TaxTMI 
TaxTMI 
2023 (1) TMI 1183
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....s confirmed against M/s Xian Organics, M/s Swift Trading (India) and M/s New Life Organics. (ii) Penalty of Rs. 90,00,000/- (Rupees Ninety Lacs Only) is imposed under Rule 26 of Central Excise Rules, 2002 on Shri M K Patel (Noticee No 9). 9. (i) The amount of Rs. 6,00,000/- (Rupees Six Lakh Only) paid by Shri Riyaz Padela is ordered to be adjusted against the amount of demands confirmed against M/s Xian Organics, M/s Swift Trading (India) and M/s New Life Organics. (ii) Penalty of Rs. 50,00,000/- (Rupees Fifty Lacs Only) is imposed under Rule 26 of Central Excise Rules, 2002 on Shri Riyaz Padela (Noticee No 10)." 2.1 During the period from 19.07.2005 to 24.03.2006, eighty five claim of rebate were filed by five entities namely M/s. New Life Organics, Ankleshwar, Gujarat, M/s. Xian Organics, Valsad, Gujarat, M/s. Swift Trading (I), Masjid, Mumbai, M/s. Real Business House, Valsad, Gujarat, M/s. J.D. Trading House, Ankleshwar, Gujarat, claiming themselves to be the merchant exporter with valid IEC number. After causing verification of Central Excise duty paid status of the goods from the Central Excise Range where the goods were manufactured ....
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....ellant 1, his counsels submitted as follows: • The Appellant is ex superintendent of Central Excise. Since the investigations had raised question mark over manufacturing and export of the goods, Appellant deposited Rs. 1,01,35,000/- under protest. • The Appellant was not aware about the forged and fabricated nature of the documents. It came to the knowledge of the Appellant only after the investigation by the department. • The role of the Appellant was limited to introduction of Mr. Riyaz Padela with Mr. Deepak Jare. In so far as Mr. Bansode is concerned, the Appellant had only introduced Mr. Jare with Mr. Bansode in case of any difficulty in filing the rebate claim he could have sought Mr. Bansode's help. • Appellant has only introduced Mr. Padela with Mr. Jare and Mr. Bhansode without any knowledge of document been forged and fabricated documents. • It is submitted that the Appellant has not forged or fabricated any documents. The allegation regarding making some entry in the seal covers is totally incorrect and without any basis. The Appellant has not made any entry in any of the docume....
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....6 is pari materia to Rule 209A, when it was realized by the government that offence of similar nature is also occurring for extending the fraudulent benefit by way of fake documents, the legislature have consciously inserted sub-rule 2 in Rule 26 to bring such offences under the ambit of penal provision. Since the provision of sub-rule 2 of Rule 26 was neither existing in Rule 26 (1) nor in Rule 209A of the Central Excise Rule, the provision of sub rule (2) cannot be made applicable prior to 01.03.2007 when sub-rule (2) was inserted. • In the present case also the allegations pertains to prior to 01.03.2007 and there is no allegation of physically dealing with the goods by the Appellant and as such Rule 26 (2) cannot be given a retrospective effect. Hence, the penalty of Rs. 90,00,000/- imposed upon the Appellant is not sustainable. • In view of the aforesaid submission the penalty imposed upon the Appellant may be quashed and set aside. 3.3 Arguing for the appellant 2, his counsels submitted as follows: • From para 94.1 and 109.2 of the impugned order, it is very clear that the whole case of the Department made out agains....
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.... • Mini Steel Traders, [2014 (309) E.L.T. 404 (P & H)] • Steel India Company [2014 (310) E.L.T. 184 (Tri. - Mumbai)] • The ratio of the above decisions applies squarely on the present matter, hence no penalty under Rule 26 (2) of the Excise Rules can be imposed on the Appellant. In any case, it is a trite law that no penalty can be imposed on such an offence which was committed before the said offence was penalized. Reliance in this regard is also placed on the decision of Hon'ble Supreme Court in the case of Commissioner of Central Excise v/s Elgi Equipments Ltd, wherein it is categorically held that illegality committed prior to insertion of section 11AC of the Central Excise Act, 1944 cannot be subject matter of penalty under the said provision. • The case laws relied upon by the Learned Departmental Representative during the course of hearing cannot be applied to the present case as none of the decisions deal with penalty for handling the documents during the relevant period in terms of Rule 26 of the Excise Rules. • Without prejudice to the above, the Appellant in the present case has ....
