TaxTMI 
TaxTMI 
2019 (3) TMI 972
X X X X Extracts X X X X
X X X X Extracts X X X X
....ld make the payment forthwith. 40.2 M/s Start Rite Shoes Pvt Ltd. shall pay all the dues along with interest as applicable under Section 11AB of Central Excise Act, 1944. 40.3 I impose a penalty of Rs. 16,00,000/- (Rupees Sixteen Lakhs only) against M/s Start Rite Shoes Pvt Ltd under Rule 173Q Central Excise Rules, 1944 during the time when duty adjudicated was evaded. 40.4 I impose a penalty of Rs. 4,00,000/- (Rupees Four Lakhs only) on Shri Ashok Ramchandra Mane, Director, M/s Start Rite Shoes Pvt Ltd under Rule 209 of the Central Excise Rules, 1944 then in force. 40.5 Proceedings against Shri Ramchandra Bandu Mane, Shivam Bandhu Mane and Shri Atul Ramchandra Mane, Directors of M/s SRSPL is dropped. 40.6 Amounts paid towards Central Excise duty worked out during the investigation, be appropriated against the demands confirmed hereinabove to the extent it relates to the above demand as may be verified by the Assistant Commissioner of Central Excise. 40.7 I hereby drop proceedings against the following persons namely, (i) Shri Amar Raghuvir Dhus, Chairman, Navyug Industrial Footwear Cooperative Society Ltd. (ii) Shri Shashikant Dhondiram Pawar, S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pellant's the matter was remanded back to the adjudicating authority by Tribunal vide its order No A/2118 to 2120/WZB/06 C.1 (EB) dated 18.10.2006 for re-adjudication after following the principles of natural justice. 2.5 Matter in remand proceedings have been readjudicated by the Commissioner as per the order in para 1, supra. Aggrieved appellants have filed this appeal. 3.1 In their appeal appellants have assailed the impugned order stating- i. The entire demand is based on assumptions, presumptions and unauthenticated/ unproved documents. The documents which have been basis for making the demand have been recovered by the sales tax department without any panchnama and the alleged private records so recovered do not bear any reference to the appellants. ii. Commissioner has himself in his order observed that manufacture of goods by the appellants is not proved. If there was any doubt in this regard, Commissioner could not have proceeded to confirm the demand. Manufacture and clearance are necessarily to be established by the revenue and without discharging the said burden demand of Central Excise Duty cannot be sustained. iii. The Directors of the Appellant company....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rtment needs to independently prove that appellants "manufactured" the goods in its premises. It is not sufficient for them to rely on figures supplied by the sales tax department. {Girdharilal Nannelal [1976 (3) SCC 701]} b. No evidence has been put forth by the department to show the good clandestinely cleared were manufactured by them. In this regard they have relied upon following decisions- i. Puneet Steels and Alloys Pvt Ltd [2017 (358) ELT 1253 (T)] ii. Vardhman Chemtech [2016 (7) TMI 1320 (CESTAT)] iii. Zoloto Industries [2013 (294) ELT 455 (T)] c. No evidence of receipt of raw materials, manpower, electricity transport etc for undertaking alleged production has been produced. Reliance placed on following decisions- i. Continental Cement Company [2014 (309) ELT 411 (ALL)] ii. Triveni Engineering & Industries Ltd[2016 (334) ELT 595 (ALL)] iii. Sunrise Food Products [2017 (357) ELT 599 (T)] iv. Shree Nathjee Industries [2011 (267) ELT 241 (T)] v. Rajasthan Explosives & Chemicals [2017(357) ELT 269 (T)] vi. Mittal Pigment [2018 (360) ELT 157 (T)] vii. Gupta Synthetics Ltd [2014 (312....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Shri Ashok Mane. 4.3 Arguing for the revenue learned Authorized Representative submitted- i. Statements Shri Abdul Razaque Sheikh Export Executive, Shri Ashok Mane Director, Shri Sashikant D Pawar Secretary of Nayug Footwear Industrial Co-op Society (NFICS), Shri Dinkar Shankar Shinde Chairman of Bharatiya Charmakala Gramudyog Sahakari Sangh (BCGSL), Shri Amar Raghuveer Dhus of NFICS, Shri Ravi Kant Dhindiram Secretary BCGSL, Smt M Z Kerawala former Chairman of M/s Jai Hind, M/s Jai Bharat and member of NIFCS and present member of M/s Jai Hind, Shri Ramchandra Mane Managing Director of Appellant, and Shri Shivram B Mane, clearly show the modus opearandi adopted by the appellants for the clandestine clearance of the goods by raising invoices and Bills in name of the NFICS and BCGSL. ii. In their statement Shri Jalaludin Noorallah Virji partner of M/s Regal Shoes and Shri Hanif Amir Manjee Proprietor of M/s Faith also admitted the fact about receiving the goods through Mr Raju from the Appellants. iii. The department has sufficiently discharged the burden to prove clandestine clearance done by the appellants within the preponderance of probability as has been held by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ussex Industrial Estate, Byculla Mumbai and at the office of Leather Co-operative Society namely Bharatiya Charmakala Gromoudyog Sahakari Sanstha as registered body, registered under No. BOM/IMD/E/981/83 having its registered office at Palanjee Batanjee