TaxTMI 
TaxTMI 
2009 (3) TMI 392
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..... C/461/2006 Sri. H.S. Shetty, Director upto 20-9-2000 and thereafter PA Holder v. CCE, Bangalore Penalty: Rs. 40,00,000 u/s 112(a) 2. We heard both sides. 3. The appellant company M/s. Lanyard Foods Limited (M/s. LFL in short), Bangalore, were registered with the Central Excise Department on 14-2-2000 for manufacture and clearance of Sunflower Oil, Soyabean Oil, Palmolein Oil & Soap Stocks, Oil foot & Dregs, which are all excisable. They imported crude sunflower oil/Soyabean oil at concessional rate of Customs Duty in terms of Customs Notification No. 20/99-Cus., dated 28-2-1999, as amended, for use in the manufacture of their final products i.e. for refining into edible refined vegetable oil. In terms of the Notification, the appellants are required to follow "Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods, Rules, 1996 (hereinafter known as IGCRDMEG Rules). Consequently, they executed the following bonds: - (i) 1/2000 dated 18-2-2000; (ii) 2/2000 dated 18-2-2000; (iii) 3/2000 dated 22-2-2000; (iv) 4/2000 dated 22-2-2000; (v) 7/2000 dated 24-4-2000 and (vi) 8/2000 dated 24-4-2000 under the above mentioned Rules. In fact, they i....
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....2 were proposed. There was also a proposal to hold the impugned goods liable for confiscation under Sections 111(o) of the Customs Act, 1962. 4. On conclusion of the adjudication proceedings, the learned Adjudicating Authority gave findings from paras 61 to 83 of the impugned OIO. The learned adjudicating Authority has outlined the relevant legal provisions in paragraph 63, 64, 65 and 66 of the impugned order. The original Notification is 20/99-Cus., dated 28-2-1999. In terms of the above Notification, the concessional rate of duty available was 15% (Basic Customs Duty) for "All vegetable oils of edible grade, in loose or bulk form". The above Notification was amended by Notification No. 139/99-Cus., dated 30-12-1999 and 140/99-Cus., dated 30-12-1999 in terms of which, the concession would be available only to edible oil imported for the purpose of refining or for manufacture of vanaspathi. Notification 139 relates to the Basic Duty; Notification 140/99 is in respect of Additional Duty. In other words, w.e.f. 30-12-1999, the concessional rate of duty would be available only if the imported goods were used for refining or for manufacture of vanaspathi. The Customs Notification No....
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.... MTs of Soyabean Oil and taken the same into stock immediately. When the total storage capacity of the appellant unit is only 231 MTs, as declared in their own Ground Plan and submitted at the time of registration, it is not possible for them to store so much quantity of oil at a given time. It is also seen that 57.27 MTs of Degummed Soyabean Oil pertaining to the Ex-bond Bill of Entry 601 dated 15-3-2000 has been received by M/s. SAS Refineries, Gauribidanur on 23rd, 24th and 25th of March 2000. However, the appellants had submitted Annexure-V stating that they had received the entire consignment of 500 MT of Degummed Sobayean oil pertaining to the Ex-bond Bill of Entry 601 in their factory premises on 20-3-2000 at 16.30 hours. It is seen from the duplicate copy of Form 39 No. 271287 recovered from M/s. SAS Refineries that the consignment has been consigned from Mangalore to Gauribidanur whereas, the triplicate copies of the same Form 39 maintained by the appellant shows that the consignment has moved from Bangalore to Qauribidanur. The inference drawn is that the appellant had deliberately made changes of entries in the triplicate copy of the said From 39 in order to make it appe....
