TaxTMI 
TaxTMI 
2023 (5) TMI 186
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..... under sub-section (2) of Section 11A of the Central Excise Act, 1944 and direct the noticee to pay the same forthwith; (ii) I confirm the demand for Central Excise duty amounting to Rs. 19,92,386/- Rupees Nineteen lakhs Ninety Two Thousand Three Hundred and Eighty Six Only) [Rs. 19,53,320/- (basic) and Rs. 39,066/- (Ed. Cess)] against M/s Balarajeshwar & Co. under subsection (2) of Section 11A of the Central Excise Act, 1944 and direct the noticee to pay the same forthwith; (iii) I order recovery of interest from M/s Vijaylakshmi & Co. at the appropriate rates on the Central Excise duties confirmed at (1) above under the provisions Section 11AB of the Central Excise Act, 1944 and direct them to pay the same forthwith; (iv) I order recovery of interest from M/s Balarajeshwar & Co. at the appropriate rates on the Central Excise duties confirmed at (2) above under the provisions of Section 11AB of the Central Excise Act, 1944 and direct them to pay the same forthwith; (v) I impose penalty of Rs. 1,36,09,293/- ( Rupees One Crore Thirty Six Lakhs Nine Thousand Two Hundred and Ninety Three only) on My Vijaylakshmi & Co. under t....
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.... Enterprises under the provisions of Rule 26 of the Central Excise Act, 1944 and direct her to pay the same forthwith; (xv) I impose a personal penalty of Rs. 1,00,000/-(Rupees One Lakh Only) on Shri P. Ganeshkumar, proprietor of M/s Shree Engineering Works under the provisions of Rule 26 of the Central Excise Act, 1944 and direct him to pay the same forthwith; (xvi) I impose a personal penalty of Rs. 1,00,000/-(Rupees One Lakh Only) on Shri P.Subburaj, proprietor of M/s Ganesh Enterprises under the provisions of Rule 26 of the Central Excise Act, 1944 and direct him to pay the same forthwith;" 2.1 Acting on intelligence that M/s Telebrands (India) Pvt Ltd were getting exercise equipments manufactured (marketed under the brand name "AB KING PRO") through certain manufacturer and that such manufacturing activity was actually controlled by two persons namely Shri G Nandgopal and Shri Prakash Pandya, but the production and clearances were shown in name of various manufacturers to avail the benefit of SSI exemption under notification No 8/2003-CE dated 01.03.2003, the premises of concerned manufacturers were searched by the officer of DGCEI under proper ....
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....he year 2004, Shri G. Nandgopal and Shri Prakash Pandya floated two separate proprietary concerns namely M/s Vijaylakshmi & Co. of Shri G. Nandgopal and M/s Balarajeshwar & Co. of Shri Prakash Pandya, which started individually manufacturing and supplying the exercise equipments to M/s Telebrands. The units claimed small scale exemption as envisaged under notification no. 8/2003-CE dated 01.03.2003. Shri G. Nandgopal and Shri Prakash Pandya, introduced persons known to them as manufacturers of gymnasium equipment, who then have "manufactured and supplied" gymnasium equipment to M/s Telebrands. 2.4 In order to take advantage of the SSI concession, Shri G. Nandgopal @ Gopi adopted a modus operandi by introducing several fictitious firms to distribute the actual turnover of his firm viz. M/s Vijayalakshmi & Co. among the said firms: M/s BN Enterprises, M/s GEE KAY & Co., and M/s Venkateshwara Enterprises, with the sole intention to avail benefits under the SSI scheme, by showing a turn over below Rs.1 crore. 2.4.1 The bank accounts of all the firms were opened at Mulund (W) branch of Bank of India by Shri Nandgopal and the orders were procured from M/s Telebrands i....
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....me M/s Ganesh Enterprises of Shri P. Subburaj, as a dummy front unit, to facilitate clearances from his unit M/s Balarajeshwar & Co. The total turnover of M/s Balarajeshwar & Co. including the turnover shown in the name of M/s Ganesh Enterprises: (Value in Rs.) Year Value of clearances Balarajeshwar Ganesh Enterprises Total 2003-04 5522790 5522790 2004-05 7694409 7320930 15015339 2005-06 8480000 8712909 17192909 2006-07 7763412 7763412 2007-08 2418839 2418839 Grand Total 26356660 21556629 47913289 2.11. It appeared that the said noticees actual turnovers in the above manner, in order to avail exemption as small had deliberately suppressed their scale units in terms of Notification 8/2003 CE, as amended, as a result of which the proviso to Section 11 A (1) of the CE Act, 1944, appears to be invokable, for extended period of limitation. 2.12 Thus M/s Vijayalakshmi & Co, and M/s Balarajeshwar & Co., through their above acts of omission and commission have deliberately, wilfully and with an intent to evade payment of CE duty contravened the provisions of section 6 of the CEA, 1944 (hereafter referred to a....
