AI Drafter 
TaxTMI 
TaxTMI 
2015 (10) TMI 2143
X X X X Extracts X X X X
X X X X Extracts X X X X
.... E/1062/2010, E/1075/2010, E/1185/2010, E/1195/2010, E/1208/2010, E/1209/2010, E/1210/2010, E/1221/2010, E/1223/2010, E/1224/2010, E/1237/2010, E/1242/2010, E/1244/2010, E/1325/2010, E/1039/2010, E/1103/2010, E/1162/2010, E/1178/2010, E/1187/2010, E/1188/2010, E/1194/2010, E/1198/2010, E/1204/2010, E/1205/2010, E/1222/2010, E/1238/2010, E/1243/2010, E/1214/2010, E/1305/2011 Shri P.K. Jain, Member (Technical) And Shri S. S. Garg, Member (Judicial) For the Appellant : Shri Shridev Vyas, Advocate, Shri J. C. Patel, Advocate, Shri N.K. Tiwari, Consultant, Shri M.A. Saiyed, Advocate, Shri K.I.Vyas, Advocate, Shri Vipin Kumar Jain, Advocate , Shri A.V.Naik, Advocate , Shri Rajesh Agarwal, Proprietor, Shri Mayur Shroff, Advocate , Shri D.H. Nadkarni, Advocate , Shri C.S. Biradar, Advocate, Shri N.S. Patel, Advocate , Shri Sachin Chitnis, Advocate, Ms. Anjali Hirawat, Advocate , Shri R.V.Shetty, Advocate Shri Ajay Kumar, Joint Commissioner (AR) : For the Respondent ORDER Per: P.K. Jain: All the 31 appeals listed below are against imposition of penalty under Rule 26 of the Central Excise Rules, 2002/2004: S. No. Appeal No. Appellant Penalty (Rs. ) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....exported under claim of rebate. 3. In brief the case of the Revenue is that two firms named M/s. Shreeman Textiles and M/s Sajjan Textiles availed credit on the strength of duty paying documents without receiving any yarn and subsequently, the yarn was shown to be sent to various job-workers and a small part to their own weaving units wherein the yarn was weaved into grey fabrics and the grey fabrics was cleared on payment of duty utilising the credit on yarn. Case of the Revenue is that the yarn itself has not been received and the purported job-workers were either not known or in case of three job-workers, who were known have denied having done any job-work on behalf of M/s. Shreeman Textiles and M/s Sajjan Textiles. Addresses or names of other purported job-workers could not be given by Shri Suresh Raj Purohit, who was the proprietor of the two firms. Further, the two premises of M/s. Shreeman Textiles and M/s Sajjan Textiles, though supposed to have 24 and 28 looms, no electricity was consumed during the period and even as per their own admission only 2% of the grey fabrics were manufactured in their own premises and remaining 98% from the job-workers (non-existent as mentio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of grey fabrics was siphoned off from the account within a few days of such deposit. In respect of certain merchant exporters i.e. M/s. Vijay Fabrics and M/s. G. Tex, even though the details were appearing on the ledger of M/s. Shreeman Textiles and M/s Sajjan Textiles no such entries were found in the bank statements. Further, in respect of certain yarn purported to have been received by M/s. Shreeman Textiles and M/s Sajjan Textiles no invoices could be produced by Shri Suresh Purohit. During investigation, initially Shri Purohit was available and produced certain documents but thereafter he stopped cooperating and did not respond to the summons. 4.2. Another aspect that was found during the investigation that Shri Raj Purohit has stated in his statement that all the buyers had taken delivery from their manufacturing units and transportation was their responsibility and hence no transport documents are available with them. Further, by and large no such details were written in the invoices. On the other hand, merchant exporters as also the processors, in their statements have stated that the goods were delivered to the processing unit or to the merchant exporters godown and tr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lant is set aside and the appeal is allowed. 