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....s a finding that the appellant had fabricated/manipulated his office copies of Form 39 to make it appear as though the goods had been transported from Bangalore to the refining units while in reality, the crude oil had been transshipped directly from the Mangalore Port to the said Refineries. 4.5 The Commissioner has brought out the contradiction in the statement dated 28-5-2002 of Shri H.S. Shetty and his reply to the Show Cause Notice. In the statement, he had stated that the machineries installed in their premises were capable of filtering and de-odorizing process but in the replies made to the Show Cause Notice, it was stated that the machineries installed were capable of only filtering and packing. The investigations further revealed that all the processes involved in refining the crude oil were undertaken by the Refineries and no crude oil in a semi-processed condition was cleared by them to the appellant. On completion of refining, the refined oil had not been sent to the appellant but was cleared from their premises itself under their respective brand names and no documents had been raised by them for sending the semi-processed crude oil or refined oil to the appellant's....
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....documents being in the nature of office correspondence, the same could not be provided to the appellant. She has also dealt with the contention of the appellant that the dominant intention of the Notification has been complied with by sending the goods to job workers. She has stated that the entire process of refining of oil was done by the Refineries. Therefore, it is clear that the goods imported have been disposed of to other Refineries in contravention of the provisions of law. As the appellant is claiming the benefit of Notification for claiming concessional rate of duty, it is their duty to adhere to all the conditions and satisfactorily prove beyond any reasonable doubt that all the conditions have been fulfilled. She has stated that the conditions of IGCRDMEG Rules, 1996 have not been fulfilled and, therefore, it cannot be said that the dominant intention of the Notification has been complied with. With regard to the appellant's contention that Sales Tax had been paid on the clearance/sale of sunflower and soya bean oil, she has scrutinized the figures submitted and came to the conclusion that the Sales Tax paid cannot be related to the goods in question in the absence of S....
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....e appellants are highly aggrieved over the above mentioned decision of the Commissioner. The following points were reiterated. The appellants and the learned Advocates appearing on behalf of them made very elaborate submissions on the findings of the Commissioner in the adjudication order. (1) The first point is with regard to jurisdiction. The Commissioner has no jurisdiction to adjudicate the case. The jurisdictional DC could only have the right to report to the jurisdictional Customs Officers for issue of Show Cause Notice and decide about the eligibility in question. In this case, no Notification under Section 4 of the Customs Act has been issued. Rule 8 of IGCRDMEG Rules, 1996 cannot override Section 4 of the Customs Act, 1962. The decision in the case of CCE v. Pan Electronic India Ltd. - 2008 (223) E.L.T. 669 (Tri.-Chennai) is applicable to the present case. In the said case, it has been held that only the Commissioner of Customs or Proper Officers subordinate to him are the authorities competent to demand duty of short levied on goods imported. It was urged that in the present case, there is no misuse of the impugned goods. The purpose for which the goods were obtained v....
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.... S.A.S. Refineries; (iii) Shri C.S. Rajashekar, Deputy Manager (Accounts) of M/s. K.L.N. Agrotechs (P) Ltd.; and (iv) Shri H.S. Shetty, Power of Attorney Holder for M/s. Lanyard Foods Ltd. (Director of M/s. LFL during the period 1999/2000 upto September 2001) and came to the conclusion that the goods were not received in the appellant's factory. No documents were seized from the appellants. The investigation was completed by the recording the statement of Shri H.S. Shetty on 28-5-2002 and no further investigation was conducted thereafter. The bonds were duly cancelled by the jurisdictional AC on 17-4-2003. Even though the investigation was completed by 28-5-2002 and the bonds cancelled on 17-4-2003, no Show Cause Notice was issued till 31-1-2005 i.e. after a lapse of 2 years and 7 months without any valid reasons for the said delay. Therefore, the Show Cause Notice is time barred. (4) It was urged that the dominant intention is that the crude oil should be supplied to refineries and should not be sold as such. There is no illegality in getting the refining done at other premises on job work basis. The allegation that the same tanker was present at two places may be due to cleric....