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....lakshmi & Cond Prakash K. Pandya, proprietor of M/s Balarajeshwar & Co were asked vide said show cause notice as to why penalty should not be imposed on them in terms of Rule 26 of the Central Excise Rules, 2002, for having dealt with the excisable goods which allegedly were liable to confiscation and resulted in the said evasion of Central Excise duty 2.16 M/s B.N. Enterprises Prop. Shri Bapu N. Dusane, M/s GEE KAY & Co.Prop. Shri G. Konnaya, M/s Venkateshwara Enterprises. Prop. Shri G. Venkataraman, M/s Shreenath Enterprises, Prop. Smt. Tejas Venkataraman M/s Shree Engineering Works Prop. Shri P. Ganeshkumar and M/s Ganesh Enterprises, Prop. Shri P. Subburaj were asked vide the said show cause notice as to why the exemption from payment of CE duty claimed by them in terms of Notification No.8/2003 CE as amended, for small scale units, for the aforesaid period should not be denied to them and penalty should not be imposed on them in terms of Rule 26 of the CE Rules, 2002, for having dealt with the excisable goods which allegedly were liable to confiscation and resulted in the said evasion of CE duty; 2.17 The show cause notice has been adjudicated as per the impugned....
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....man, M/s Shree engineering Works of Shri P S Ganeshkumar and M/s B N Enterprises of Shri Bapu Nathu Dusane were not the dummy of appellants. No conclusion to this effect could be drawn on the basis of the admission made by them in view of the decisions as follows: * Basudev Garg [2013 (294) ELT 353 9T)] * J & K Cigarettes {2009 (242) ELT 189 (Del)] * Andaman Timber Industries [2015 (324) ELT 641 (SC)] * Saron Mechanical works [2016 (332) ELT 80 (P&H)] * Notice is barred by limitation. * Cemphar Drugs & Liniments * Pahwa Chemicals P Ltd. [2005 (189) ELT 257 (SC)] * Steelcast Ltd. [2009 (14) STR 129)] affirmed at [2011 (210 STR 500] * Religare Securities Ltd {2014 (36) STR 937] * Lanxess Abs Ltd. [2011 (22) STR 587] * K K Appachan [2007 (7) STR 230] * Penalties liable to be set aside. 3.3 Arguing for his clients Shri Anil Balani submitted that- * In the present case no proceedings were initiated against M/s Telebrands and its proprietor Shri Hitesh Israni who were actually the owners of the business of exercise equipment. * All the processes in the manufacture of the exercise equipments were carried out on job work basis hence no premises of M/s Vijaylaks....
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....s firms/units by M/s. Vijaylaxmi & Co and M/s. Balarajeshwar & Co, in order to distribute the actual turnover of their respective units with the sole intention to avail benefits under notification no.8/2003 CE dated 01.03.03 as amended by showing their turnover below Rupees One Crore to remain within the exemption limit and thus evade payment of Central Excise duty. 22. It is observed from the records that a search operation was conducted by the Officers of DGCEI at the premises of all the noticees and after investigations, it was revealed that M/s. Vijaylaxmi & Co. and M/s. Balarajeshwar & Co. are engaged in the manufacture of exercise equipment classifiable under chapter sub heading 95069190 of the Central Excise Tariff Act, 1985 and avail the benefit of Notification No.8/2003-CE dated 01.03.03 as amended: It was observed that M/s Vijaylaxmi & Co. had floated several dummy units namely; M/s. B.N. Enterprises, M/s. GEEKAY & Co., M/s. Venkateshwara Enterprises, M/s. Shreenath Enterprises and M/s. Shree Engineering Works; whereas M/s Balarajeshwar & Co. had floated a dummy unit namely, M/s. Ganesh Enterprises in order to distribute their actual turnover and restrict i....
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....s not know any persons other than S/Shri Nandgopal and Prakash Pandya. 26. The proprietors of all the firms mentioned supra have admitted to the fact that the orders for supply of the exercise equipments were procured from M/s Telebrand (India) Pvt. Ltd. on their behalf by Shri Nandgopal and Shri Prakash Pandya The bank accounts of their firms were opened in the Mulund (W) branch of the Bank of India at the behest of Shri Nandgopal and Shri Prakash Pandya, and the raw material required for the manufacture of these exercise equipments were also arranged by the aforesaid persons. 27. On careful reading of the depositions made by the suppliers of the raw material required for manufacture of the exercise equipments and the job workers who manufactured certain parts of the exercise equipments on job work basis, to the department which were recorded under Section 14 of the Central Excise Act, 1944; I deduce that the moulds and dies of the parts of the exercise equipments were prepared on the basis of the designs provided by S/ Shri Nandgopal and Prakash Pandya. The components which are essential parts of the exercise equipments cannot come into existence wit....
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....rly evident that M/s BN Enterprises is a fictitious firm of M/s Vijaylaxmi & Co. 28.3 Shri P. Sadanand Ganeshkumar, proprietor of M/s Shree Engineering Works has admitted in his statements made to the department recorded under Section 14 of the Central Excise Act, 1944, that the transaction of the bank account of his firm which was opened at the Mulund (W) branch of the Bank of India was controlled by Shri Nandgopal. He has also confessed that he was just a front and the entire show was managed by S/Shri Nandgopal and Prakash Pandya. Further, Shri Khandu Mahadev Shinde Auto, a job worker, as mentioned in para 8 above, has identified Shri proprietor of M/s Bharat P.Sadanand Ganeshkumar as a paid employee of S/Shri Nandgopal and Prakash Pandya. 28.4 M/s GEEKAY & Co., M/s Venkateshwara Enterprises and M/s Shreenath Enterprises are owned by S/Shri Konayyan Govindaswamy (elder brother of Shri Nandgopal ), G.Venkataraman ( younger brother of Shri Nandgopal) and Smt. Tejas Venkataraman (sister in-law to Shri Nandgopal). All of them have accepted in their statements that Shri Nandgopal was instrumental in procuring business for them from M/s Telebrands (India)....