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.... fit the expression "in any other manner deal with the excisable goods" in Rule 26. • As the investigation could not trace the manufacturer of goods, it does not necessarily lead to conclusion that there was no existence of excisable goods per se. Even otherwise, the expression "Excisable Goods" in Rule 26 if read standalone (as the expression "in any other manner deal with the excisable goods" is duly separated by expression "or" and "," from the expression "acquire possession of" means goods liable to excise duty i.e. it has no relationship with physical existence of goods. According to Section 2 (d) of Central Excise Act 1944: "Excisable goods" means goods specified in the first schedule and the second Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as being subject to a duty of excise and includes salt". Thus, any goods mentioned in the first schedule of the said Central Excise Tariff Act will also be excisable goods. In M/s. Hiralal Ratanlal vs. STO, (AIR 1973 SC 1034), the apex Court observed as follows: "In construing a statutory provision the first and foremost rule of construction is the literal construction. All that the Court has to see at ....
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....serted, namely:- "(2) Any person, who issues- (i) an excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or (ii) any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made thereunder like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater". " • It is worthwhile to note that the said amendment to Rule 26 has been carried out without any corresponding amendment in the Section 37(5) and thus derives its power from the said section and is only clarificatory in nature. The amendments carried out through notification No. 8/2007- Central Excise (N.T.) 01.03.2007 therefore, are, equally applicable to cases prior to issuance of this notification read with provisions of Section 37(5) of the Central Excise Act, 1944. • In any case, each issue has to be dealt with separately, in the instant c....
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.... Total 85 8,32,00,658/- 4.3 Rebate claims as detailed in table below, after causing due verification rebate claims as detailed below were sanctioned in the favour of claimant merchant exporters Merchant Exporter Number of Rebate Claims Total Rebate Claimed (Rs.) 1 M/s. Xian Organics (Noticee No. 1), Valsad, Gujrat 11 82,07,736/ - 2 M/s. Swift Trading (India) (Noticee No. 2). Ankleshwar, Gujarat 6 57,39,258/- 3 M/s. New Life Organics (Noticee No. 3). Valsad, Gujarat 2 19,60,693/- 19 1,59,07,687/- 4.4 Investigations made in respect of the rebate claims filed by the five merchant exporters revealed that they had neither paid any Central Excise duty or they have exported any goods. The investigations revealed following facts: • The manufacturers M/s. India Nippon Electrical Ltd. and M/s. Neuland Laboratories, Ankleshwar, Gujarat, whose goods were claimed to have been exported, were not in existence. • The jurisdictional Excise officers hav....
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....el from Surat to Mumbai Thane, through the courier account of his courier. 4.6 During the course of investigations, the noticee have returned the amount of Rs. 1,59,26,000/ which covers rebate which was fraudulently availed as per the following details: - Sr No Person Amount (Rs) 1 Amount transferred from the a/c of Shri Pinakin Rajwala with the Memon Co-op Bank, Mumbai branch 22,15,000 2 DD issued by Memon Co-op Bank, Surat from A/c of Shri Ketan Gotawala 29,76,000 3 Amount paid by Riyaz Padela 6,00,000 4 Amount paid by Shri Venkat Chari on behalf of Shri M.K.Patel 1,01,35,000 1,59,26,000 4.7 For imposition of the penalties on the two appellant impugned order records as follows: "88. The investigations revealed that Shri M.K. Patel (Noticee No. 9), Superintendent of Central Excise, Mumbai, had played crucial role in presentations o! fabricated/fake rebate claims to the Maritime Commissioner, Raigad and had earned considerable monetary benefit out of the amount of rebate received in the name of the merchant exporters. The evidence ....
