TaxTMI 
TaxTMI 
2009 (7) TMI 341
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.... Shri K.K. Agarwal situated at 1, Arti Society, Ellora Park, Vadodara and also the premises of M/s. R.K. Warehouse, Narol Char Rasta, Ahmedabad and that of M/s. Randal Warehouse, Aslali Village, Ahmedabad were searched on the same date under panchanama. The documents seized from the premises at 5, Golden Apartment, Subhanpura, Vadodara included some unused block transfers bearing the seal of the office of the Maritime Commissioner of Central Excise, Mumbai, Division-IV, Vadodara and Superintendent of Central Excise and Customs, Range-IV, Division-IV, Vadodara, some other block transfers which had been cancelled and some used block transfers along with AR4s, invoices and other documents of certain manufacturers showing the sale of chemicals to GCI and GI against the said block transfers without payment of Central Excise duty for export. Different invoices, AR4s, packing lists, sealed covers addressed to Maritime Commissioner of Central Excise, Assistant Commissioner of Central Excise, Division-IV, Vadodara and Superintendent of Central Excise, Range-IV, Division-IV, Vadodara and other documents received from some of the suppliers for supply of goods against block transfers to GCI an....
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....s. 25 Lakhs Assistant Commissioner Central Excise & Cus. Div-IV, Vadodara. (b) Inquiry with the office of the Maritime Commissioner, Central Excise, Mumbai, Assistant Commissioner of Central Excise, Division-IV, Vadodara and Superintendent of Central Excise Range-IV, Division-IV, Vadodara, revealed that so far as the Bonds at Sl. No. 1 to 5 above are concerned, neither any such bond had been executed with them by GCI and GI nor the authorities mentioned in the said block transfer letters had issued any block transfer letters to GCI and GI nor any letters accepting the proof of export had been issued by them to the GCI and GI. In respect of Bond at Sl. No. 5, while such a bond had been executed by the NRL, no block transfer was issued by Assistant Commissioner of Central Excise, Division-IV, Vadodara and Superintendent, Central Excise, Range-IV, Division-IV Vadodara to NRL and also the proof of export letters supposed to have been issued by them accepting proof of export submitted by these firms, were totally bogus. 3. After issue of show cause notice and personal hearing etc., adjudication order was passed by Commissioner Central Excise, Vadodara on 30-6-2004. An appeal was file....
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....I (noticee Nos. 1 and 2). He has also imposed equal amount of penalty under Section 11AC and has imposed penalty of Rs. 50 Lakhs on Shri V.L. Chalke and Rs. 5 Crores on Shri K.K. Agarwal. Hence the appeals. 5. Meanwhile, since Shri K.K. Agarwal passed away and his wife Mrs. Meena K. Agarwal filed miscellaneous application for permission to pursue the appeal on behalf of her husband, as a legal heir, which has been permitted vide No. M/1176/WZB/AHD/2008 dated 14-10-2008. 6. Shri P. Shah, ld. Advocate appeared on behalf of the GCI, GI and Mrs. Meena K. Agarwal and Shri J.C. Patel appeared on behalf of Shri V.L. Chalke and NRL. 7. Shri P. Shah, ld. Advocate on behalf of the appellants submitted written submissions, which are reproduced as under:- (a) It is submitted that demanding the duty from the appellant is beyond the show cause notice. Admittedly, the show cause notice called upon the appellant to show cause as to why penalty under Rule 209A of the erstwhile Central Excise Rules, 1944 should not be imposed upon him. The show cause notice admittedly called upon the said two firms and the 15 manufacturers to show cause as to why duty of Rs. 4,08,04,652/- should not demanded und....
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....SK Ltd. and M/s. Kishor Pumps Limited, relied upon by the Commissioner are applicable to the facts of the present case. (i) If this Hon'ble Appellate Tribunal accepts that the AR4s are considered to be bond for the purpose of demanding duty, then in that event only the duty under Rule 14A of the erstwhile Central Excise Rules, 1944 can be demanded with the maximum penalty of Rs. 2,000/-. This is what this Hon'ble Appellate Tribunal held in the case of Euro Cot Spin Limited reported in 2001 (130) E.L.T. 85. (j) It is submitted that the impugned order having proceeded on the assumption that the AR4s are to be treated as bond for the purpose of recovery of duty against the said two firms, other provisions such as Sectiond 11A, 11B, 11AC of the Act and Rule 209(A) of the Rules have no application and only the Rule that will apply will be Rule 14A of the erstwhile Rules. (k) It is an admitted position that Rules 14 and 14A of the Rules are self-contained codes. (l) It is submitted that the impugned order having proceeded on the basis that to demand duty from the said two firms, the AR4s are to be treated as bond and non-submission of the proof of export entail the invocation of Rule....