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....a and that the documents related to the purchase and sales of all the firms was periodically handed over to him, for preparing their accounts by S/Shri Nandgopal and Prakash Pandya. 29. In view of the foregoing depositions, it is clearly evident that the transactions of all the firms/units mentioned supra were under the financial and managerial control of S/Shri Nandgopal and Prakash Pandya. All activities related to these firms/units from the stage of procurement of raw material to the stage of marketing are absolutely common. 30.1 The above position is also corroborated from certain records seized from the possession of Shri Ashwini Gupta which are discussed as under: 30.2 Seized record no. 71 At page no.28 an entry stating " GEEKAY Bill no. 670 A -Cubes - 386955 Trf from Venkateshwara" was found. It is seen that M/s Chowdhary Tubes is a supplier of MS pipes to all the said firms /units. Undoubtedly, the mentioned entry clearly indicates that a bill which was issued to M/s Venkateshwara Enterprises was subsequently transferred to M/s GEEKAY & Co. At page no. 33, the entry " DHL to be trf to Shreenath /GNG" against Vijaylaxmi specifies that an expenditur....
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....ese cartons were then delivered to M/s Telebrands (India) Pvt Ltd. The employees of M/s Telebrand (India) Pvt Ltd. Then check the products for defects and thereafter affix the sticker of the brand name - "AB King Pro". In 2004, Shri G. Nandgopal and Shri Prakash Pandya started separate proprietary concerns; viz. M/s Vijaylaxmi & Co. & M/s Balrajeshwar & Co., respectively. These companies started manufacture and supply of the exercise equipments to M/s Telebrands (India) Pvt. Ltd. While doing so, they claimed the benefit of exemption under Notification No. 8/2003-CE dated 01.03.2003. At this point, purportedly at the instance of Shri Hitesh Israni - Telebrands (India) Pvt. Ltd. Shri G. Nandgopal and Shri Prakash Pandya Managing Director of M/s represented certain persons known to them as manufacturers of gymnasium equipment and passed of huge quantities of the product as "manufactured and supplied" by these persons to M/s Telebrands (India) Pvt. Ltd. The persons known to Shri G. Nandgopal were shown to be owners of units; viz. M/s B. N. Enterprises, M/s GEE KAY & Co., M/s Venkateshwara Enterprises, M/s Shreenath Enterprises & M/s Shreenath Engineering for the sole purpose of spreadi....
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....r Notification No. 8/2003-CE dated 1.03.2003 in 2005-06, 2006-07 & 2007-08. It therefore follows that the entire turnover of Rs. 4,29,11,000/- for the financial year 2005-06 was chargeable to central excise duty from the first rupee. The central excise duty payable including education cesses is Rs. 70,03,075/-. So also, the turnover for 2006-07 being Rs. 76,68,163/-, central excise duty including education cesses amounting to Rs. 12,52,026/- was payable by M/s Vijaylaxmi & Co. Similarly the turnover for the financial year 2007-08 upto June 2007 is Rs. 29,57,946/- on which central excise duty payable including cesses works out to Rs. 4,87,470/-. Needless to say, these duties are perforce, recoverable from M/s Vijaylaxmi & Co. 30.7 The other main patron and beneficiary of this elaborate artifice - Shri Prakash Pandya has floated a firm by name M/s Ganesh Enterprises with Shri P. Subburaj as its proprietor to facilitate clearances from the unit of which he is the proprietor, viz. M/s Balrajeshwar & Co. and to evade payment of duty on the goods manufactured by him there. It has been revealed by the investigation that only invoices/delivery challans were raised from M/s G....
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....not necessary for the department to struggle for any further evidence when, in the absence of valid retraction, admission made by the parties totally in favour of Revenue's case Section 14 of Central Excise Act, 1944. 31.3 So also in the case of Devi Dass Garg vs. Commissioner of Central Excise, Delhi-1[2010(257)ELT 289(Tri-Del)], the Tribunal has recorded its views regarding the standard of evidence required in central excise cases. The text of the headnote is reproduced below for reference. Evidence. - Preponderance of probability confirmation of duty evaded and imposition of penalty - Standard of proof Confiscation of goods, required in departmental proceedings is preponderance of probability Adjudicating authority or Tribunal to evaluate evidence of both sides and decide what is most probable - Section 11A of Central Excise Act, 1944.[paras 5.5.3] 32. Thus all the evidences on record demonstrate that M/s. B.N. Enterprises, M/s. GEEKAY & Co., M/s. Venkateshwara Enterprises, M Enterprises, M/s. Shree Engineering Works and M/s. Ganesh Enterprises were Shreenath floated as dummy units by M/s Vijaylaxmi & Co. and M/s Barajeshwar & Co In order ....