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....f the said rebate claims. Thereafter, Shri Riyaz Padela had handed over the 'Authority Letters' of above named firms, which authorized Shri Bhaskar Tate to act on behalf of the firms. As per the directions of Shri M K Patel, Shri Bhaskar Tate collected the rebate claims from the residence of Shri M. K. Patel situated at B-201, Siddhi Towers, Bhakti Mandir Marg, Thane(W) and submitted to the office of the Maritime Commissionerate, Raigad, when the rebate claims were sanctioned, Shri Bhaskar Tate collected the cheques and handed over the same to Shri M. K. Patel, at his residence, at Thane. Shri Bhaskar Tate used to co- ordinate the whole exercise of filing, processing and collecting cheques pertaining to sanction of the rebate claims, under the directions of Shri M K Patel and he (Deepak Jare) was not actively involved in the said exercise nor has he received any remuneration for the same. Shri Deepak Jare further stated that he had visited the office of the Maritime Commissionerate, Raigad, in the said connection on couple of occasions, on the instructions of Shri M K Patel to handle some technical clarifications required by the Rebate Section which Shri Bhaskar Tate was un....
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....ection on the assumption that the rebate claims were correct and genuine. In June 2006 he had learnt that investigations were going on in the matter of the above mentioned rebate claims. He immediately contacted Shri M. K. Patel and had confronted him, but Shri M. K. Patel had assured him that everything was above board. He had called up Shri Deepak Jare and Shri M K Patel and requested them to come clean on the issue and also asked Shri M.K. Patel to advice Shri Deepak Jare to appear before the investigating officials and co-operate in the investigations. Every time Shri M. K. Patel used to assure him that there was nothing wrong in the rebate claims. 88.5 Shri Qadir Amin Dangra clerk of M/s. Memon Co-op. Bank, Surat in his statement dated 24.07.06 deposed that an amount of Rs.1,75,00,000/- was withdrawn from the account of Shri Pinakin Rajawala (holder of dummy account in his bank), by him and was given to Shri Javed Shaikh. The entire transactions were carried out by Shri Riyaz Padela & Shri M.K. Patel, who had approached him for his help to open accounts in different names and to deposit certain cheques in such accounts and en-cash the amount. According to their ....
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....e knew Shri M.K. Patel from the time when he was Superintendent at Bhiwandi in the year 2004. Somewhere in March-April, 2005, Shri M. K. Patel offered him help as he was in a position to facilitate the rebate claims, with the officers in Central Excise Raigad Rebate Department. Thereafter, he had offered one Shri Dilkumar to carry out the work of encashing the cheques with his friend, Shri Afroz Bachau, which Shri Dilkumar accepted. Shri Dilkumar had informed him that he indeed had some claims of Excise Rebate and in case any person could help him to process the same, he would be interested. Accordingly, he gave a positive reply to Shri M. K. Patel of his said proposal. He requested Shri Dilkumar to give him few sets of the exports documents and showed the same to Shri M. K. Patel on his visit to Surat. After going through the said documents, Shri M. K. Patel informed him that, he could claim the rebate on the basis of the said documents and Shri M. K. Patel would have to be paid 60% of the total rebate amount claimed towards the work done through him. Shri Dilkumar accepted the offer and introduced him to Shri Rakesh and informed that from then onwards he was required to contact S....
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....t recorded on 26.12.2006 stated that Shri Rakesh had contacted him on several occasions with regard to written references/queries from Central Excise Raigad Commissionerate in relation to the rebate claims. He used to prepare a draft reply as per the guidance of Shri M.K. Patel and give it to Shri Rakesh, who in turn, used to bring back the said reply duly typed over the concerned company's letter- heads and duly signed by the authorized persons, which he then, forwarded to Shri M. K. Patel for submission to the excise authority. The documents of rebate claims received from Shri Rakesh and forwarded to Shri M.K. Patel pertained to the following firms viz., (I) M/s. Xian Organics, Valsad (ii) M/s. Real business House, Valsad (iii) M/s. New Life Organics, Ankleshwar (iv) M/s. J.D. Trading, Ankleshwar & (v) M/s. Swift Trading India, Mumbai. 88.8 Shri M. K. Patel in his statement dated 15.01.07 and dated 26.02.07 admitted that in all 11 parcels were received by him and 1 parcel was received on his behalf, which were sent by Shri Ralyaz Padela from Surat. The parcels contained documents related to claims of rebate which were handed over by him to Shri Bhasker Tate, th....
