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2019 (4) TMI 238

evenue against the said appellant was on all four identical to the case of Appellant-1 and the quantum of penalty imposed on him was same as that imposed on present appellant. Tribunal has after consideration of all the issues dismissed the appeal in that case. Following the said order of tribunal and taking note of the fact that by their acts appellant has/ was in process of facilitating the fraudulent rebate in excess of ₹ 1,00,00,000/- we uphold the order of Commissioner against Appelant-1 and dismiss his appeal. - Appellant -2 has knowingly or unknowingly became party to the conspiracy and fraud committed by Shri K K Gupta and his Muni Group of Companies. Accordingly we have no hesitation in holding that penalty under Rule 26 of Central Excise Rules, 2002 is justified - Commissioner has imposed a penalty of ₹ 1,00,00,000/- on Appellant-2, who is Group B Central Government Employee. The penalty imposed is his highly disproportionate to the means of the person on whom it has been imposed, might be equivalent to all his life earnings. In our view taking into account all the facts and the fact that Appellant-2 could have been the innocent victim of the conspiracy of .....

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Central Excise Act, 1944 and Central Rules, 2002 was made from the Muni Group of Companies, penalties were proposed against all other noticees (including present Appellant) under Rule 26 and 27 of Central Excise Rules, 2002. 2.6 The said show cause notice has been adjudicated confirming the demands with interest, confiscation of the seized goods and penalties on the Muni Group of Companies. Penalties have been imposed on all other noticees including the present appellants as stated in para 1, supra. 2.7 Aggrieved by the penalty imposed Appellants are in appeal before us. 3.1 In his appeal Appellant 1 has assailed the order of Commissioner stating- i. The show cause notice has not detailed any allegation against them in specific in as much as no investigation was carried out against them. {Kalyanpur Cements Ltd {2008 (221) ELT 544 (T-Kolkata)] ii. Cross examination as requested by them has been disallowed. iii. In the present case Appellant was an merchant exporter and he had received the goods under cover of valid ARE-1 and legible invoice. The goods received were also duly sealed. The relevant ARE-1 were duly certified as correct by the jurisdictional range officer. In view of th .....

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n initiated based on a single forensic report taken from a private agency. He had requested to bring on record the forensic report taken by Central Bureau of Investigation (CBI). This approach is totally contrary to admitted position on the rebuttal of evidence. ii. Even in the decisions of quasi judicial authorities, there should be am elementary evidence to arrive at pre-ponderance of possibility. iii. Penalty has been imposed on him under Rule 26, without even alleging that he was in any way concerned with transporting, removing, depositing, keeping, concealing, selling or purchasing or in any other manner dealing with excisable goods. The entire case against him that has been made out against him in the order in original is one of dereliction of duty during the material period of time and has nothing to do with dealing in excisable goods, as required for penal consequence under Rule 26. Thus order imposing penalty under Rule 26 is contrary to the provisions of rule itself. iv. The order is contrary to liberal policy declared by the Government for Textile Sector and hence needs to be set aside. 4.1 We have heard Shri Alok Yadav, Advocate for Appellant 1, Shri Ashok Singh, Advoca .....

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ject matter of the appeals decided by the tribunal in the order referred to by the learned Authorized Representative. In para 8 rejecting the contentions raised by the Appellants therein which are identical to the contentions raised in the present appeals tribunal has observed as follows: 8. One of the common contentions by various learned counsels for the appellants was that penalty under Rule 26 cannot be imposed on the appellants, many of them are merchant exporters or Rule 12B manufacturers. It was the contention of the learned counsels that as per the department s case Muni Group of Companies have only supplied duty-paying invoices and the goods have come from some other sources and these goods along with the invoices of the Muni Group of Companies were exported and rebate was claimed. It was the contention of the learned counsels that Commissioner has not indicated as to how and under which provisions of law the goods allegedly procured from the market and exported are liable to confiscation. 8.1 We have given considerable thought to the submission. We reproduce Rule 25 and 26 of the Central Excise Rules, 2002 as under: RULE 25. Confiscation and penalty. - (1) Subject to the .....