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....endent entities. In fact the evidences mentioned supra throw light on the fact that the units namely, M/s B.N.Enterprises, M/s GEEKAY & Co., M/s Venkateshwara Enterprises, M/s Shreenath Enterprises, M/s Shree Engineering Works and M/s Ganesh Enterprises existed only on paper. 36. As far as the noticees' plea that all of them are separate proprietorship concerns engaged in the manufacture of exercise equipments and do not have inter-se financial relationship and common managerial control is concerned, I find that although all the units are separate proprietorship concerns on paper; all the activities related to these units from the stage of procurement of raw material to the stage of marketing are common. The bank accounts of all the units have been opened and are operated from the Mulund (W) branch of the Bank of India as directed by S/Shri Nandgopal and Prakash Pandya. The fact that all the units had credit facility from this bank at the behest of these persons and the fact that the said persons stood as guarantors for the raw material purchased by all these units establish that all these units were one and that these units were merely created as a camouflage to....
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.... grant further cross examination of these persons. Therefore, their prayer for the same stands rejected. 39. In view of the foregoing findings and discussions, I hold that M/s B.N.Enterprises, M/s GEEKAY & Co., M/s Venkateshwara Enterprises, M/s Shreenath Enterprises, M/s Shree Engineering Works are fictitious firms floated by 'M/s Vijaylaxmi & Co. and M/s Ganesh Enterprises is a fictitious firm floated by M/s Balarajeshwar & Co. in order to suppress their actual turnovers and remain within the exemption limit, as prescribed under notfn. no. 8/2003-CE dt 01.03.03 as amended. Therefore, all the charges made in the show cause notice sustain and have been proved beyond doubt. It is also established that all these acts of omission and commission were committed by the noticees knowingly with wilful intention to evade payment of proper central excise duty as elaborated in the foregoing paras which justifies invoking the extended period of limitation. 40. I also hold that the benefit availed under the Notification no. 8/2003-CE dt 1.03.03 as amended is denied to the noticees at Sr. no. 5 to 10 of the show cause notice namely, M/s B.N.Enterprises, M/s GEEK....
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.... and not having precedent value. (Para 10) With regard to the available provisions for confiscation in Central Excise Law, the tribunal at Para 11 held that "It is nobody's case that a binding judicial authority on the question of imposability of fine under Section 125 of the Customs Act in lieu of confiscation would not be applicable where the similar question arises as to whether a fine could be imposed under Rule 25 of the central Excise Rules, 2002 (read with Section 34 of the Central Excise Act) in lieu of confiscation of excisable goods not available for confiscation" 43. With regard to the proposal for imposition of penalty, it is pertinent to mention that the Hon'ble Supreme Court in the case of Gujarat Travancore Agency Vs Commissioner Income Tax [1999 (42) ELT 350 (SC)] had opined that tax liability is a civil obligation. Drawing from this pronouncement of the Supreme Court, one has to interpret the expression intent to evade duty' in the case of civil obligation (like tax obligation). One can only seek to establish this through tax behaviour. Tax behaviour in central excise is self-assessment by the manufacturers. 44.&nb....
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....on of Commissioner about liability to confiscation that decides penalty - Person dealing with goods either should know or have reasons to believe that same liable to confiscation case that Shri V.L. Chalke not aware that goods liable to confiscation - Penalty imposable - Penalty also liable under Rule 14A of erstwhile Central Excise Rules, 1944 for diversion of goods - Rule 26 of Central Excise Rules, 2002. I am, therefore, of the firm view that these persons are liable to be penalized. 45. I find that the tax behaviour of the noticees clearly reflect the fact that they were well aware that floating of fictitious firms would facilitate them in availing the exemptions and concessions as envisaged under Notification No. 8/2003-CE dt 01.03.03. They deliberately suppressed their turnover in such manner and thus evaded payment of central excise duty which was legally due. Their intent is thus crystal clear. Therefore, they have rendered themselves liable to be stringently penalized." 4.3 The issue involved in the present case has been referred to the issue of the clubbing of the clearance of various entities which were found to be dummy during the investi....
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.... so ever asked by her husband. * As informed by her husband after one or two years of undertaking the business of the manufacture of gymnasium equipments, firm stopped the same and started the business of import/ export which is looked after by Shri Nandgopal @ Gopi. 4.5 Shri Bapunath Dusane has in his statement stated as follows: * my education qualification is Xthpassed from Poona Board and I passed in the year 1978. My college is at Bhalod, Talika Yaval, District Jalgaon. After passing my Xth Examination and after a period of two to two and half years, I came to Mumbai and joined I.T.I. Abhinav Technical Institute, Dadar, for the course of Turner and Fitter. In the year 1982 I joined M/s. Metropolitan Springs Pvt. Ltd., Wadala, Mumbai as machine (Leth) operator and worked with them for nearly 11 months. Subsequently I, joined M/s. Emco Electricals, Sion, M/s. Kumar Specialty Products, Bhandup as supervisor till January, 2002. Since, M/s. Kumar Specialty Products, Bhandup was shut down, I was in search of a new job. Meanwhile, I came in contact with Mr. G. Nandgopal alias Gopi who was proprietor of M/s. Vijay Laxmi & Company, Panna House, Bhandup West, Mumbai and after inq....
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....der cover of delivery challans and the invoices of M/s. B. N. Enterprises. * I had only prepared the papers viz. delivery challans and the invoices as per the instructions of Shri. G. Nandgopal alias Gopi. * I further confirm that the said delivery challans and the invoices of M/s. B. N. Enterprises were prepared to create an impression that the gymnasium equipments were manufactured by Ms. B. N. Enterprises and supplied to M/s. Telebrands (I) Pvt. Ltd. * I state that I am not aware the reasons for the said documentation. * I state that I was getting my salary without any additional monthly consideration for the said documentation. However I have received additional Rs.15.000/- from Shri Gopi during the Diwali festival. On being specifically asked I state that the above documentation, establishment and transactions shown to be carried out were as per the instructions and directions of Shri. G. Nandlal alias Gopi. * Regarding the payments made by M/s. B. N. Enterprises, for its purchases made during the said period I say that being a proprietor of M/s. B. N. Enterprises, I was the authorized signatory for issue of cheques for making payme....