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..... (7) It was submitted that the Commissioner's observation in para 72(ii) that the quantity of 1600 MT taken to stock on the same day of the receipt while the full storage capacity is only 231 MT, it was submitted that the goods were being sent for job work with the knowledge of the Central Excise Officers as admitted by the learned Commissioner vide para 82(a) of the impugned order. The findings are beyond the Show Cause Notice. (8) With regard to observations in para 72(iv), stating that Bill of Entry 707/6-4-2000 to the effect that it is shown that the entire consignment was received on 31-5-2000, while the same was received at Gauribidanur on 10-4-2000, it was submitted that the Inspector had checked the entries on Form V. In his deposition also dated 20-5-2000, he had clarified the fact of verification. No Show Cause Notice was issued to him. M/s. SAS has not disputed the fact of receipt of crude oil for processing. (9) With regard to the Commissioner's observation in 72(v), that weighment slips were not produced, Shri H.S. Shetty has clearly deposed that weighment slips were mis-placed. Since the weight of tanker is available, the weight of oil could be easily arrive....
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.... following persons: (i) Shri R. Krishna Rao; (ii) Shri S.A. Suresh Babu; (iii) Shri C.S. Rajashekar; (iv) Inspector of Central Excise of the Range who verified the receipts of crude oil at Bangalore factory; (v) Superintendent of Central Excise Range who issued the report dated 5-1-2001; (vi) The AC who cancelled the bond on 17-4-2003; and (vii) The Superintendent who recorded the statements of Shri H.S. Sheriff. Out of these witnesses, two important witnesses viz. (i) Shri R. Krishna Rao and (ii) Shri C.S. Rajashekar were not produced for cross-examination. The learned Commissioner has explained the reasons in para 82(d) of the impugned order. She has stated that 'all reasonable steps were taken to provide the opportunity of cross-examination. However, the witnesses failed to turn up'. The Commissioner has not explained as to what are the reasonable steps taken to produce them for cross-examination. The summons issued under Section 14 of the Central Excise Act, ought to have enforced as per the penal provisions contained therein for dishonouring the summons. It is obligatory on the part of the Department to produce witnesses by strictly empowering the provisions of law. It is n....
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.... to LFL. Only 25 lorry receipts were produced in November 2001 which covered 233 MTs. as against a total quantity of 7258 MTs. copies of Form 39 recovered from two of the Refineries viz. (i) M/s. SAS Refineries and (ii) M/s. KLN Agrotech, however, indicated that the crude oil consignments were received from Mangalore port directly by the refiners. The statements recorded from the representatives of the above two refineries also corroborated the fact of direct receipt of crude oil from Mangalore and the non-return of the processed oil to LML. Therefore, it can be noted that the records of M/s. LFL are fabricated. Moreover, LFL did not produce any weighment slips for any of the stages of receipt/dispatch of oils. They simply gave the explanation that these were mis-placed. 6.1 Further, the learned Special Counsel referred to 11 Ex-bond clearances, out of total 18 clearances to urge that the departmental officers could not have verified the so-called receipt of the crude oil in the appellant's premises. The discrepancies between the date of assessment and the Annexure-V declarations were pointed out. The Commissioner, in the adjudication order, had outlined them. The discrepancies ....
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....ions and stated that the complete details of investigations would be intimated to the Commissioner, as the revenue implications would have entailed issue of SCN and adjudication by the Commissioner. But, ignoring the above correspondence with the Commissioner, on 17-4-2003, the successor ACCE, returned the duplicate/photo copies of Bonds executed by LFL with the endorsements, "cancelled" - as the original Bonds were purportedly, not traceable - along with the documents/copies of documents submitted by LFL to get the end-use certificates. LFL did not furnish these documents again to the Dept. The ACCE did not inform the Commissioner about the 'cancellation' of the Bonds nor did he forward the results of the investigations to the Commissioner. The documents etc. relating to the investigations in the instant case remained in the Divisional office. Later, in September, 2003, as a result of review of pending cases by the Commissioner, the non-forwarding of the papers for issue of SCN by Commissioner was discovered. Further, the issue of proper end-use of the goods was raised at the Customs end by the AG's Audit in January, 2004. Investigations were re-started by the Commissioner's Of....