6. Appellant No.2: Appellant No.2, M/s Balkrishna Textile Pvt. Ltd., is a processing house. During investigation, statement of Shri Rashid I Chippa, authorised person, was recorded wherein he stated that they have received invoices of M/s. Shreeman Textiles and M/s Sajjan Textiles but these fabrics were on account of merchant exporter Movement Impex Trading Co., Parikh Impex Pvt. Ltd., and M/s. Manhattan Exports and M/s. Srinathji Yashraj Enterprises who exported the processed fabrics. In the statement he has also indicated that the goods were received along with LR and they have made payment to the transporter through cheques. It is also claimed that they have recovered the transportation charges along with the processing charges from the merchant exporters. It also appears that certain invoices, ARE-1s in respect of Movement Impex Trading Co., and Manhattan Exports were produced. We do not find any investigations have been done with reference to these four merchant exporters and whether the exporters are real or fake. It does not seem that any investigation was carried out with reference to the LRs to know from where the grey fabric....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rect contact with M/s. Shreeman Textiles and M/s Sajjan Textiles and they have done the job-work on behalf of M/s. K.S. International who had delivered the goods to their processing units and after the processing was over, the goods were also taken by M/s K.S. International. From the investigation there is no evidence indicating that the appellant had knowledge that the grey fabrics received by them along with the invoices of M/s. Shreeman Textiles and M/s Sajjan Textiles are liable to confiscation. In view of the said position, no penalty can be imposed under Rule 26 and the appeal of the appellant is allowed. 9. Appellant No. 5: Appellant No. 5, M/s Kunal Textiles, is a processing house. He has processed 48771 L.Meters of grey fabrics received from M/s Shreeman Textiles and M/s Sajjan Textiles under invoice No. 246 dated 08/10/2004. In his statement Shri Murlidhar A. Bachani stated that the said goods had been received on behalf of M/s. MRK Impex and these were received through National Transport Corporation under 4 LRs and they have paid for the transportation and the same were recovered from M/s. MRK Impex. It was also stated that the grey fabrics was processed and cleared f....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... they, after processing, handed over the goods along with invoices, ARE-1s, etc. and also no objection certificate for claiming the rebate to such merchant exporter. From the investigation, there is no indication whatsoever, that the appellant were in know how or has any reason to believe that the grey fabrics received by them from M/s Shreeman Textiles and M/s Sajjan Textiles were liable to confiscation and hence no penalty under Rule 26 can be imposed. Appeal of the appellant is allowed. 12. Appellant No: 8: Appellant No. 8, M/s Kagzi Brothers Pvt. Ltd., is processing house who has processed the goods on behalf of M/s. Diamond Impex. In their statement they have submitted that they have no direct contact with M/s Shreeman Textiles and M/s Sajjan Textiles. The goods were received by them on behalf of the merchant exporter who had arranged for the transportation of the goods and after processing the goods were delivered to the M/s. Diamond Impex for export along with ARE-1, invoices and NOC for claiming rebate. From the investigation or from the impugned order there is no evidence to indicate that the appellant had reason to believe that the goods received by them are liable to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he goods to different merchant exporter who would have claimed the rebate. Keeping in view the overall factual matrix, in our view, the appellant had reason to believe that the goods are liable to confiscation and therefore liable to penalty under Rule 26. Therefore, penalty has been correctly imposed. However, keeping in view the fact that the investigation have not been done at transporters end, and it is not coming out from the show cause notice how much is the credit taken by them, the penalty imposed is reduced to Rs. 50,000/-. 