TaxTMI 
TaxTMI 
2009 (10) TMI 770
X X X X Extracts X X X X
X X X X Extracts X X X X
....of an intelligence received, the department took up investigation and the investigation conducted revealed that GCUL had obtained CT-3 certificates by replacing the raw material sheet attached to the MOU in the divisional office of Central Excise so that PTY/PFY which did not figure in the original list figured in the replaced list and on that basis CT-3 certificates were issued. The officers of GCUL also forged project authority certificates whereas there was no permission certifying the requirement of PTY/PFY issued by competent authorities such as Development Commissioner, NEPZ, Ministry of Commerce etc. On the strength of CT-3 certificates issued based on replaced raw-material sheets and forged approved project the eighteen supplier EOUs removed PTY/PFY without payment of duty. On the basis of CT-3 certificates the supplier EOUs obtained permission from the respective Development Commissioners and removed goods without payment of duty from their factory premises under cover of AR-3As. Even though GCUL is located at Gurgaon, the supplier EOUs sent PTY/PFY to local yarn markets at Bhivandi, Surat, Ahmedabad etc. Payment received from local buyers/weavers at Bhivandi, Surat, Ahmed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....., dated 4-1-95 once the goods are taken possession of by GCUL at Bhivandi, in terms of CT-3 certificate and also in terms of B-16 bond executed by GCUL, the responsibility to carry goods to the factory premises for production and manufacture of export goods shifts to GCUL. Therefore, the diversion of the goods to local market was by GCUL and appellants cannot be held responsible. They had no role to play in the offences committed by GCUL. 3.4 The Commissioner has concentrated on determining the duty liability on the supplier EOUs in paras 77 to 82 of his order. The approach of the Commissioner is a single track approach and he has not considered the liability of GCUL in terms of law. The Commissioner's observations are contrary to the proposal and findings in the investigation which revealed that goods removed from the factory of manufacture are not eligible for the exemption from duty and liability was on GCUL who had removed the same without payment of duty. Further, the provisions of Rule 1996 categorically shifts the duty liability on the user EOU and therefore, the decision of the Commissioner to hold supplier EOUs liable to pay duty is wrong. GCUL committed al....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er to clear the goods without payment of duty in respect of exports. EOU is entitled to procure duty free raw-material for availing exemption of duty under Notification No. 1/95 and by executing bond. Therefore, in this case goods were cleared free of duty as per the rules, the liability of the manufacturer shifts to the user industry. 3.11 The Commissioner has wrongly come to the conclusion that the concession was sought by the manufacturers whereas the concession was sought actually by the user EOU and not by them. After the user EOU obtained and issued CT-3 certificates goods were cleared without payment of duty and therefore it cannot be said that the manufacturers had sought to clear the goods without payment of duty. 3.12 The same Commissioner in their own cases in two instances had held that the liability to discharge the duty is on the user industry even if the supplier was aware of diversion by the receiver and the liability of supplier manufacturer arises only under Central Excise Law and not under the bond. The Commissioner has failed to follow his own decisions. 3.13 Once re-warehousing certificates are produced and same has not been shown that re-warehousing c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and goods never reached GCUL and were actually diverted at Bhivandi and other places to the domestic market. Even the appellants in this case are also not denying such diversion. When we examine the rationale adopted by the Commissioner for fixing the liability on the appellants instead of GCUL, we find that he has found that the evasion occurred on account of the conspiracy involving supplier EOUs, brokers and GCUL. The aim of the conspiracy was to share the evaded taxes amongst all the conspirators. When the conspiracy was hatched EOUs needed documentary support to remove goods and therefore GCUL was made to provide CT-3 certificates in exchange for commission. Since PTY was not covered as a raw-material, the list of raw-materials was replaced in the divisional office file and thereafter CT-3 certificates were obtained. He has held that once a document was obtained by resorting to forgery, such a document is null and void ab-initio and any transaction that flow from such a document is also null and void. Since the CT-3 certificate itself was invalid document, all permissions obtained on the basis of such invalid document and further activities become totally invalid and no benefi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dertook to pay duty on pilfered goods. (v) GCUL also undertook to maintain detailed accounts of all indigenous goods used in the manufacture. (vi) GCUL also undertook to fulfill export obligation and also conditions stipulated in the Notifications under which specified goods had been obtained and failing which they would pay the duties leviable on such goods. (vii) This GCUL also undertook to discharge any Central Excise duty payable on the goods obtained by them from 100% EOUs and transport it from the place of procurement to their premises under Chapter X procedure. 