Chawl, No.8, Room No.7, Ground Floor, Sussex Road, Byculla, Mumbai-27. During the period from 1983 upto 1996 did hatch a criminal conspiracy to defraud the Government of Maharashtra, in Sales Tax Department by misusing the concessional scheme of Sales Tax, meant for the members of the co-operative Societies of cobblers by camouflaging the actual sales and purchases of Leather goods from the individual cobblers in open market as sale and purchase by society floated and controlled by themselves and their agents, and thereby causing loss of revenue in form of sales tax which they were supposed to collect on behalf of Government and deposit it with the Sales Tax Department, and for that purpose all of them agreed to do or caused to be done the following various Illegal Acts: A. To float and register the cobblers co-operative society by name Bharatiya Charmakala Gramoudyog Sahakari Sanstha by manipulating the Membership Forms, Members....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th intention to avail of the concession meant for such society and thereby to actually induce the officers and staff of sales tax department in granting the exemption from payment of sales tax and thereby to cause wrongful loss to Government of Maharashtra in collection of due tax on sale and purchase of leather goods by persons other than the society and thereby to cheat the Government in that behalf. And thereby Accused Nos.1 to 4 did commit the offence of hatching criminal conspiracy punishable u/s. 120(b) IPC, r/w 465,467,468,471,403,406,409,420 IPC. SECONDLY That in pursuance to the aforesaid criminal conspiracy and in furtherance of common intention of all the accused in the course of same transaction at the aforesaid date, time, place and duration, accused namely 1) Ramchandra Bandu Mane, 2) Shivram Bandu Mane, 3) Ashok Ramchandra Mane and 4) Anil Ramchandra Mane the office bearers of aforesaid companies, in their respective capacities caused fabrication Society i.e. Bhartiya Charmakala Sahakari Sanstha by filling in false application forms, making false entries in application, preparing false record of receipt of membership fees, preparing false record of receipt o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ndation did approach Sale Tax Department and applied for, and obtained exemption Certificates entitling the society not to collect and pay the sales tax from time to time and on the strength of such exemption did dishonestly avoid to collect and pay sales tax to the total tune of Rs. 26,05,733/- approximately at the rate of Rs. 48 for the aforesaid period and thereby caused wrongful los to State Exchequer to that extent on account of such misrepresentation and thereby committed the offence of cheating punishable u/s. 420 IPC r/w 120(b) IPC and or 34 IPC and or 114 IPC. LASTLY That accused No.2 Shivram Bandu Mane, 3) Ashok Ramchandra Mane and 4) Anil Ramchandra Mane in the capacity of promoter members of a registered cooperative society by name Bhartiya Chamkala Chamudyog Sahakari Sangh Maryadit showed as having collected money (Share Capital) by misleading other members about the purpose of the society, to facilitate registration of the society; and secondly they intentionally had shown false transaction of manufacture of leather goods and sale of the same to 1) Startrite Shoes Company, 411-B, Sussex Industrial Estate, Sussed Road, Byculla, Mumbai-27 2) Mane & Company, 226, D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uch records of clandestine activities for tax evasion. So the records cannot be rejected as evidence for the reason that the register does not indicate the company's name or the signature of any authorized person of the company. 30. The documents relied upon in this SCN are relied upon in the charge sheet filed before the court also against these notices. So the notices have access to these documents if they so desire. In fact for defending the charge against them in the court they have to go through the original document if they are disputing it. They have only raised the objection that it is only a photocopy and there is no objection that the records are different from the original. Since this is only a technical objection and since strict rules of evidence are not applicable to quasi-judicial proceedings I hold that these can be relied upon as evidence." 5.4 Section 36A & 36B of Central Excise Act, 1944 provides as follows: "Section 36A Where any document is produced by any person or has been seized from the custody or control of any person, in either case, under this Act or under any other law and such document is tendered by the prosecution in evidence against him ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l. There is no illegality or perversity visible in the order passed by the learned Sessions Judge. The judgments and orders passed in the case of Smt. Rekha Rana (supra) and Deoki Nandan Aggarwal (supra) cannot be applied in the present case because in those orders an interpretation of the general provisions of the Evidence Act was given. In both the judgments special provisions under Section 36A and 36B of the Act were not considered. It is settled law that if any provision is given in a Special Act which is contrary to the provisions of the general law then the special law shall supersede the provisions of the general law. Under such circumstances, looking at the provisions of Sections 36A and 36B of the Act, the prosecution not only could file copy of the documents as mentioned under Section 36B of the Act but, prove such copies as original. There is no need to file or show the original documents before the trial Court. Under such circumstances, the application of the prosecution appears to be a formality. The prosecution could prove the copies of the documents as mentioned under Section 36B of the Act and therefore, if the revisionary Court has accepted the application filed by....