AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2013 (7) TMI 1041
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....ant Nos. 7 to 9 are connected with Order-in-Original No. 171/Commr. (AH)/05, while Appellant No. 10 is connected with Order-in-Original No. 170/Commr. (AH)/05. In addition miscellaneous applications have also been filed by M/s. S.R. Industries and cross-objections by the Commissioner of Central Excise, Chandigarh and are allowed. 2. In respect of 1st appellant, in four cases duty as also penalty have been ordered while in remaining two only penalty has been ordered in the impugned orders. Appeals are for duty and penalty both. In respect of remaining 9 appellants, issue is relating to penalty only. The details in respect of all the appellants are tabulated as under :- Appellant Order-in-Original No. Appeal No. Duty Penalty M/s. S.R. Industries 167/Commr(AH)/05 E/260/2006 30,18,490 30,00,000 + 17,00,596 M/s. S.R. Industries 168/Commr(AH)/05 E/256/2006 69,35,450 1,00,00,000 M/s. S.R. Industries 169/Commr(AH)/05 E/258/2006 55,64,276 55,00,000 + 29,09,573 M/s. S.R. Industries 170/Commr(AH)/05 E/262/2006 -- 9,00,000 M/s. S.R. Industries 171/Commr(AH)/05 E/254/2006 1,42,67,935 1,....
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....s a 100% Export Oriented Unit manufacturing Terry Towel. Appellant No. 2 is the Managing Director of the company SIRL. Appellant No. 3 is an employee of M/s. SRIL. Appellant Nos. 4, 5 & 6 are brokers of Yarn. 4. For the manufacture of Terry Towel, appellant No. 1 does not required PTY/PFY (Polyester Texturised/Filament Yarn). However appellant No. 1 incorrectly got CT-3 Certificate issued and in some cases forged the CT-3 certificates, and on the basis of such certificates, procured PTY/PFY from six Gujarat/Silvasa based 100% E.O.Us. viz. M/s. Guptex Pvt. Ltd. Surat; M/s. Shree Sanand Textile Industries Ltd., Sanand; M/s. Aryama Polytex Ltd., Halol; M/s. Parshava Textiles Pvt. Ltd., Surat; M/s. Sarla Polyester Ltd. Silvasa; and M/s. Baroda textiles Ltd., Mumbai. The PTY/PFY was procured duty free (facility available to 100% EOUs, in this case appellant No. 1) and such duty free PTY/PFY instead of being used in the manufacturing process in the unit of appellant No. 1 was diverted from the earlier mentioned six units in Gujarat/Silvasa directly to Bhiwandi market, with the help of brokers. Further a word "Limited" appearing at the end of the appellant No. 1's name) was floate....
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....ix Gujarat/Silvasa based on EOUs was cleared without payment of duty to another EOU, who is appellant No. 1 and, such PTY/PFY was clandestinely diverted and sold in Bhiwandi market. In fact, there was no such challenge even before the Commissioner. Commissioner in one of the impugned orders have observed as under : "On going through the facts of the case, the allegations and the replies of the notices, I find that none of the above turn of events was ever disputed by any of the notices. I notice that the chief concern of all the notices during the course of investigation was to deflect responsibility and culpability of the said acts of diversion. I find that each noticee desperately attempted to ward off the blame by claiming that they were unaware of the circumstances of the case. For example, SRIL attempted to deflect culpability and duty liability by stating that the fact of forged certificates/mouds operandi was well within the knowledge of departmental officers and thus attempted to wriggle out of the case on technical grounds of limitation. SPL. Silvassa attempted to deflect responsibility on the ground that they were unaware that SRIL did not have the machinery to utilize....
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....: Notification No. 1/95-Central Excise "In exercise of the powers conferred by sub-section (1) of section 5A of the Central Excises and Salt Act, 1944 (1 of 1944), read with sub-section (3) of section 3 of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (58 of 1957), the Central Government being satisfied that it is necessary in the public interest so to do, hereby exempts excisable goods, specified in Annexurre I to this notification (hereinafter referred to as the said goods), when brought in connection with - (a) the manufacture and packaging of articles, or for production or packaging or job work for export of goods or services out of India into hundred percent. export oriented undertaking (hereinafter referred to as the user industry); or"; (b) ............ (c) ............ from the whole of, (i) the duty of excise leviable thereon under section 3 of the Central Excises and Salt Act, 1944 (1 of 1....
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.... the said rules; (g) the user industry follows the procedure contained in Chapter X of the said rules with the modification that a certificate in form C.T. 3 as annexed to this notification at Annexure II, shall be used by the Central excise officer in charge of the user industry in place of a certificate in form C.T. 2 prescribed under the said rules; ANNEXURE II No. . . . . . . . . . . . . . . . . Date . . . . . . . . . . . . . . . . . . . FORM C.T. 3 Certificate for removal of excisable goods under bond This to certify that : (1) Mr./Messrs............................(Name and address) is/are bona fide licensee holding licence No. ...............................valid upto.................... (2) That he/they has/have executed a bond in Form B-16 (General Surety/General Security). No................date............... for Rs. ................. with the Assistant Collector of Central Excise ........................and as such may be permitted to remove ...................(quantity) of ..................(excisable goods) from the unit at..........................to their undetaking ........................at..........................