15. Appellant No. 11: Appellant No. 11, M/s Sankeshwar Fabrics Pvt. Ltd., is a processor of the goods. It appears that they have received the goods on behalf of the merchant exporter, M/s. Atlas Exports. No specific material is coming out in the investigation against them or any reason to conclude that the appellant had reason to believe that the goods received by them are liable to confiscation. We find from the show cause notice or from the order-in-original there is no specific details about the present appellant and is covered in general. In reply to the show cause notice the appellant has submitted that they have taken the credit on the invoice....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ded over to them by M/s. Angoora International and after processing they were taking the goods from their factory. In the statement they have also clarified that they have no idea about M/s Shreeman Textiles and M/s Sajjan Textiles and they were not dealing with them. It was also submitted that the processing charges were received by them through cheques from Angoora International. They produced copies of all the relevant documents ARE-1s, invoices, ledger accounts, etc. From the investigation it is clear that they were not in contact with M/s Shreeman Textiles and M/s Sajjan Textiles and have no reason to believe that the goods received by them are liable to confiscation and in view of this, no penalty can be imposed under Rule 26 and the appeal is allowed. 18. Appellant No. 14: Appellant No. 14, M/s S.V. Business Pvt. Ltd., is a processor who has received the goods from a merchant exporter M/s Gulabdas & Company. M/s. Gulabdas & Company have in turn purported to have purchased the goods from M/s Shreeman Textiles and M/s Sajjan Textiles which were delivered to the appellant at their factory and after processing they were delivered to them. Statements of Shri D.N. Naidu, who wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tiles and M/s Sajjan Textiles are liable to confiscation. Therefore, no penalty can be imposed under Rule 26 on them and the same is set aside. The appeal of the appellant is allowed. 21. Appellant No. 17: Appellant No. 17, M/s Srinathji Yamunaji Enterprises, is a merchant exporter. They got the goods processed from M/s. Balkrishna Textile Mills Pvt. Ltd. It is seen from the records that no statement of any person from the appellant-firm had been recorded to understand from where the goods were actually procured and from where the invoices were received and how the goods were transported. It is also not known whether invoices/grey fabrics were directly purchased or through some other intermediary and the role of such intermediary. In the absence of any such investigation, it cannot be said that the appellant had knowledge that the goods were liable to confiscation and hence no penalty can be imposed under Rule 26. The penalty imposed is set aside and the appeal is allowed. 22. Appellant No. 18: Appellant No. 18, M/s G.Tex Inc., is a merchant exporter. Shri Pravin Ucchil, Liaison Officer of M/s G. Tex, in his statement has submitted that they have purchased the fabrics for pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion is that the appellant bought grey fabrics from somewhere else and invoices were procured from M/s Shreeman Textiles and M/s Sajjan Textiles. Under the circumstances, we are of the view that the appellants had reasonable belief that the goods being purchased were liable to confiscation and hence penalty under Rule 26 is correctly imposed. However, it is not coming out from the show cause notice as to the value and the duty involved on such goods. Keeping in view these facts, we reduce the penalty imposed from Rs. 3 lakhs to Rs. 1 lakh. 24. Appellant No. 20: Appellant No. 20, M/s. Mitesh Brothers, is a merchant exporter. They have claimed that they had placed the order through one Shri Suresh Sharma like in the case of appellant No. 18 but they could not produce any telephone number or any whereabouts of Shri Suresh Sharma. Further, they have no documents relating to transportation and how the goods were transported to Ahmedabad from Bhiwandi and also could not produce any octroi details. Under the circumstances, the only conclusion that can be drawn is that the appellant had purchased the grey fabrics from somewhere else and invoices from some other places. Under the circums....