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roup of Companies and purchased certain invoices from them so as to fraudulently show as if the goods were purchased from Muni Group of Companies on the invoices of Muni Group and thereafter exported or used in processing. Thus, there are excisable goods which are purported to be cleared on the invoice of Muni Group. In all cases, the investigations have indicated that the goods were never transported from Muni Group of Companies to the appellants or to the port of export. Investigations revealed that the goods were lifted from some dealers in Surat, etc. Further, investigations indicate that some payments were made to Muni Group of Companies through account payee cheques. However, immediately, thereafter, Muni Group of Companies have issued cheques in the name of some other entities. These cheques were, in turn got discounted by the merchant exporter/appellants. In some cases, the amounts were paid by crossed bearer cheques to Muni Group of Companies. However, these cheques were, in reality, not deposited in the accounts of Muni Group of Companies, but were deposited either in the name of certain dealers or got discounted from various bill discounters/shroffs. In nutshell, the mon .....

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of rebate even though in reality, no duty was paid in the scheme of the above fraud, it was fraudulently shown that the duty was paid and the appellants or Muni of Group of Companies would be able to get refund of the duty in the form of rebate which thereafter will be distributed among themselves. 8.5 The reasoning adopted by the hon ble Gujarat High Court in the case of Sanjay Vimalbhai Deora (supra) which in turn has been upheld by the hon ble Supreme Court is equally applicable. Similarly, the judgment of the Punjab and Haryana High Court in the case of Veekay Enterprises and M S Metals (supra) are equally applicable. 8.6 The learned counsel for the appellant has also submitted certain judgments wherein hon ble Supreme Court and other courts have held that the goods purchased from the market are deemed to be duty-paid. We have gone through the said judgments. We find the facts in the present case are very different. In fact, if the goods were duty paid, there was no reason for the appellants to approach Muni Group of Companies and procure the fraudulent invoices. In that situation, the appellants could have got the invoices from the seller of the goods and could have claimed t .....

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tanding. Such an interpretation of law will make minor violators of the procedure as liable to penalty under Rule 26 while the outright law violators or fraudsters will go scot free. We therefore take no cognizance of the order passed by the Commissioner and the fact that such order has been accepted by the department is of no consequence. Thereafter bench analyzed the role of individual appellant and recorded finding in respect of each appellant separately. 5.3 The allegations in the Show Cause Notice against the Appellants in present case are recorded in para 79 and 80 of the Show Cause Notice as follows: 79. The merchant exporters involved in the case have knowingly purchased bogus Application for Removals for Exports (ARE-1s), from Muni Group, showing units of Muni Group, as the supporting manufacturer and these respecti8ve Merchant Exporters, as exporters, with an intention to claim and collect the Central Excise Duty shown in the respective ARE1s, just by presenting these ARE1s to the Customs authorities at the time of export at the port of export, along with the non-duty paid and bought out textile fabrics, procured by the Merchant Exporters from the open market, locally. Th .....

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esented at Customs with the export documents obtained from the units of Muni Group, with an intent to fraudulently avail the rebate of duty shown as paid in the documents of Muni Group, in conspiracy with Shri K.K. Gupta and his Muni Group. c) Though the exporters have made an attempt to show that the transactions were genuine by issuing cheques in the name of units of Muni Group, for the purported purchase of fabrics, the flow of the amounts shown in such cheques back to the exporters discussed in earlier paras above indicates that no payments have been made to Muni Group for claimed purchase of fabrics. This pattern of financial flow indicates the very bogus/fake nature of the entire transaction. In fact in this way the Merchant Exporters would get the amount back in cash. d) None of the Merchant Exporters or their representatives have stated to have visited the premises of units of Muni Group. e) The exporters, whose statements were recorded, have stated to have purportedly carried out the textile purchases through brokers, many of which were contacted by them on mobile and no addresses of these brokers were available with the exporters, indicating that these brokers named by th .....

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der Section 14 of the Central Excise Act, 1944 and even arrest under Section 13 of the Central Excise Act, 1944, Shri K.K. Gupta could not produce any of the records required to be maintained by the assesses under the pretext that the same were handled by one Shri Ashok Sawant, his employee. He also did not produce said Shri Ashok Sawant nor did furnish his address or whereabouts. The investigation, when traced out his residence, searched it and pursued for his appearance, Shri Ashok Sawant did not appear or could be traced out, no records were found at his residence, or the residence of Shri K.K. Gupta or even the office at 111, Champaklal Industrial Estate, Sion shown by them on the registration. The entire proceedings indicate that no records were maintained in the manner prescribed under the central excise act, 1944 and merely documents suitable to the exporters and the persons interested in availing fraudulent Cenvat credit were created and apparently sold at commission to facilitate the purchasers of the documents to earn undue benefits. 80. From the foregoing paras, it is conclusively established that a conspiracy was hatched by Shri K.K. Gupta, in conjunction with Shri M.K. .....