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....namely M/S Vijay Lakshmi & Co., 9, Panna House, Devidayal Compound, LBS Marg, Bhandup West, Mumbai-400078. This company started in October 2004 after getting the assurance from Mr. Hitesh Ishrani for purchase of Gym. Equipments manufactured by the said company. I have acquired the premises approximately 860 sq. feet, from Mr. Devi Kumar, the proprietor of Devi Dayal Compound on rental basis. I entered into an agreement with deposit of Rs. 50000/- and monthly rent of Rs. 12000/- per month. The copy of agreement with rental receipts will be made available with in a period of 10 days. I further state that M/s Vijay Lakshmi & Co. is engaged in the manufacture of Gym. Equipments. The Gym. Equipments are manufactured and sold to M/s Teicbrands (1) Pvt Ltd. only. There is no written agreement for sale and purchase of the product between M/s Telebrands (1) pvt. Ltd and M/s Vijay Lakshmi & co. The details process of manufacture has already been explained in this statement in case of M/s GNG & Co. On being ask about the machinery installed in the premises for manufacture of Gym. Equipments, I state that, the company has five Drilling machines, and that no other machinery is installed in the ....
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....es the new company in the name of M/s BN Enterprises was floated. I further state and confirmed that M/S B.N Enterprises was floated by me. I have put my dated signature on the statement of Mr. Bapu Dusane dated 24/7/07 in token of having confirming and accepting the contention therein." "I have now been shown the statement of Shri Hitesh Israni, Managing Director of M/s Telebrands India Pvt. Ltd. dated 18.10.07. I have carefully read this statement and I have put my dated signature on this statement today in token of having read it. I have now been asked to comment on the statement of Shri Hitesh Israni, where he has stated that initially he was in touch with Shri Prakash Pandya and Shri Nandgopal Gopi of M/s GNG & Co. for manufacture of the gymnasium equipment AB KING PRO. To-this, I say that as explained by me earlier, myself and Shri Prakash Pandya were the two partners of one firm running in the name and style M/s 。 GNG & Co. This firm was initially manufacturing equipment for M/s Telebrands which was sold by them under the name "Surya Namaskar". Subsequently, Shri Hitesh Israni wanted to launch another type of gymnasium equipment, which was sold by them under ....
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....facturing process, I introduced my family members, Shri G. Konnayan and Shri G. Venkataraman into this business. I say that apart from my brothers, I have also introduced Shri P. Ganeshkumar, who was earlier doing job work of fabrication for the gymnasium equipment. I say that G Konnayan was supplying equipment through the firm M/s Gee Kay & Co., M/s Shreenath Enterprises was the firm of the wife of Shri G. Venkataraman, which manufactured gymnasium equipment initially and then started imports. In the year 2006 Shri G. Venkataraman started the firm M/s Venkateshwara Enterprises, which was engaged in the manufacture of the gymnasium equipment for supply to M/s Telebrands. I say that Shri P. Ganeshkumar accepted the offer of becoming a manufacturer of gymnasium equipment, and he started a firm by name M/s Shree Engineering Works. I say that further, through us, Shri Naresh Dedhia, who is another job worker, doing work of powder coating, was also introduced to M/s Telebrands and he initially supplied gymnasium equipment through one existing firm M/s Ravi Coats, which was subsequently closed and another firm by name M/s Dedhia Enterprises. To this I would furthe....
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....hri G. Konnayan and he had his manufacturing facility at Saki Naka. I am not aware whether Shri Ashwini has at any time visited this factory premises at Saki Naka, but it is possible that since he was only handling the accounting on the basis of documents, he may have felt that it is not necessary for him to visit the premises of M/s Gee Kay & Co. I have now been specifically asked about M/s Ganesh Enterprises, and the submissions made by Shri Ashwini Gupta on the basis of the evidences put in front of him. I have now been shown the statement dated 16.10.07 of Shri Sunil Alwani of M/s Sunil Enterprises, a supplier of rexine. I have carefully read this statement and put my dated signature on the same in token of having read it. After carefully reading these statements, I say that the documents shown to me indicate that Shri Subburaj Perumal of M/s Ganesh Enterprises was actually a front used. I say that Shri Prakash Pandya will be in a better position to explain the nature of understanding between him and Shri Subburaj as this person was introduced on behalf of Shri Prakash Pandya." "Q. Shri Ganesh Kumar has stated that you and Shri Prakash Pandya had helped him....