X X X X Extracts X X X X
X X X X Extracts X X X X
....an Textiles and M/s Sajjan Textiles were actually deposited in the account of Director of the appellant. In the above facts and circumstances, we have no hesitation to hold that the appellant had reason to believe that the goods being purchased are liable to confiscation and penalty under Rule 26 is correctly imposed. Keeping in view the over all facts and circumstances of the case and the quantity of grey fabrics purchased by them, we reduce the penalty from Rs. 3 lakhs to Rs. 1.5 lakh. 26. Appellant No. 22: Appellant No. 22, M/s Dimond Impex, is a merchant exporter. Statement of one Shri Ramesh Narayan, Partner of M/s Dimond Impex was recorded, wherein he explained that one representative of M/s Shreeman Textiles and M/s Sajjan Textiles approached them in their office and upon approval of quality and price through samples shown by him they placed order and the goods were delivered to the godown of M/s Sharda Synthetics, Dombivli for processing as per their instructions. He further clarified the name of the person who came on behalf of M/s Shreeman Textiles and M/s Sajjan Textiles as Shri Deepak Bhai having his office at Room No. 7, 1st Floor, Building No. 312, Kalbadevi Road a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....gation details available there is no evidence to indicate that the appellant had any reason to believe that the goods being purchased by them are liable to confiscation and, therefore, no penalty under Rule 26 can be imposed. We therefore set aside the penalty and allow the appeal. 28. Appellant No. 24: Appellant No. 24, M/s Gulabdas & Company, is a merchant exporter. We find from the investigation that no statement of any person from the appellant was recorded. However, one Shri Manish H Zaveri, is a broker for powerloom-grey textile fabrics has stated that he has supplied the grey fabrics on behalf of the appellant to M/s S V Business, Dombivli, and the goods were supplied by their commission agent such as M/s Bhaveek Synthetics and Chavan Trading Co. From the investigation it appears that Shri Manish H Zaveri dealt with M/s Shreeman Textiles and M/s Sajjan Textiles through M/s Bhaveek Synthetics and Chavan Trading but it is not coming out whether the appellant were aware that the goods supplied by their broker were in turn purchased through any commission agent such as M/s Bhaveek Synthetics and M/s Chavan Trading Co. or through M/s Shreeman Textiles and M/s Sajjan Textiles. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....abrics which were purchased by the present appellant, and also the fact that ingredients to impose penalty under Rule 25 are less stringent than that under Rule 26 we consider it appropriate in the facts and circumstances of the present case as also the evidences available that penalty under Rule 26 need not be imposed. Hence the appeal of the appellant is allowed. 31. Appellant No. 27: Appellant No. 27, M/s Atlas Export (India) is a merchant exporter. It appears that no statement of any of the persons from the appellant has been recorded. It is only one Shri Prakash Gundecha, Director of M/s Blue Chip Fabrics Pvt. Ltd., in his statement has stated that they have done the processing on behalf of the present appellant and the goods were sent under the invoices of M/s Shreeman Textiles and M/s Sajjan Textiles by the present appellant. There is nothing incriminating in the said statement against the present appellant. Since no investigation has been done at the appellants end, it cannot be said that the present appellant had knowledge or reason to believe that the goods purchased from M/s Shreeman Textiles and M/s Sajjan Textiles are liable to confiscation. In view of this positio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al Textiles. Statement of Shri Murlidhar Bachani was recorded which indicated that the goods were transported through National Textile Corporation, Ahmedabad under 4 LRs and the transportation charges were paid by Kunal Textiles and later on recovered from the present appellant. Statement of Shri Dipang Kamdar, partner of the appellant was recorded under Section 14 of the Central Excise Act, 1944. He has in his statement stated that they have purchased four consignments from M/s Shreeman Textiles and M/s Sajjan Textiles. It was submitted by them that the consignments purchased through broker Shri Dipak Kanodia. Appellant could not produce any bank statement or anything regarding payments for the goods purchased. Since the appellant has admitted that he has purchased the four consignments from M/s Shreeman Textiles and M/s Sajjan Textiles who do not have any facility to manufacture the goods as is evident from the investigation. It would be reasonable to presume that the appellant was aware that the goods being bought by him are purchased from one place and the invoices from other place. It could, therefore, be reasonable to conclude that they were aware that the goods are liable to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ty under Rule 25. Those facts and material has to be examined and decided keeping in view the evidence available on record. In the present case, imposition of penalty under Rule 26 has been decided based upon the evidences available and the sufficiency of such evidences for imposition of penalty under Rule 26. 37. We also note that that counsels for both the sides have quoted a number of judgments during the arguments. The present case is a fact based case and the applicability of the case laws will entirely depends upon the facts of that case. In the present cases, the issue is only relating to penalty under Rule 26. In our view, judgment of the Punjab and Haryana High Court in the case of Vee Kay Enterprises vs. CCE 2011 (266) ELT 436 (P&H) is relevant in the facts of the present case. In any case, a bare reading of Rule 26 would indicate its applicability to any person who has dealt with the goods in any manner and has reason to believe that such goods are liable to confiscation. We have gone through other case laws. We do not consider it necessary to discuss various case laws quoted by both the sides. 38. In the result, we dispose of the appeals as under: S. No. App....