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ore the investigation (para 78 B(6) of SCN. In fact they have made correspondence with investigation for seeking time etc. and yet now claim that without their examination charges are made. It is therefore clear that their submission cannot be given any credence and their transactions with Muni group are only on appear without receipt of any goods from Muni group. The rebate claims, therefore, pending sanction, related to them also not be allowed/admissible. 5.5 Commissioner has in para 95 of his order discussed the role of Appellant 2 stating as follows: Further, it is clear from the evidence on records that, Shri M.K. Patel, who was Superintendent in charge of the Range- IV, Kalyan-I Division in the jurisdiction of which the units of Muni Group had obtained central excise registration for manufacturing and trading, misstating the facts about activity to be carried out there had actively participated in the entire scheme of fraudulently availing rebates, by using the ARE1s and invoices issued by units of Muni Group. The scheme could succeed only because of his active participation in which he attempted legalizing the documents so issued by Muni Group and authenticating the duty pa .....

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its connected duty payment certificates were of Shri Patel only, thus falsifying the claim of Shri Patel. Since the five ARE1s were merely taken as representative specimen, at random, one each for one unit of Muni Group, it can be generalized that all the ARE1s on which he had denied signatures were his signatures only. Circumstantial evidences also confirm this finding. That is, when confronted with a few ARE1s, he denied them to be bearing his signatures, however, on these very ARE1s, he had put a new confirmatory signature, by visiting the Range Office after transfer to confirm that those were his signatures only. The contradictory statements indicate that he was lying about it and all the ARE1s were signed by him. By these acts of commission/omission supported by evidences in the form of ARE1s, duty payment certificates bearing his signature, the impugned Return of M/s. Apex Corporation viz-a-viz duty payments certificates issued in excess of duty shown in the Returns, Shri M.K. Patel is liable to penalty under Rule 26 ibid. 5.6 Appeal No E/697/2010: i. From the facts as state above in para 5.4 that facts leading to imposition of penalty on the Appellant 1 were considered by th .....

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A. When the petitioner seeks for cross-examination of the witnesses who have said that the recovery was made from the petitioner, necessarily an opportunity requires to be given for the cross-examination of the witnesses as regards the place at which recovery was made. Since the dispute concerns the confiscation of the jewellery, whether at conveyor belt or at the green channel, perhaps the witnesses were required to be called. But in view of confession made by him, it binds him and, therefore, in the facts and circumstances of this case the failure to give him the opportunity to cross-examine the witnesses is not violative of principle of natural justice. It is contended that the petitioner had retracted within six days from the confession. Therefore, he is entitled to cross-examine the panch witnesses before the authority takes a decision on proof of the offence. We find no force in this contention. The Customs officials are not police officers. The confession, though retracted, is an admission and binds the petitioner. So there is no need to call Panch witnesses for examination and cross-examination by the petitioner. v. In case of Naresh J Sukhwani [1997 (83) ELT 258 (SC)]], Ap .....

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of penalty imposed on him was same as that imposed on present appellant. Tribunal has after consideration of all the issues dismissed the appeal in that case. Following the said order of tribunal and taking note of the fact that by their acts appellant has/ was in process of facilitating the fraudulent rebate in excess of ₹ 1,00,00,000/- we uphold the order of Commissioner against Appelant-1 and dismiss his appeal. 5.7 Appeal No E/734/2010. i. Role of the Appellant and findings of the Commissioner against him has been stated in para 5.5 above. ii. In para 97, Commissioner has again observed that role of the Appellant 2 was not limited but he was roped in as part of the conspiracy conceived and hatched by the Shri K K Gupta. He while performing his duties had certified duty payments without verification and issued positive reports of CENVAT credit whenever referred by other jurisdictions. iii. Thus Appellant -2 has knowingly or unknowingly became party to the conspiracy and fraud committed by Shri K K Gupta and his Muni Group of Companies. Accordingly we have no hesitation in holding that penalty under Rule 26 of Central Excise Rules, 2002 is justified. iv. Commissioner has i .....

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