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ved from the sales tax authority which were independently examined and scrutinized for the purpose of demand of Central Excise duty. Commissioner has in his order in para 31, specifically held as follows: "31. It is clear that the societies were a sham maintaining only some accounts without actually manufacturing or selling footwear. For deciding liability of excise duty what is crucial is manufacture of goods. So the books of accounts of the societies are not very relevant for deciding excise duty liability. So the issue to be examined is whether there is any evidence of evasion of excise duty based on the private records recovered by Sales Tax Authorities from Shri Ramachandra Mane and accepted to be records of SRSPL by Shri Ashok Mane in his statement dated 28.2.97." Since the approach of Commissioner was to determine the demand on the basis of manufacture, reliance placed by the documents recovered or surrendered by the appellant to the sales tax authority cannot be faulted with. 5.6 All other arguments raised by the appellants with regards to production of the goods, receipt of raw material, power consumption transportation and manpower has been dealt by the Commissio....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... SRSPL had nothing to do with the transaction. It is argued that if the goods belonged to SRSPL the money would have been paid to SRSPL. However this is a false argument. The deposition of the office bearers of the societies is that the proceeds of the cheques were paid to the persons who brought the cheques (that is to say persons like Mr. Raju or Mr. Shinde, who are alleged to be employees of SRSPL). The statement is not that the proceeds were returned to the dealers who issued the cheques. 33. The arguments in favour of confirming excise duty demanded on the basis of sales recorded in the private records recovered from Shri Ramachandra Mane are,- (a) The statements of various persons show that the two fictitious co-operative societies were functioning from the premises of SRSPL. The account books of the societies were recovered by the sales tax authorities from the premises of SRSPL. There are records which show that raw materials ordered in the name of the societies were shipped to the premises of SRSPL. For example in a communication dated 30/11/95 relating to confirmation of dispatch of "Synthetic Materials for footwear uppers" shipped under letter of credit 11-1/0557/9....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... from elsewhere. In their statements- A. Recorded on 3.12.1996 and 7.05.1997, Shri Dinkar Shankar Shinde, the Chairman of the Bharatiya Charmakala Gramudyog Shahakari Sangh Ltd stated that, • the society was formed by Shri Ramchandra Mane and Shri Ashok Mane and on record there were around 350 members which are bogus and non existent; • the main business of the society was to prepare sales bills on the basis of the information provided by the show rooms or shoe dealers and to maintain registers like purchase, sales ledgers etc. B. Recorded on 30.01.1997 and 09.05.1997, Shri Amar Raghuveer Dhus, Chairman of Navyug Footwear Industrial Co-operative Society stated that, • he was made Chairman and Treasurer from 1994 to 1996 on the instruction of Shri Ashok Mane, Director of SRSPL; • the society was controlled by Shi Ashok Mane, a all the accounts/ records of the day to day activity were looked and maintained by Shri S D Pawar under instruction of Shri Ashok Mane; • around 340 bogus members were registered with the society; • he was only signing the cheques and office documents sent to him by Shri Pawar ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tity of the corporation is entirely separate from that of its shareholders; it bears its own name and has a seal of its own; its assets are separate and distinct from those of its members; it can sue and be sued exclusively for its own purposes; its creditors cannot obtain satisfaction from the assets of its members; the liability of the members or shareholders is limited to the capital invested by them; similarly, the creditors of the members have no right to the assets of the corporation. This position has been well-established ever since the decision in the of Salomon v. Salomon & Co. [(1897) A.C. 22 H.L.] was pronounced in 1897; and indeed, it has always been the well recognised principle of common law. However, in the course of