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....e 209A of the Rules, on the ground that he had floated the said two firms and fabricated the block-transfer letters and other papers with the help of Mr. Chalke and purchased chemicals without payment of duty and instead of being exported illicitly disposed of in local market. The Commissioner of Central Excise finding that Mr. Chalke under the instructions of the appellant took delivery of the goods from the supplier and arranged the transportation of the goods and both the appellant and Mr. Chalke knew that these goods were liable to confiscation under the Rules is untenable and unsustainable in law. It is submitted that in the absence of any evidence on record to show that the appellant had physically dealt with the goods, the imposition of penalty under Rule 209A of the Rules, is clearly untenable and unsustainable in law. (u) In any event, no penalty under Rule 209A of the Rules, could have been imposed on the appellant by reason of the fact that the Commissioner of Central Excise has proceeded to demand duty from the said two firms under Rule 14 of the Rules. The Commissioner of Central Excise, has treated the block transfers as bond executed by the said two firms and enforc....
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....nd has been executed before Assistant Commissioner for Rs. 25 Lakhs and the block transfer had been permitted by the Superintendent. He also submits that there is no provision for block transfer when the bond is executed before the Assistant Commissioner and therefore, the Superintendent who permitted clearances against block transfer should have issued the show cause notice within a year of the clearances, since no suppression can be alleged. It is his submission that there is a contradiction between Para 13 and Para 14 in the show cause notice. He submits that what was executed before Assistant Commissioner was only B-1 general bond and that is not a relevant bond for the purpose of exports. As regards Shri V.L. Chalke, he submits that he has retracted the statements given by him before the Magistrate. Further, even though samples of signatures have been taken from Shri V.L. Chalke, no expert opinion has been obtained by the Revenue from the forensic experts to show that Shri Chalke had actually committed forgery. He also submits that Rule 173Q is not attracted since it requires contravention of Rules or provision of the Act by the manufacturer for rendering goods liable to confi....
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....ord that many of the suppliers knew Shri P.N. Purohit and knew him as an employee of K.K.A. (iii) He also pointed out that Shri V.L. Chalke never denied that he was an employee. He had also clearly admitted to forgery and even from the arguments advanced by the ld. Advocate it becomes clear that Shri V.N. Chalke is only dummy. He pointed out that ld. Advocate on behalf of Shri Chalke had submitted while arguing about penalty that he was only an employee and therefore the penalty imposed is very harsh assuming that penalty is likely to be imposed but not accepting the same. It is his arguments that arguments advanced by the ld. Advocate on behalf of the notice Nos. 1 and 5 i.e. NRL and Shri V.L. Chalke clearly show that Shri Chalke was nothing but a dummy. As regards jurisdiction, he submits that it is strange that appellants are raising this question of jurisdiction at this stage when the matter has been remanded and adjudication order has been passed in de-novo proceedings. He also submits that this issue was not brought before Tribunal also earlier. In this connection he drew our attention to the documents submitted with the appeal filed by the appellants, before this Tribunal a....
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.... only manufacturers are liable to pay duty and not the appellants, in view of the fact that they neither executed any bond before Maritime Commissioner nor before the Assistant Commissioner incharge of the jurisdiction, ld. Advocate submits that it was the appellants who had produced forged block transfers to 16 suppliers and received goods for export and also produced forged proof of export to the suppliers manufacturers; having done this and having claimed to the merchant-manufacturers and having declared to the suppliers and also to the departmental officers in whose jurisdiction the suppliers were located, that they were merchant-exporters, only for the purpose of payment of duty. It cannot be held that they were not merchant-manufacturers and in the absence of a bond, duty cannot be demanded from them. He submits but for the investigations conducted by the Revenue, the appellant would have escaped the liability to duty completely. Further having declared themselves as merchant-manufacturer and having enjoyed benefit of receiving the goods for export without payment of duty, if they are allowed to claim that they are not liable to pay duty on the ground that they had not execut....
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....t is the proprietor who pays the duty. Therefore it would be appropriate and there is nothing wrong if demand is made in the name of proprietor. This becomes necessary when the proprietor claims he is not the proprietor. Otherwise whether the demand is raised in the name of firm or proprietor, the result is same. Once either of the parties to the dispute, raise the point regarding proprietor and in view of the fact that Section 11A requires duty to be demanded from person chargeable to duty, Commissioner as adjudicator is bound to identify the proprietor and charge him with liability. Further Section 11A of the Act also requires notice to be served on person chargeable with duty. Therefore in the show cause notice itself identification of proprietor and his liability and reasons/evidence for the purpose have to be incorporated, so that person gets an opportunity to defend himself. There cannot be any dispute that "the person here would mean not only artificial person like a corporation, Pvt. Limited Company or a partnership firm but also an individual. As regards proprietary firm, person and the firm are one and the same and are inseparable. Therefore, in the case of proprietary fi....