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....he applicant's premises, on the date on which goods are received in the applicant's premises; (iii) in the case of loss of goods while in storage or during handling in premises approved under rule 192, on the date on which such loss is discovered by the proper officer or made known to him; (iv) in all other cases, on the date on which the notice for demand of duty is issued or on the date on which duty is paid, whichever is earlier." In the present case, PTY/PFY was procured for use in the manufacturing unit of appellant No. 1 but in reality was diverted and sold in Bhiwandi market. Thus goods have not been used for the stated purpose, appellant No. 1 is therefore liable to duty leviable on the PTY/PFY procured under various CT-3 certificates. 8. Ld. Advocate for appellant No. 1 argued that duty liability is that of six supplier EOUs as the re-warehousing certificates viz. AR-3A had forged signatures of the excise officers and hence were null and void; as long as re-warehousing is not complete, duty liability is of supplier EOU. This contention was with reference to condition (f) of Notificatio....
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....tion 12 of the Customs Act, 1962 (52 of 1962), on like goods produced or manufactured outside India if imported into India, and where the duties of customs are chargeable by reference to their value, the value of such excisable goods shall, notwithstanding anything contained in any other provision of this Act, be determined in accordance with the provisions of the Customs Act, 1962 (52 of 1962) and the Customs Tariff Act, 1975 (51 of 1975). Ld. Advocate's contention is that since in the present case PTY/PFY was not allowed to be sold in India, therefore proviso is not applicable and hence duty should be computed as per the main part of the Section 3(1) and not the proviso. We are unable to agree to this preposition of ld. Advocate. Ld. Advocate has not explained how the PTY/PFY was not allowed to be sold in India. Appellant No. 1's unit is located in India CT-3s were issued to the said appellant unit in all the cases before us, the supplier EOUs were therefore allowed to sale PTY/PFY to the unit of appellant No. 1, which is located in India. We therefore hold that supplier export oriented undertakings were allowed to sale the said goods in India and therefore proviso to Section ....
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....nt. Here we find that contentions raised are three fold. The first contention is that violation is of Chapter X and Chapter X is a self-contained Chapter; there is no provision of penalty in this chapter and hence penalty cannot be imposed. The second contention is that notices invoked Rule 173Q while penalty has been imposed under Rule 209. The third contention is that show cause notice/impugned orders does not specify the sub-clause under which penalty is being imposed and therefore penalty cannot be imposed. In support of these three contentions, ld. Advocate has quoted following case laws viz. (i) Commissioner of Customs, Mumbai v. Toyo Engineering India Limited - 2006 (201) E.L.T. 513 (S.C.). (ii) Commissioner of Central Excise, Nagpur v. Ballarpur Industries Ltd. - 2007 (215) E.L.T. 489 (S.C.). (iii) Vamsadhara Paper Mills Ltd. v. Commissioner of Central Excise, Visakhapatnam - 2010 (251) E.L.T. 302 (Tri.-Bang.). (iv) Amrit Foods v. Commissioner of Central Excise, U.P. - 2005 (190) E.L.T. 433 (S.C.). We have considered ld. Advocates submissions. The first contention is that Chapter X is a s....
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....209. The two rules are identically worded, all sub-clauses etc. are same. It is only title of Chapter VII-A that is different. Chapter VII-A was introduced in the Central Excise Rules at the time of introduction of Self Removal Procedure. Title of Chapter VII-A is "Removal of excisable goods on determination of duty by producer, manufacturer or private warehouse licences". Rule 209 is part of Chapter XII dealing with "Penalties and confiscation", in general. As noted earlier, Rule 173Q and Rule 209 are absolutely identical. Even the ld. Advocate in his Misc. application has admitted that Rule 209 is pari materia with Rule 173Q. Under the said circumstances, we hold that mentioning of Rule 173Q instead of Rule 209 will not vitiate the proceedings. Appellant has understood the violation of law done and he was put to notice for the same. The next contention is that the clause sub-clause of Rule 209/173Q is not mentioned. We find this objection is purely procedural in the present case. Appellant No. 1 is aware that goods procured duty free from another 100% EOU were clandestinely diverted in market in violation of Chapter X of the Central Excise Rules, 1944. In fact, even ld. Advoca....
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.... the appellant. In our considered opinion this is incorrect as the demand of the interest cannot be considered as demand of duty. We also find that the adjudicating authority has imposed equivalent amount of penalty on the appellant under the provisions of Section 11AC for the purpose of imposition of penalty as there is no allegations as to suppression, fraud, misstatement etc. on the appellant". We do not find anything comparable in the present case. Ld. Advocate has quoted another judgment of the Hon'ble Supreme Court in the case of Amrit Foods v. Commissioner of Central Excise, U.P. reported in 2005 (190) E.L.T. 433 (S.C.). In this case the issue was classification of Milk shake mix, Soft serve mix, Coffee creamer and Cream packed. Penalty was also imposed under Rule 173Q on a classification issue. In this context, this Tribunal had taken a view that show cause notice did not specify the clause under which penalty is proposed, which was upheld by the Hon'ble Supreme Court. The facts and circumstances in the present case are totally different. Here goods obtained duty free are clandestinely diverted and is covered by clause (d). This is not even disputed by the appellant. ....