time, the doctrine that the corporation or a company has a legal and separate entity of its own has been subjected to certain exceptions by the application of the fiction that the veil of the corporation can be lifted and its face examined in substance. The doctrine of the lifting of the veil thus marks a change in the attitude that law had originally adopted towards the concept of the separate entity or personality of the corporation. As a result of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed have been enumerated and classified into fourteen categories. Similarly in Gower's Company Law (4th Ed.), a chapter is devoted to `lifting the veil' and the various occasions when that may be done are discussed. In Tata Engineering and Locomotive Co. Ltd. [(1964) 6 SCR 885], the company wanted the corporate veil to be lifted so as to sustain the maintainability of the petition, filed by the company under Article 32 of the Constitution, by treating it as one filed by the shareholders of the company. The request of the company was turned down on the ground that it was not possible to treat the company as a citizen for the purposes of Article 19. In CIT v. Sri Meenakshi Mills Ltd. [AIR 1967 SC 819], the corporate veil was lifted and evasion of income tax prevented by paying regard to the economic realities behind the legal facade. In Workmen v. Associated Rubber Industry Ltd. [(1985) 4 SCC 114], resort was had to the principle of lifting the veil to prevent devices to avoid welfare legislation. It was emphasised that regard must be had to substance and not the form of a transaction. Generally and broadly speaking, we may say that the corporate veil may be lifted where a statute its....
X X X X Extracts X X X X
X X X X Extracts X X X X
....be lifted to see who is behind it but also that they should have interest, directly or indirectly, in the business of each other. But once it is found that persons behind the manufacturer and the buyer are same, it is apparent that buyer is associated with the manufacturer, i.e., the assessee and then regard being had to the common course of natural events, human conduct and public and private business it can be presumed that they have interest, directly or indirectly, in the business of each other (refer Section 114 of the Evidence Act). It is, however, difficult to lay down any broad principle to hold as to when corporate veil should be lifted or if on doing that, could it be said that the assessee and the buyer are related persons. That will depend upon the facts and circumstances of each case and it will have to be seen who is calling the shots in both the assessee and the buyer. When it is the same person the authorities can certainly fall back on the third proviso to clause (a) of Section 4(1) of the Act, to arrive at the value of the excisable goods. It cannot be that when the same person incorporates two companies of which one is the manufacturer of excisable goods and othe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ound that the corporate personality was used as a mask for evasion of tax where transactions were found to be a sham or collusive or where the corporate personality was employed to circumvent statutory liability or to evade the tax liability. In such a situation, the veil could be lifted to find out the real culprits hiding behind it. It was held that even though there are no statutory provisions, the circumstances so existing in the particular case warrants the lifting of the corporate veil to realize the tax from the Directors or partners as the case may be as has been held in Telco & Ors. v. State of Bihar - AIR 1965 SC 40 (paras 24 & 27); CIT v. Shree Minakshi Mills Ltd., Madurai - AIR 1967 SC 819 (para 8); New Horizon Ltd. & Another v. Union of India and Others (1995) 1 SCC 478; Delhi Development Authority v. Skipper Construction Co. P. Ltd. (1996) 4 SCC 622 (paras 24 to 28); Calcutta Chromotype Ltd. v. Collector of Central Excise, Kolkata - AIR 1998 SC 1631 = 1998 (99) E.L.T. 202 (S.C.) (paras 12, 14); Shubhra Mukharjee & Another v. Bharat Cooking Coal Ltd. & Another - (2003) 3 SCC 312; Kapila Hingorani v. State of Bihar - JT 2003 (5) SC 1 (paras 25, 26, 27); Vodafone Interna....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re manufactured by Start Rite Shoes? Ans. I know that the shoes used to come from Mane and he was also the owner of Start Rite Shoes. Q 8 You have seen one pages 111 and 113. While looking at this page can you say that the transaction represented therein pertains to goods supplied to you by Start Rite Shoes? Ans. I will ask my accountant and will get back to you. I am not aware of it now. Q.14 What do you mean by saying that Mr Mane used to control the society? Ans. Mr Raju used to say they are from Mr Mane. The bills were from the society. Examination of Shri Akbar Amirali Jaffer Q 6 Do you know the source from which Raju used to bring the shoes? Ans. Sources could have been multiple. But we had visited one factory as I stated in my statement. Q.14 What do you mean by saying that Mr Mane used to control the society? Ans. The person who supplied the goods would have told us. Examination of Shri Jalaloodin Lataf Ali Merchant, Partner of M/s Red Shoes Q.6 Who used to bring the shoes? Who used to bring the invoice? Ans. Sometimes Raju was bringing shoes, sometimes he used to send it through some other person. Mr Shinde used to bring the invoices.