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.... for the payment due to guarantee given by us. specifically that I was never in control of the bank account of M/s Shree Engineering Works and I was also never involved in the day to day activity of M/s Shree Engineering Works apart from the facts stated by me above." 4.7 Shri Prakash Pandya has in his statement recorded under Section 14 of the Central Excise Act, 1944 stated as follows: "I have now been shown the statement dated 19.03.08 of Shri Nandgopal G. @ Gopi, given before your officers, and I have carefully read the same. I have now been asked to explain the nature of relation between me and Shri Gopi. To this I say that as explained by Shri Gopi in his statement and as deposed by me in my earlier statement, I say that in the beginning stages, during the year 2003, myself and Shri Nandgopal @ Gopi had together formed a partnership firm M/s GNG & Co. This firm was engaged in doing job work for a company which was supplying exercise equipment "Surya Namaskar" to M/s Telebrands (India) Pvt. Ltd. I say that the said firm M/s GNG & Co. was located at Devidayal Estate, Bhandup, which is in the same locality where the premises of M/s Telebrands (India) Pvt. Ltd. is also situat....
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....larity of the exercise equipment, AB KING PRO, was demanding higher quantities of supplies of the same, and he also wanted that the entire production should not be in the control of one or two individuals. He informed myself and Shri Gopi that he warned to place orders on other firms. However, myself and Gopi, mutually agreed that the margin available on the manufacture of the exercise equipment is good and the manufacturing process also does not require any technical expertise. Hence, as per our mutual understanding, we introduced persons known to us to Shri Hitesh Israni, after getting their consent to become manufacturer of the exercise equipment. I say that during period. we had introduced Shri Naresh Dedhia, who was the job worker, doing the powder coating jobs for us, as he was already conversant with the processes involved. The relatives of Shri Gopi, Shri G. Konnayan, Shri Venkataraman and Smt. Tejas Venkataraman were also introduced and they conducted the manufacturing activity of making and supplying exercise equipment to M/s Telebrands through their respective firms Ms GEF KAY & Co, M/s Venkateshwara Enterprises and M/s Shreenath Enterprises respectively. One more person....
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....t is hence put to me now that M/s Ganesh Enterprises was only a name used and the production was of my firm. M/s Ganesh Enterprises was just a dummy firm formed. To this, I say that I am not in a position to explain the reasons why these persons have stated the details provided by them in their respective statements. I am also not in a position to deny the same. I have nothing more to add at present. The above statement has been typed on the office computer on my request. I have carefully read this statement and I say that it is correctly recorded as stated by me. It is my voluntary statement and no force or threat was used for recording it." 4.8 From the above statements and various documentary evidences referred in the impugned order, in our view the fact that the appellants namely M/s Vijaylakshmi & Co through its proprietor was engaged in the supply of the gymnasium equipments to M/s Telebrands and in order to keep his turnover below the exemption limits as per the Notification No 8/2003-CE had floated/ used the names of the proprietary concerns created/ operated in the name of his family members and employees. In fact if the corporate veil is lifted we are firmly of th....
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....cision of the House of Lords in the case of Salomon v. Salomon [1897 AC 22]. This is how this Court noticed in Tata Engineering and Locomotive Company Ltd. v. State of Bihar & Ors. [(1964) 6 SCR 885] : "The true legal position in regard to the character of a corporation or a company which owes its incorporation to a statutory authority, is not in doubt or dispute. The corporation in law is equal to a natural person and has a legal entity of its own. The entity of the corporation is entirely separate from that of its shareholders; it bears its own name and has a seal of its own; its assets are separate and distinct from those of its members; it can sue and be sued exclusively for its own purposes; its creditors cannot obtain satisfaction from the assets of its members; the liability of the members or shareholders is limited to the capital invested by them; similarly, the creditors of the members have no right to the assets of the corporation. This position has been well-established ever since the decision in the of Salomon v. Salomon & Co. [(1897) A.C. 22 H.L.] was pronounced in 1897; and indeed, it has always been the wellrecognised principle of common law. However, in the cours....
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....made by two sections of the Companies Act, 1948, by judicial disregard of the principle where the protection of public interests is of paramount importance, or where the company has been formed to evade obligations imposed by the law, and by the Courts implying in certain cases that a company is an agent or trustee for its members. In Palmer's Company Law (23rd Ed.), the present position in England is stated and the occasions when the corporate veil may be lifted have been enumerated and classified into fourteen categories. Similarly in Gower's Company Law (4th Ed.), a chapter is devoted to 'lifting the veil' and the various occasions when that may be done are discussed. In Tata Engineering and Locomotive Co. Ltd. [(1964) 6 SCR 885], the company wanted the corporate veil to be lifted so as to sustain the maintainability of the petition, filed by the company under Article 32 of the Constitution, by treating it as one filed by the shareholders of the company. The request of the company was turned down on the ground that it was not possible to treat the company as a citizen for the purposes of Article 19. In CIT v. Sri Meenakshi Mills Ltd. [AIR 1967 SC 819], the corporate veil was ....
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....ice thereof, i.e., the price at which such goods are ordinarily sold by the assessee to a buyer in the course of wholesale trade for delivery at the time and place of removal, if the buyer is a related person and price is not the sole consideration for sale. As to who is a related person, we have to see its definition of Section 4(4)(c) of the Act. It is not only that both, the manufacturer and the buyer, are associated with each other for which corporate veil may be lifted to see who is behind it but also that they should have interest, directly or indirectly, in the business of each other. But once it is found that persons behind the manufacturer and the buyer are same, it is apparent that buyer is associated with the manufacturer, i.e., the assessee and then regard being had to the common course of natural events, human conduct and public and private business it can be presumed that they have interest, directly or indirectly, in the business of each other (refer Section 114 of the Evidence Act). It is, however, difficult to lay down any broad principle to hold as to when corporate veil should be lifted or if on doing that, could it be said that the assessee and the buyer are rel....
