted) and to determine the actual persons who had actually controlled the affair of said societies. Hon ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eet the requirements of different economic problems, the theory about the personality of the corporation may be confined more and more. 13. In Life Insurance Corporation of India v. Escorts Ltd. Ors. [(1986) 1 SCC 264], this Court again considered this question and said : While it is firmly established ever since Salomon v. A. Salomon Co. Ltd. [(1897) AC 22 HL] was decided that a company has an independent and legal personality distinct from the individuals who are its members, it has since been held that the corporate veil may be lifted, the corporate personality may be ignored and the individual members recognised for who they are in certain exceptional circumstances. Pennington in his Company Law (4th Ed.) states : Four inroads have been made by the law on the principle of separate legal personality of companies. By far the most extensive of these has been made by legislation imposing taxation. The Government, naturally enough, does not willingly suffer schemes for the avoidance of taxation which depend for their success on the employment of the principle of separate legal personality, and in fact legislation has gone so far that in certain circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public interest, the effect on parties who may be affected etc. 14. In M/s. Mcdowel and Company Ltd. v. Commercial Tax Officer [(1985) 3 SCC 230 = (1985) 154 ITR 148], this Court examined the concept of tax avoidance or rather the legitimacy of the art of dodging tax without breaking the law. This Court stressed upon the need to make a departure from the Westminster principle based upon the observations of Lord Tomlin in the case of IRC v. Duke of Westminster [(1936) AC 1] that every assessee is entitled to arrange his affairs as to not attract taxes. The Court said that tax planning may be legitimate provided it is within the framework of law. Colourable devices, however, cannot be part of tax planning. Dubious methods resorting to artifice or subterfuge to avoid payment of taxes on what really is income can today no longer be applauded and legitimised a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to accept such a narrow interpretation. True that shareholdings in a company can change but that is the very purpose to lift the veil to find out if the two companies are associated with each other. Law is specific that when duty of excise is chargeable on the goods with reference to its value than the normal price on which the goods are sold shall be deemed to be the value provided (1) the buyer is not a related person and (2) the price is the sole consideration. It is a deeming provision and the two conditions have to be satisfied for the case is to fall under clause (a) of Section 4(1) keeping in view as to who is the related person within the meaning of clause (c) of Section 4(4) of the Act. Again if the price is not the sole consideration, then again clause (a) of Section 4(1) will not be applicable to arrive at the value of the excisable goods for the purpose of levy of duty of excise. 15. In the present case, we do find that the authorities of and the Appellate Tribunal did address themselves to the basic question as to the shareholdings of both, the assessee and the buyer, inasmuch as they found that the Managing Director of both the companies was the same and one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efer charge sheet in para 5.2 supra) we find that the real actors behind the both the bogus co-operative societies were Shri Ashok Mane and Shri Ramchandra Mane the Directors of SRSPL. Further the fact of supply of goods by Appellant to various shop owners in the name and against the bills of Cooperative Societies has been admitted by various shop owners in their statements. The issue in respect of admissibility of the statements recorded under Section 14 of Central Excise Act, 1944 is well settled and the depositions made in the statements cannot be discarded. The shop owners have admitted receiving the goods from Appellant and invoice from the society, and such admission is itself enough to hold that the goods were manufactured and cleared by the appellants clandestinely. Once revenue is able to make allegation of clandestine clearance on the basis of records and circumstantial evidence such as statements of the person concerned, it has discharged its burden and it is for the Appellant to show that charge of clandestine clearance is not true in their case. 5.10 Some of these dealers were cross examined during the course of adjudication proceedings and they have stated as follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Bharti Co-op Society. Q 9 Did you know the sources from which Raju used to bring the shoes? Ans. I was under impression that it used to come from Start Rite Shoes. In my mind, I was buying from Start Rite Shoes. I have not done any independent verification of the source. Q 10 Did you have any personal knowledge from which you can say that the goods were manufactured in the factory of Start Rite Shoes? Ans. I have visited the factory of Start Rite Shoes a few times for seeing samples. So when goods as per sample came I presumed that it was coming from Start Rite Shoes. Q.11 But you said Raju used to come to you and show the samples? Ans. Yes that is true. But I have visited the factory