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....by the Commissioner of Customs (Export), JNCH, Sheva, vide his letter F.No. SG/MISC-254/06 SIIB (X)JNCH dated 09.05.07. It was observed that handwriting on the sealed covers and on the letters placed inside, apparently matched the with the handwriting of Shri M. K. Patel, who merely stated that the handwriting on the said documents only appeared to be similar to his own. 88.10 In order to confirm the identity of the person who fabricated the documents in question, specimen original copies of the questionable documents (along with specimen handwriting of Shri M.K. Patel, were forwarded to the Government Examiner of Questioned Documents, Hyderabad, for comparison of the handwritings. The report sent by Government Examiner of Questioned Documents, Hyderabad, vide letter C4238/2007/3132 dated 01.10.2007 confirmed that the handwriting on the fabricated ARE-1s submitted alongwith the rebate claims, was that of Shri M.K. Patel. The said report further confirmed that even the envelopes addressed to the rebate sanctioning authority purportedly sent by the office of JNCH authorities containing typed letters certifying the exports of goods in question and similar such envelopes....
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....t Shri Riyaz Rafiq Padela (Noticee No.10) had actively involved in procurement and submission of fabricated rebate documents with the office of the Maritime Commissioner, Raigad and he was one of the beneficiaries of the amount of rebate obtained. The evidence collected during investigations is as under: 89.1 Shri Qadir Amin Dangra clerk in the Memon Co-op. Bank, Surat in his deposition recorded on 09.06.2006 stated that, Shri Javed Shaikh who later on was found to be associate of Shri Riyaz Rafiq Padela, had contacted him to open accounts in the Memon Co-op. Bank, in the names of some other persons. Pursuant to the said proposal of Shri Javed Shaikh, he had introduced him to Shri Pinakin Muljibhai Rajawala who agreed to open the bank account in his name, for consideration of Rs.4000/- to Rs.5,000/- per month. The amount deposited in the account of Shri Pinakin Mulji Rajawala, through certain cheques, was withdrawn, in cash, by Shri Javed Shaikh. On 05.06.2006, a cheque issued from HDFC Bank was deposited in the said account of Shri Pinakin Mulji Rajawala, for an amount of around Rs.10 lakh, which had been withdrawn by Shri Javed Shaikh. Shri Qadir Amin Dangra ....
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....to the above mentioned accounts were deposited by Shri Javed Shaikh and the cash was also collected by him, 89.2 Shri Deepak Sharad Jare in his statement dated 26.07.2006 stated that Shri MK Patel had introduced him to Shri Riyaz Padela from Surat and had informed him that Shri Riyaz Padela was in the business of export. They requested for his help in processing of several Central Excise rebate claims which were to be filed with the Maritime Commissionerate, Raigad. As Shri M K Patel was known to him, he had instructed his cousin, Shri Bhaskar Tate to assist them in the work related to the processing of the said rebate claims. Thereafter, Shri Riyaz Padela had hand over the 'Authority Letters' in the name of Shri Bhaskar Tate, which authorized him to act on behalf of the firms namely M/s. Swift Trading (India), Mumbai, M/s. Xian Organics, Valsad and M/s. New Life Organics, Ankleshwar. Alongwith the said 'Authority Letters', Shri Bhaskar Tate was also handed over certain documents pertaining to the rebate claims of the above mentioned three firms by Shri M K Patel for submission and processing at the office of the Maritime Commissionerate, Raigad....
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....the export documents which were shown to Shri M. K. Patel on his visit to Surat. Shri Patel approved the documents and agreed to process the rebate claims on the basis of the said documents for payment of 60% of the total rebate amount claimed, towards the work done through him. He in turn had called up Shri Dilkumar and informed him that the work related to claiming of rebate on the basis of documents given by him could only be undertaken against an expense of 70% which included his share of 10% of the total rebate amount claimed, to which Shri Dilkumar agreed. Shri Dilkumar introduced him to Shri Rakesh and said that from then onwards he was required to contact Shri Rakesh for obtaining all the sets of rebate claims. The liaison work relating to documents between Shri M.K. Patel and Shri Rakesh was done by him. The documents were forwarded to Shri M. K. Patel, either through the courier agency or by handing over the same personally. The amount of 60% of the total amount of rebate sanctioned, was given to Shri M, K. Patel through M/s. Patel Natwarlal Chinubhai & Co., (Angadia) (a private courier agency), Surat, He had given Shri M. K. Patel about Rs. 95 lakh towards his share of p....