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....ourt has powers to disregard the corporate entity if it is used for tax evasion or to circumvent the tax obligation. Same view has been taken by the Apex Court in cases of :- (a) Calcutta Chromotype v. Collector of Central Excise, reported in 1998 (99) E.L.T. 202 (S.C.) = (1998) 3, SCC-681; (b) Subra Mikharjee & another v. Bharat Cooking Coal Ltd., reported in (2000) 3 SCC-312; and (c) Delhi Development Authority v. Skipe Construction Co. (P) Ltd., reported in (1996) 4 SCC-622. The Apex Court in the case of Associated Rubber Industry Ltd., reported in 1986 (157) ITR-77 (S.C.), relying upon its earlier judgment in case of Medowell& Co. Ltd. v. CTO, reported in 1985 154 ITR-148, 161 (S.C.) has held that even if companies are distinct legal entities having separate existence, this is not the end of the matter and it is the duty of the Court in every case, where ingenuity is expended, to get behind the smokescreen and discover the true state of affairs. Thus, the principle of lifting the corporate veil for discovering the true state of affairs behind the veil of the corporate entity is a well settled legal principle. It is this principle which has to be ap....
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....e again, the under-valuation aspect assumes importance. While the supply by MACL to three companies was Rs. 0.50 per unit, the sale price by the three companies was Rs. 5 per unit. It is on record that accounts were kept by common staff and marketing was done under the supervision of a person who belongs to the same group of concerns. The amounts have been collected by an employee of MACL. The socalled Directors of the companies were undisputedly employees of MACL. Almost the entire financial resources were made by MACL. The financial position clearly shows that MACL had more than ordinary interest in the financial arrangements for companies. The statements of the employees/Directors show that the whole show was controlled, both on financial and management aspects by MACL. If these are not sufficient to show inter-dependence probably nothing better would show the same. The factors which have weighed with CEGAT like registration of three companies under the sales tax and income tax authorities have to be considered in the background of factual position noted above. When the corporate veil is lifted what comes into focus is only the shadow and not any substance about the existence of....
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....n the basis of Board's Circular No. 6/92-C.E. is not acceptable. 7.1.3 Thus, if there is evidence on record to prove that a particular person, whether natural or juristic, has comprehensive financial and management control over several entities and is the actual beneficiary of their activities, the clearances of the factories owned by these entities are to be clubbed for the purpose of determining their eligibility for SSI Exemption by treating them as the units of only one manufacturer, even if those units are owned by different public limited companies, private limited companies or partnership firms. If on clubbing their clearances during the preceding financial year, the aggregate value of the clearances is found to be exceeding the threshold limit for SSI Exemption, the SSI Exemption would have to be denied to each of them and if each of them is a functioning unit and not a non-functional dummy unit, the duty can be demanded separately from each unit. 7.1.4 However, if there is only one unit which is functioning unit and other units are just dummy units, not actually engaged in manufacturing activities, duty would have to be demanded only from the existing unit by treatin....
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....ries, M/s. Foamsil Chemicals and M/s. Arun Chemicals, whatever is their constitution, (these are proprietary concerns), are under common management and closely controlled by only one person Shri J.S. Jain, who is one of the appellants here. The facts and circumstances have warranted to examine the reality of these units; and after going behind the mask of these entities, it has been revealed that activities of these units i.e. manufacture, clearance, etc. has to be clubbed together. In this regard, we take support from the Hon'ble Supreme Court's observations in the above case of Calcutta Chromotype Ltd. (supra) which are given below : 14. ........... (emphasis supplied) 11.1.5 We do not agree with the appellants' contentions that impugned order has fixed liabilities of Central Excise duty separately on the noticee/appellant, namely, M/s. Atlantic Chemical Industries, M/s. Foamsil Chemicals (who is not the appellant) here and M/s. Arun Chemicals and have held that their clearances are to be clubbed whereas the impugned order concludes that M/s. Arun Chemicals had no manufacturing facilities and if it is so, how liability could be fixed against M/s. Arun Chemica....
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....Talcum Powder for M/s. Lakme Ltd.; that this is a part of his statement recorded on 7-9-1987; that Shri Jayant Divekar confirmed that formula, specification, tins and standard to be maintained were provided by M/s. Lakme Ltd.; that M/s. Dhiraj Can Co., Ankleshwar had written a letter to M/s. Sanjay Steel Co., Ahmedabad that the return of the above consignment was an arrangement between M/s. Lakme Ltd. and as such no freight involved in this respect can be paid by us; that this reveals that the entire portion was under the control and supervision of M/s. Lakme Ltd.; that the price charged by the three units cannot be accepted under Section 4 of the CESA, 1944. 9. On careful consideration of the submissions made by both sides and the documents referred to , we find that the three units got activated only for a short period of one month or so. We also find that the main activity of the three units was trading activity in steel products. We also find that the three units do not have permanent machinery. We also observe that machinery was taken on hire only for the manufacture of lavender beauty talcum powder. We also find that this arrangement was done through Consultancy Agen....