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lers have even during the cross examination before the adjudicating authority, with the pre43 ponderence of probability admitted that shoes received by them were manufactured and cleared by M/s Start Rite Shoes against the invoices issued by the cooperative society. 5.11 Hon'ble Supreme Court has in case of D Bhoormul [1983 (13) ELT 1546 (SC)], has held as follows: 31. The other cardinal principle having an important bearing on the incidence of burden of proof is that sufficiency and weight of the evidence is to be considered to use the words of Lord Mansfield in Blatch v. Archar (1774) 1 Cowp. 63 at p. 65 "According to the Proof which it was in the power of one side to prove and in the power of the other to have contradicted". Since it is exceedingly difficult, if not absolutely impossible for the prosecution to prove facts which are especially within the knowledge of the opponent or the accused, it is not obliged to prove them as part of its primary burden. 32. Smuggling is clandestine conveying of goods to avoid legal duties. Secrecy and stealth being its covering guards, it is impossible for the Preventive Department to unravel every link of the process. Many facts rel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....concerned in the smuggling. 34. The propriety and legality of the Collector's impugned order had to be judged in the light of the above principles. 35. It is not correct to say that this is a case of no evidence. While it is true that no direct evidence of the illicit importation of the goods was adduced by the Department, it had made available to the Collector several circumstances of a determinative character which coupled with the inference arising from the dubious conduct of Baboothmull and Bhoormull, could reasonably lead to conclusion drawn by the Collector, that they were smuggled goods. These circumstances have been set out by us earlier in this judgment. We may recapitulate only the most salient among them. 5.12 Decisions relied upon by the appellant seeking the establishment of production, receipt of raw material, power consumption, transport, manpower usage etc., cannot be applicable to present case as in present case appellants have used the mask of co-operative societies which have been found to be bogus for their nefarious activities. In our view the case of revenue is well established within pre-ponderence of probability as has been held by the Apex Court in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was completed, the purchaser was under no obligation to pay any extra amount to the seller, namely, the respondent. In such a transaction, it is the seller who takes on the obligation of paying all taxes on the goods sold and in such a case, the said taxes on the goods sold are to be deducted under Section 4(4)(d)(ii) and this is precisely what has been directed by the Tribunal. There is also nothing to show that the sale price was not cum-duty." Similarly, in the case of Supreme Fabrics Ltd., the issue was whether excise duty was payable on loading charges which the appellant had claimed as abatement while computing the taxable value. In that context, the Hon'ble Apex Court held that loading charges form part of assessable value and excise duty would be leviable and the loading charges so collected should be treated as cum-duty tax. In Srichakra Tyres Ltd. case, the facts of the case were that the appellant cleared tyres on the sale price declared by them. Later on price revisions were effected upwards but they did not discharge the additional duty liability on the enhanced prices collected from the customers. In the context of duty demand on the enhanced price, that is, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hall be deemed to be and shall be deemed to always have been, as validly taken or done or omitted to be done as if the amendment made by section 125 of the Finance Act, 2001 had been in force at all material times; b. no suit or other proceedings shall be maintained or continued in any court, tribunal or other authority for any action taken or anything done or omitted to be done, in respect of any excisable goods under any of such rule, notification or order, and no enforcement shall be made by any court, of any decree or order relating to such action taken or anything done or omitted to be done as if the amendment made by section 125 of the Finance Act, 2001 had been in force at all material times; c. recovery shall be made of all such amounts of duty or interest or penalty or fine or credit of duty in respect of inputs or capital goods or other charges which have not been collected or, as the case may be, which have been refunded, as if the amendment made by section 125 of the Finance Act, 2001 had been in force at all material times. Explanation.--For the removal of doubts, it is hereby declared that no act or omission on the part of any person shall be puni....