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.... Quadir Amin Dangra and cash received was given to Shri Riyaz Padela, against the cheques given by him for discounting. He had so far handed over around Rs.20 lakh to Shri Riyaz Padela. 89.6 Shri Riyaz Padela in his statement recorded on 26.12.2006 inter-alia, stated that Shri Rakesh an associate of Shri Dilkumar had contacted him on several occasions with regard to queries in relation to discrepancies found in the rebate claims and at such times, he used to contact Shri M.K. Patel to get suitable reply furnished for such queries. He used to prepare a draft reply as per the guidance of Shri M.K. Patel and give it to Shri Rakesh, who in turn, used to bring back the said reply duly typed over the concerned company's letter-heads and duly signed by the authorized signatory, which he then, used to forward to Shri M. K. Patel for submission to the authority. He availed the services of M/s. Shree Maruti Courier, Surat for sending all the concerned documents to Shri M.K. Patel. The documents of rebate claims received from Shri Rakesh and forwarded to Shri M.K. Patel pertained to the following firms viz., (i) M/s. Xian Organics, Valsad (ii) M/s. Real business House....
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....f Central Excise Rules, 2002 are also levelled against all the noticees No. 01 to 21. It is on record that noticees No. 01 to 05 have filed fake documents with an intention to obtain rebate from the department and they have also succeeded in obtaining considerable amount of Rs.1.59 Crores from such fake rebate claims, on the basis of forged and fabricated Central Excise documents. They are therefore liable for penalty under Rule 26 and Rule 27 of Central Excise Rules, 2002. Noticees No. 6, 7 & 8 being proprietors of Noticees No. 1, 2 & 3, they are not separately liable for penalty. The liability of Noticees No. 09 to 21 is to be examined and determined in the light of the provisions of Rule 26 and Rule 27 of Central Excise Rules, 2002, and defence replies of the noticees. 105. The provisions of Rule 26 and Rule 27 of Central Excise Rules, 2002 are that: ..... To attract penalty under Rule 26, a person has to (i) acquire possession of, or (ii) in any way to be concerned in their transportation, removal, deposition, keep, sell or purchase, or (iii) in any other manner deal with the excisable goods and he should have knowledge or reason to ....
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.... has held that it is necessary for the assessee to be put on notice as to the exact nature of contravention for which penalty is proposed to be imposed upon. The ratio of this judgment was followed in the case of M/s. Madhur Hosiery Industries 2006(200)ELT-147 Tribunal and in the case of Nakoda Textile Industries 2009(240)ELT-199-BOM-HC. In the case of B. Lakshmichand Vs. GOI 1993(12)ELT-322 Hon'ble Madras High Court has held that for imposition of penalty (Section 112 of Customs Act), charges against the accused should be clear and not ambiguous. If specific clause of the penal section is not quoted penalty is not sustainable. Onus of proof is on the department to prove essential Ingredients of an offence. (ii) In the case of Vijay Transport Co. Ltd. Vs. Commissioner of C.EX. 2008(230)ELT-154-Tri-Ahm. on the issue of imposition of penalty on the transporter the tribunal has held that in the absence of any evidence to show involvement of the transporters in aiding and abetting the clandestine activity of a manufacturer penalty under Rule 209A/Rule 26 of Central Excise Rules cannot be imposed. In the case of ZU Alvi -2000(36) RLT-721-Trib, the issue Involved was i....