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....ix months. He submitted that the declaration was filed by the three units stating that they were manufacturing talcum powder. It was therefore, necessary for the Department to verify the declarations and there was no suppression by the appellants of any fact from the Department. He therefore, submitted that the demand beyond six months cannot be enforced under the provision of Section 11A of CESA, 1944. We find that the period for which the demands have been raised is between 26-12-1985 to 20-1-1986 of M/s. Zenith Enterprises, 30-1-1986 to 21-2-1986 for M/s. Sanjay Steel Co. and 26-2-1986 to 16-3-1986 for M/s. Shalin Cosmetics whereas the show cause notice was issued on 6-9-1990. We also observe that in the show cause notice, there is an imputation that there was suppression of material facts and misstatement inasmuch as the three units did not disclose that they were manufacturing the product for M/s. Lakme Ltd. The learned Counsel for the appellants agitated before us very forcefully that the three units had submitted the declarations which were required under the law and that in view of that declarations there was no suppression as the product was clearly declared. But here we a....
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....e cylinders bore the name of MACL. If the three companies had separate standing as contended it could not be explained why they could not get the cylinders directly from the lessors on lease basis and the need for introducing MACL as the lessee and then the three companies becoming sub-lessees. As noted by the Commissioner, entire receipts were paid as lease amount to MACL. Here again, the under-valuation aspect assumes importance. While the supply by MACL to three companies was Rs. 0.50 per unit, the sale price by the three companies was Rs. 5 per unit. It is on record that accounts were kept by common staff and marketing was done under the supervision of a person who belongs to the same group of concerns. The amounts have been collected by an employee of MACL. The socalled Directors of the companies were undisputedly employees of MACL. Almost the entire financial resources were made by MACL. The financial position clearly shows that MACL had more than ordinary interest in the financial arrangements for companies. The statements of the employees/Directors show that the whole show was controlled, both on financial and management aspects by MACL. If these are not sufficient to show ....
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....e panch (mediater) witnesses for cross-examination contending that reliance on the statements of those witnesses without opportunity to cross-examine them, was violative of the principle of natural justice. The High Court had dismissed the writ petition. In that context, it was held that his retracted confession within six days from the date of the confession was not before a Police Officer. The Custom Officers are not police officers. Therefore, it was held that "the confession, though retracted, is an admission and binds the petitioner. So there is no need to call Panch witnesses for examination and crossexamination by the petitioner". As noted, the object of the Act is to prevent large-scale smuggling of precious metals and other dutiable goods and to facilitate detection and confiscation of smuggled goods into, or out of the country. The contraventions and offences under the Act are committed in an organised manner under absolute secrecy. They are white-collar crimes upsetting the economy of the country. Detection and confiscation of the smuggled goods are aimed to check the escapement and avoidance of customs duty and to prevent perpetration thereof. In an appropriate case whe....
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....ven when a statement is founded upon consideration of the relevant facts and circumstances and also found to be voluntary, it cannot be relied upon because the same was retracted. We may usefully refer to the legal position stated in the following paragraph by this Court in K.T.M.S. Mohd. & Anr. (supra) : "34. We think it is not necessary to recapitulate and recite all the decisions on this legal aspect. But suffice to say that the core of all the decisions of this Court is to the effect that the voluntary nature of any statement made either before the Custom Authorities or the officers of Enforcement under the relevant provisions of the respective Acts is a sine qua non to act on it for any purpose and if the statement appears to have been obtained by any inducement, threat, coercion or by any improper means that statement must be rejected brevi manu. At the same time, it is to be noted that merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise etc. to establish that such improper means has been adopted. However, even if the maker of the statement fa....
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....ation of the witness would make no material difference in the facts and circumstances of that case. The Court observed : "3. It is true that the petitioner had confessed that he purchased the gold and had brought it. He admitted that he purchased the gold and converted it as a kara. In this situation, bringing the gold without permission of the authority is in contravention of the Customs Duty Act and also FERA. 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 crossexamination 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 cros....
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....h of natural justice. On the material on record, in our opinion, there has been no such breach. In the show-cause notice issued on August 21, 1961, all the material on which the Customs Authorities have relied was set out and it was then for the appellant to give a suitable explanation. The complaint of the appellant now is that all the persons from whom enquiries were alleged to have been made by the authorities should have been produced to enable it to cross-examine them. In our-opinion, the principles of natural justice do not require that in matters like this the persons who have given information should be examined in the presence of the appellant or should be allowed to be cross-examined by them on the statements made before the Customs Authorities. Accordingly we hold that there is no force in the third contention of the appellant." 20. Coming to the case at hand, the Adjudicating Authority has mainly relied upon the statements of the appellants and the documents seized in the course of the search of their premises. But, there is no dispute that apart from what was seized from the business premises of the appellants the Adjudicating Authority also placed reliance up....
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....and the extent to which the penalty may be reduced. 18. One cannot fail to notice that both the proviso to sub-section 1 of Section 11A and Section 11AC use the same expressions : "....by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,...". In other words the conditions that would extend the normal period of one year to five years would also attract the imposition of penalty. It, therefore, follows that if the notice under Section 11A(1) states that the escaped duty was the result of any conscious and deliberate wrong doing and in the order passed under Section 11A(2) there is a legally tenable finding to that effect then the provision of Section 11AC would also get attracted. The converse of this, equally true, is that in the absence of such an allegation in the notice the period for which the escaped duty may be reclaimed would be confined to one year and in the absence of such a finding in the order passed under Section 11A(2) there would be no application of the penalty provision in Section 11AC of the Act. On beha....