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....exception, point the finger of accusation at Shri R.C. Mahajan. It was also revealed that Shri R.C. Mahajan was the main beneficiary. Further, on scrutiny of the letters dated 13-6-1996, 1-6-1996, 14-5-1996, 5-5-1996 & 20-4-1996, on the letterhead of SRIL, addressed to the Director, SPL, Mumbai, it was evident that payments for the PTY/PFY supplied by SPL was also sent by SRIL to SPL partially in cash which was sent through Shri Rajesh Malik and Shri Devenedra Sehgal. Further, I observe that the letters were not signed by the Director/Authorised Signatory, but Ms. Nasreen Fatima, who was in fact, only a receptionist in the office of SRIL. New Delhi. In statement dated 8-1-1999, she initially stated that the letters were signed, in a routine course, at the behest of Shri Devendra Sehgal, who in turn acted as per the directions and instructions of Shri R.C. Mahajan, MD, SRIL. But on going through the statement of Ms. Fatima, I observe that she later accepted that she had signed as Director/Authorized Signatory on the instructions of R.C. Mahajan. Moreover, she also confirmed that the amounts cited in the aforesaid letter signed by her were sent by Shri R.C. Mahajan to SPL through Shr....
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....in the name of M/s. S.R. Industries; that he had not met Shri Devendra Sehgal, Accountant, SRIL; that he had met Shri Munish Mahajan to confirm that the payment @ Rs. 18/- Kg was reaching Shri R.C. Mahajan; that he had met Shri R.C. Mahajan in the office of SRIL at D-976, New Friends Colony, New Delhi to deliver the payment of commission." Above statements as also finding of the Commissioner clearly bring active involvement of appellant No. 2 in procuring and diverting the goods. Appellant No. 2 in his statement simply denied the knowledge and stated that what has been done by his employees was without his knowledge. It is impossible to believe such statement in the facts and other evidences of the present case. Appellant has not even taken any action against any of the employees. The intention of appellant No. 2 who was the main beneficiary was definitely mala fide. We therefore dismiss all the six appeals filed by appellant No. 2 and upholds the penalties imposed, which are reasonable. 12. Appellant No. 3 has also filed appeal against imposition of penalties on him under Rule 209A. Appellant No. 3 was the manager in M/s. SRIL (appellant No. 1). The main contention of t....
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....0) E.L.T. 593 (Tri.-Bang.). (x) Bajaj Auto Ltd. v. Commissioner of Central Excise, Aurangabad - 2005 (190) E.L.T. 362 (Tri.-Mumbai). (xi) O.P. Agarwal v. Commissioner of Customs, Kandla - 2005 (185) E.L.T. 387 (Tri.-Del.). We have gone through these judgments. In the present case, Appellant No. 3 as per his own admission was financially benefited for the illegal acts. Further, he was instrumental in forging the signature of Central Excise officer on rewarehousing certificates as also making forged CT-3s. The facts of the present case are very different than in the cases quoted by the ld. Advocate. 13. Appellant Nos. 4, 5 and 6 are brokers of yarn. Appellant Nos. 4 and 5 have filed appeal in all the 6 cases. Appellant No. 6 has filed appeal in one case only, as his role is limited to PTF/PFY supplied by a particular one supplier EOU only. The main contention of ld. Advocates on behalf of three brokers is that they are only brokers and therefore they have not dealt with the goods and in any case only evidence against them is their own statements. Even these statements only clarifies that they have only got brokerage for the deals. ....
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....refore dismiss all the appeals filed by appellant Nos. 4, 5 and 6. 14. As far as appellant Nos. 7, 8 and 9 are concerned, penalties have been imposed on them. Appellant No. 7 is a supplier EOU. Appellant No. 8 is Managing Director of M/s. SPL (appellant No. 7). Appellant No. 9 is the Marketing Manager in M/s. SPL. Ld. Advocate of these appellants main contention was they have supplied PTY/PFY to Appellant No. 1 under Notification No. 1/95, have followed the correct procedure viz. goods were supplied based upon CT-3 and re-warehousing certificate in the form of AR-3A were received and thus they have followed the procedure and have not done anything wrong and hence not liable to penalty. While these arguments look attractive, however on going through various statements including statement of appellant Nos. 7 and 8, it is clear that goods were diverted with their connivance and they were also getting additional amount (over and above the normal price to EOU of such goods). Shri K.K. Jhunjhunwala, Managing Director of M/s. SPL and appellant in his statement has accepted that goods were delivered in Bhiwandi on the basis of letters of M/s. SRIL and all the documents were handed ....