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....ements. The statements are also corroborated with documentary evidence and hence the ratio of the cases cited by the noticees is not applicable to the subject case. 108. In addition to the case laws cited by the noticees it is also appropriate to discuss the following cases In which the provisions of Rule 26 & Rule 27 of Central Excise Rules, 2002 have been dealt with in detail and therefore are relevant for deciding the subject issue. In the case of Sachindananda Banerjee, A.C.C. Calcutta Vs. Sitaram Agarwal 1999 (110) ELT-292-SC, the apex court has discussed the scope of the term in any way concerned or 'In any manner dealing with the goods'. Though the issue involved is that case was related to smuggled goods and penalty under Section 167 of the Sea and Customs Act, the ratio laid down by the apex court is relevant. The court has held that the words 'concerned' and 'deal' have a wide connotation. The word means 'interested in, involved in, mixed up with,' while the words 'deal with' means 'to have something to do with, to concern oneself, to treat, to make arrangement, to negotiate with respect to somethin....
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....icee No. 9) was the main conspirator in fraudulently obtaining rebate of Rs.1,59,07,686/- from the Maritime Commissioner, Raigad. The role of Shri M.K. Patel was fully underlined by Shri Deepak Jare, Shri Bhaskar Tate and Shri Riyaz Padela in their statements. Shri Riyaz Padela used to courier the documents related to the said claims of rebate at the residence of Shri M.K. Patel, which after scrutiny and corrections were handed over to Shri Bhaskar Tate for onward submission to the office of the Maritime Commissioner. The cheques pertaining to the rebate sanctioned amount were delivered to Shri M.K. Patel by Shri Bhaskar Tate. Shri Riyaz Padela or on his instructions Shri M.K. Patel deposited the cheques in the accounts of the merchant exporters concerned. Shri M.K. Patel had offered his services to get rebate claims processed and sanctioned from the office of the Maritime Commissioner. The deal was struck between Shri M.K. Patel, Shri Dil Kumar & Shri Riyaz Padela and it was decided that out of the amount of sanctioned rebate claims, 60% of the total amount was to be received by Shri M.K. Patel, 30% by Shri Dil Kumar and the remaining amount of 10% was received by Shri Riyaz Padel....
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....also voluntarily deposited an amount of Rs.6,00,000/-, vide TR-6 Challans dated 21.12.06 (for Rs.5,00,000/-) and dated 28.12.06 (for Rs.1,00,000/-), towards the erroneously sanctioned rebate to the said merchant exporters, which was kept by him as his share. All the above facts have also been accepted by Shri Riyaz Padela in his written submission dated 18.03.2010. However, his claim for refund of the amount of Rs.6,00,000/-paid by him on the grounds that the said amount was recovered under stress/duress, is not maintainable, in view of the fact that there is no evidence on record to show that he had retracted any of his statements given before the investigating officers. It is therefore evident that, it is an afterthought on the part of Shri Riyaz Padela. Therefore, the amount of Rs.6,00,000/- recovered from Shri Riyaz Padela is liable to be adjusted against the demand. Shri Riyaz Padela had directly involved himself in processing and obtaining the fraudulent rebate claims to the tune of Rs.1,59,07,686/- from the office of the Maritime Commissioner, Raigad. The amount of rebate sanctioned and paid to the merchant exporters is liable to be recovered from Shri Riyaz Padela and other....
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.... out, with the statements of the co-accused and those statements are relevant material in the light of Section 138B. Counsel further points out that clause (b) says that statement has to be admitted in evidence when the maker of the statement is examined as a witness. Counsel then refers to Section 139 which reads : "139. Presumption as to documents in certain cases.-Where any document - (i) 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, or (ii) has been received from any place outside India in the course of investigation of any offence alleged to have been committed by any person under this Act, and such document is tendered by the prosecution in evidence against him or against him and any other person who is tried jointly with him, the court shall - (a) presume, unless the contrary is proved, that the signature and every other part of such document which purports to be in the handwriting of any particular person or which the court may reasonably assume to have been signed by, or to be in the handwriting of, any particular person, is in that per....