of Start Rite Shoes also a few times. Q.12 Is it possible that the shoes supplied from multiple sources? Ans. Logically it is possible. Examination of Shri Haneef Amir Manji Q.6 Do you know the source from which Raju used to bring the samples? Ans. Raju used to say that he was bringing from Start Rite Shoes. Q.7 Is it possible that the goods were made by somebody else? Ans. May be. Q.9 Who used to bring samples and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business remain in the special or peculiar knowledge of the person concerned in it. On the principle underlying Section 106, Evidence Act, the burden to establish those facts is cast on the person concerned : and if he fails to establish or explain those facts, an adverse inference of facts may arise against him, which coupled with the presumptive evidence adduced by the prosecution or the Department would rebut the initial presumption of innocence in favour of that person, and in the result prove him guilty. As pointed out by Best in `Law if Evidence (12th Edn. Article 320, page 291), the presumption of innocence is, no doubt, presumptio juris : but every day s practice shows that it may be successfully encountered by the presumption of guilt arising from the recent (unexplained) possession of stolen property, though the latter is only a presumption of fact. Thus the burden on the prosecution or the Department may be considerably lightened even by such presumption of fact arising in their favour. However, this does not mean that the special or peculiar knowledge of the person proceeded against will relieve the prosecution or the Department altogether of the burden of producing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n case of D Bhoormal, supra. 5.13 Since the issue is in respect of duty evasion by committing fraud etc., in our view extended period of limitation under proviso to Section 11A(1) will be applicable in the present case. 5.14 Appellants have raised the issue with regards to quantification of duty in their Appeal. However we find Commissioner has in para 36 37 of his order clearly stated t principles for quantification of duty and we do not find any merits in such a submission made by the appellants. The para 36 and 37 of the order are reproduced below: 5.15 As far as issue of allowing cum duty value benefit is concerned we do not find any merits in that submission as the issue is one involving fraud and clandestine clearance. Tribunal has in case of- A. Jay Jalaram Processors [2014 (313) ELT 724 (T-Ahd)] held- 7. If that be so, such value has to be adopted as assessable value for the purpose of quantification of duty. It has to be kept in mind that the clearances were effected by the appellant without payment of any duty and the consideration received by him from merchant manufacturer was without including the element of duty. It is not a simpliciter case of no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that is, the revised price collected minus the original price on which the duty was raised, the question of cum-duty liability was considered. In that context it was held that the consideration should be treated cum tax. It is worth noting that in all these decisions, the appellants were discharging duty liability on some price and the demand for differential duty arose an account of price revision. It was in that context it was held the consideration received should be treated as cum tax. In the facts of the case before us, the appellant had not discharged any excise duty liability on the clearances effected in excess of ₹ 30 lakhs and it is a pure case of tax evasion. Therefore, the facts of the present case are distinguishable from these obtaining in Srichakra Tyres and Maruti Udyog case cited supra. It is a settled position in law facts of a decision relied upon have to be shown to fit the factual situation of a given case. Without such discussion reliance could not be placed on a decision. Circumstantial flexibility one additional or different fact may make a world by difference between conclusions in two cases, as held by the Apex Court in Alnoori Tobacco Products [2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be punishable as an offence which would not have been so punishable if this section had not come into force. The issue in this respect also is covered by the decision of Apex Court in case of Chandpaklal Ramanlal Shah Vs Reliance Industries [2017 (354) ELT 289 (SC)] 4. Learned Solicitor General appearing for the appellant submitted that the view taken by the High Court is erroneous. The charge against the respondent was of evasion of excise duty under Section 9(1)(b) which remains unamended. The evasion was on account of the respondent having taken credit without following the procedure under Rule 56A. By omission of the said Rule, the charge did not suffer from any legal infirmity. Alternatively, it was submitted that Section 6 of the General Clauses Act applied to omission which was also repeal. It also applies to a Rule. In this regard, reliance has been placed on Fibre Boards Pvt. Ltd. Bangalore versus Commissioner of Income Tax, Bangalore, Shree Bhagwati Steel Rolling Mills versus Commissioner of Central Excise. It was also submitted that retrospective amendment has been made to the Act by the Finance Act, 2001 making it clear that actions taken under a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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