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....mmissioner of Central Excise indicating the estimated quantity and value of such goods to be imported, particulars of the notification applicable on such import and the port of import". He invited our attention to the use of the words "goods for use in his factory". He stated that the requirement is that the goods should be used in the factory of the appellant. In this case, the goods have not been received in the factory and the documents submitted are false in view of the various discrepancies. Further, he stated that in the bond executed by LFL, the mentioned quantity of crude oil is for use in the factory of LFL for the manufacture of refined oil and in the manner specified in the application. The declaration made in the application and the terms of bond were not observed by LFL in respect of the clearances of crude oil made under 18 Bills of Entry. He relied on the following two decisions of the Tribunal. (i) Indofil Chemical Co. v. CCE, Mumbai - 2003 (159) E.L.T. 443 (ii) Danish (Pvt.) Ltd. v. CCE, Jaipur-I - 2007 (216) E.L.T. 644. 6.8 He urged that the Commissioner has found that the crude oils were never received in the factory of LFL, but were diverted to the Refi....
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.... main allegations against the appellants are that they cleared the crude oil imported in terms of Notification No. 20/99 dated 28-2-1999, as amended, by availing concessional rate of duty, but did not comply with the requirements of following the IGCRDMEG Rules, 1996; that they diverted the imported crude oil to various refineries and the imported crude oil did not reach the factory of the appellant; that they created or fabricated documents to show that their unit at Bangalore had received them. In this way, it has been alleged that they deliberately evaded Customs duty. The longer period has been invoked alleging suppression of facts with an intention to evade duty. 7.1 The clearances of crude oil have been made under 18 Ex-Bond Bills of Entry. Before availing the concessional rate of duty, the appellants were required to submit Annexure-III Certificates to the Customs. This requirement is in terms of the IGCRDMEG Rules, 1996. It is seen that Annexure-III Certificates, in every case has been issued by Deputy Commissioner of Central Excise. This fact has not been disputed. To avail the concessional rate of duty, there is a requirement of registration of the appellant's unit. Th....
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....es. Q.3 Were you not aware of the investigation conducted by the prev. staff of your division right from 2001? Answer: Yes. It was brought to my notice through an investigation report duly prepared by the Superintendent of Central Excise of the Range who handled the same as a Preventive Superintendent of the division, at the time of proposal to close the bond, wherein the Supdt. has categorically recommended closure of the bond stating that the assessee has fulfilled all the conditions. This was also endorsed by the divisional Inspector who was incharge of the Prev. then. Q. 4. When the entire investigation report was placed before you, even then you cancelled the bond on the ground that there was no infirmity to cancel the bond. Is that correct? Answer: I accepted the investigation report recommended for closure of the bonds. Q. 5. Did you look into the report for canceling the bond and also other investigations conducted by the Prev. staff relating to alleged infirmities committed by the company? Answer: Investigation report put up to me covers all aspects." 7.3 Further, the cross-examination of Shri K.E.A. Sheriff, Superintendent, is on record. It is seen th....
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....the case, took the recorded statement of Shri H.S. Shetty and recommended the closure of the bond. This is clear from the record of cross-examination. The AC who cancelled the bond has also stated that he was satisfied that the conditions of IGCRDMEG Rules, 1996 were satisfied by the appellants. In other words, from the official records, one cannot come to the conclusion that the appellants suppressed any facts. In respect of the IGCRDMEG Rules, Annexure-V declarations were made. This is not in dispute. The said Annexures are on record. Some of the Annexures have been verified by the concerned Inspector. His endorsement 'verified' is also found. In these circumstances, the charge of suppression of facts cannot be sustained. The Assistant Commissioner himself has stated that he was satisfied that all the conditions of the Rules were complied with and then only he cancelled the bond. None of the concerned officers, including the Superintendent who investigated the case, stated that they were misled by the appellants. All these indicate that it would be very difficult to sustain the charge of suppression of facts. However, according to the Department, the impugned goods could not have....