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....hat he knew Shri Chalke as an employee of Shri K.K.A. and he had introduced Shri Chalke for the purpose of opening accounts of GCI. Further he had also introduced Shri Chalke as proprietor of M/s. Ganesh Dychem and in the name of Ganesh Dychem, the goods obtained for export were sold in the local market and it was also found that in the name of Ganesh Dychem in respect of a large quantity of goods obtained from manufacturers by NRL, even cenvatable invoices were issued. (v) The statements of 16 suppliers directly or indirectly show that all of them knew NRL, GCI and GI as firms belonging to Shri K.K.A. (vi) The statement of Shri Arvind Purohit also shows that Shri K.K. Agarwal was considered as the owner of all the firms. Shri Arvind Purohit acted as broker of GCI and GI. (vii) The bank accounts of Ganesh Dychem, GCI, Shriram Enterprises and Ganesh Chemicals and Gujarat Chemicals show transactions running into crores through direct deposits and transfer from one account to another. Details of which have been discussed by the Commissioner. (viii) There is no dispute about the quantity cleared without payment of duty and actual duty liability. (ix) We also note with approv....
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....of introduction of the Section in the Act. 17. We have to consider the submissions made on behalf of the NRL separately as regards duty liability since facts are slightly different. In the case of NRL, the bond executed before Assistant Commissioner was B-l Bond and Block Transfers were issued by the Superintendent. There is no dispute that bond was executed before Assistant Commissioner but Block Transfers were not issued by the Superintendent. Similarly, proof of export was also forged as in the case of other goods received for export by the appellants. Ld. Advocate on behalf of the appellants drew our attention to the fact that Shri K.K.A. had stated in his statement that other than GCI and GI, no other firm was owned or controlled by him who is involved in the activity of procuring of goods on forged documents. Further it is on record that the Superintendent incharge of the range had given reply that he had not issued any block transfers. It is also on record that proof of export submitted in respect of these supplies were also diverted to the local market. Ld. Advocate has also pointed out that as per Para 2.3 of the Circular No. 87/87/94-CX dated 26-12-94, bond can be execut....
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....mand for duty in respect of NRL for Rs. 9,44,435/- cannot be sustained on the ground of limitation alone. 18. While on the subject, it has to be mentioned that the matter was heard extensively on 2-12-2008, by the Division Bench in Ahmedabad on the plea of non-supply of documents only. After hearing both the sides for a considerable time, the Bench had found no merits in the plea. However, detailed orders were not passed. On that occasion, on behalf of the Revenue photocopies of documents signed by Shri K.K. Agarwal acknowledging the receipt of all the relied upon documents in respect of all the appellants, were produced and all were dated 1-9-2005 and 6-9-2005. Further, another receipt issued by Shri KKA on 10-5-2000 was also produced, which is reproduced for ready reference:- RECEIPT Received documents/records appearing at Sr. No. 01, 02, 05, 13, 14, 15,16, 17, 18, 19, 20, 22, 24, 26, 27, 29, 31, 32, 33, 35, 36, 37, 38, 39, 40, 44, 45, 46, 47, 48, 49, 50, 51, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 72, 73, 74, 75, 76, 77, 82 and 83 of the Annexure 'A' showing list of documents/records seized/recovered from the office premises of M/s. Gujchem Internatio....
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....sue the appeals can be required to pay penalty imposed on Shri K.K.A. This becomes important since Shri K.K. Agarwal passed away. If we have to hold that penalty is leviable on him, the liability is to be discharged by his wife and if we hold that liability is to be discharged, it would be vital to consider whether penalty is imposable on Shri K.K.A. In this connection, ld. Advocate cited decision of the Tribunal in the case of Al Jabel Ali Exports and Imports reported in 2001 (137) E.L.T. 220 (Tri.-Chennai), Modern Industries reported in 2008 (223) E.L.T. 213 (Tribunal) = 2007 (8) S.T.R. 529 (Tri. - Mumbai) and in the case of Manjit Sethi - 1996 (85) E.L.T. 121 (Tribunal), in support of his contention that penalty cannot be imposed on deceased person and if imposed cannot be recovered from his legal heirs. We find that this issue is squarely covered by the decisions cited by the ld. Advocate and therefore penalty even if it is confirmed against Shri K.K.A. recovery from his wife cannot be effected. Therefore, we hold that no penalty needs to be imposed on Shri K.K.A. Further, in respect of duty liability, no precedent case has been shown and no arguments were put forth and therefo....
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....is dealing with the goods either should know or have reasons to believe that the same are liable to confiscation. In fact, we find that in the show cause notice there is no proposal for confiscation of the goods. In this case, in view of the fact that Shri V.L. Chalke was the one who forged the block transfer, proof of export etc. and he was the one who had sold the goods under invoices without payment of duty, he was the one who facilitated purchases of the goods in India, who issued the cenvatable invoices even though no duty was paid on such goods, it cannot be said that he was not aware that the goods which were supplied by the suppliers against block transfers without payment of duty and being diverted in the local market under invoices, which facilitated availment of credit, are liable to confiscation. Therefore, we find that Shri V.L. Chalke is clearly liable to penalty under Rule 26 of Central Excise Rules, 2002 (Rule 209A of the Rules). Even if he is not liable to penalty under Rule 209A of the Rules, he would be clearly liable to penalty under Rule 14A of the Rules, in view of the fact that he was the one who actively assisted and participated in the diversion of exported....