7. The conditions in the bond apparently flow from Rule 196 of Central Excise Rules, 1944 the first paragraph of which is reproduced below : "RULE 196. Duty leviable on excisable goods not duly accounted for. - If any excisable goods obtained under Rule 192 are not duly accounted for as having been used for the purpose and in the manner stated in the application or are not shown to the satisfaction of the proper officer to have been lost or destroyed by natural causes or by unavoidable accident during transport from the place of procurement to the applicant's premises or during handling o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r Rule 196 of Central Excise Rules, the liability to pay duty on the goods squarely falls on him unless he is able to show that the goods were destroyed because of unavoidable accident or natural cases during transport. The case laws cited by the learned Commissioner are not relevant because in those cases the primary liability to pay duty was not on the person who obtained the license by forging. In ICI India case, the liability to pay duty was on the importer whereas the license was obtained by forgery. That is not the case here. In this case once the goods are cleared by the supplier EOU on the basis of valid CT-3 certificate, the burden shifts to the receiver. If the receiver forges the CT-3 certificate, forges the AR-3A re-warehousing certificates, forges the project authority signature, if we hold that he is not liable to pay duty, we would be rewarding him for his action of forgery and manipulation. This is definitely not the intention of the law. 8. We also find that there is not enough evidence to show that there was a conspiracy. As per para 17 of the show cause notice, GCUL through yarn brokers Shri Narendra and Shri Arun Gupta approached STL for supply of PTY under N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ence specifically implicating the appellants, it would not be correct to hold them liable for diversion in Bhivandi. We also find considerable force in the defence arguments wherein they have stated that the two appellants in this case started production much later than 31-1-95 the date on which the leads for conspiracy was shown by replacing the list of raw-materials in the divisional office. STL commenced production on 22-9-95 whereas KFL on 29-11-96. By March, 1996, GCUL had already obtained a certificate also from the Asstt. Commissioner regarding genuineous of the raw-material list which had been replaced by them in the divisional office file. Even though it is not exactly relevant we find it strange that no collusion has been alleged in this case, even though we find that there is fraud and forgery, mis-declaration etc. and therefore there are grounds for invoking extended period. Nevertheless, it has to be accepted that if the departmental officers had exercised minimal care to check before issuing CT-3 certificate books to the appellants which was based on the raw-material list replaced by GCUL, the whole evasion could not have been possible. Not only based on such a list C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e was forged. CT-3 certificate was issued from a book which was authenticated by the Department, the signature of the authorized signatory was authenticated by the range officer as claimed by the learned representative of the appellant which was not contradicted. Further, the CT-3 certificate and other documents were produced to the range officer and even the re-warehousing certificate was also produced. As we said earlier if the range officer was diligent and had sent the copy of the re-warehousing certificate for verification, the facts would have come out. He did not do so. At least no evidence has been putforth to show that he did it and with what results. Further, when the CT-3 certificates were authenticated, the GCUL was required to declare the goods which were cleared on the basis of CT-3 certificate and account for them. There is no indication as to whether such a declaration was filed and what action was taken. Therefore, to invoke extended period against the appellants in this case we feel that evidences brought out in the order are not sufficient. Once again we have to observe that order being a common order in respect of 18 suppliers could have missed some evidences wh....