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....as not evidence on the basis of which a person could be found guilty in departmental proceedings. The Court stated : "........ The fact that the criminal Court had acquitted the petitioner would be of no consequence since the acquittal was on the footing that the confession of a co-accused could not be used against the petitioner. In departmental proceedings, there is no bar to use such statements......"" They dispute the penalty imposed on them under Rule 26 of the Central Excise Rules, 2002. They rely on the decision of the Hon'ble Bombay High Court in case of Bansal Steel Corporation [2017-TIOL-1883-HC-MUM-CX] holding as follows: "11. From the above judgment, it is clear that Rule 209A can be invoked and the penalty imposed only when the person has physically dealt with the excisable goods with the knowledge or belief that the goods are liable for confiscation. In the present case, the allegation was of unused gate passbooks being misused by the Respondents for the purpose of issuing fake/forged gate passes to assist M/s. Singhal Swaroop Ispat Ltd. There was no case of the Respondents having physically dealt with the excisable goods with the knowledge ....
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....act. Fraud and justice never dwell together. Fraud is a conduct either by letter or words, which includes the other person or authority to take a definite determinative stand as a response to the conduct of the former either by words or letter. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by willfully or recklessly causing him to believe and act on falsehood. It is a fraud in law if a party makes representations, which he knows to be false, and injury enures therefrom although the motive from which the representations proceeded may not have been bad. An act of fraud on court is always viewed seriously. A collusion or conspiracy with a view to deprive the rights of the others in relation to a property would render the transaction void ab initio. Fraud and deception are synonymous. Although in a given case a deception may not amount to fraud, fraud is anathema to all equitable principles and any affair tainted with fraud cannot be perpetuated or saved by the application of any equita....
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....formity and well being in the society and not endanger the economy of the country as such for the said preposition reliance is placed on the decisions of the Apex Court in the following cases. Balkrishna Chhaganlal Soni [1983 (13) ELT 1527 (SC)] "17. Guilt being established, the fifth act of the tragedy is reached. Social and economic offences stand on a graver footing in respect of punishment. The appellant's advocate pleads in elimination of the imprisonment that gold of considerable value has been confiscated, that his client has gone out of business (his licence having been cancelled) and the possibility of further mischief is absent, seven years of criminal proceedings have been a long ordeal deterrent enough to inhibit future anti-social adventures, and some jail term he has already undergone. Counsel submits that his client will now turn a new leaf if he is not returned to prison. We decline to be moved by this dubious prospect. 18. The new horizons in penal treatment with hopeful hues of correction and rehabilitation are statutorily embodied in India in some special enactments; but crimes professionally committed by deceptively respectable members of th....
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....been already dealt with by severe departmental penalty; (iii) that the convicted person is a young man. To the extent to which gold smugglers and other anti-social operators in the field of crime can be given an unhappy holiday in jail, the courts must help the process on conviction, if judicial institutions are not to be cynically viewed by the community. We confirm the sentence. The appeal fails and is dismissed." Champalal Punaji Shah [1983 (13) ELT 1661 (SC)] "6. Shri Jethmalani also urged that the trial of the respondent was considerably delayed, that there was thus a violation of the fundamental right to life and liberty guaranteed under Article 21 of the Constitution and that was a sufficient ground to entitle the accused to a dismissal of the complaint against him. We have earlier discussed the relevant principles which should guide us in such situations. In this case the accused himself was responsible for a fair part of the delay. He has also not been able to show cause how he was prejudiced in the conduct of his defence by reason of the delay. Shri Jethmalani when suggested that the long lapse of time since the commission of the offence should be taken into a....
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....ce, it seems, is legal, tax evasion is illegal. .... In Commissioner of Income tax, Gujarat v. A. Raman & Co.,[[1968]1 S.C.R 10] JC Shah, JJ. speaking for himself and Sikri and Ramaswami, JJ repeating almost verbatim the observations in Westminister and Fishers Executors observed: "Avoidance of tax liability by 80 arranging commercial affairs that charge of tax is distributed is not prohibited. A taxpayer may resort to a device to divert the income before it accrues or arises to him. Effectiveness of the device depends not upon considerations of morality, but on the Legislative injunction in taking statutes may not, except on period of penalty, be violated, but it may lawfully be circumvented." The same Judge, speaking for himself, Ramaswami and Grover JJ in Commissioner of Income tax, Gujarat v. Kharwar [72 ITR 603] expressly followed Westminister and observed: "The taxing authority is entitled and is indeed bound to determine the true legal relation resulting from a transaction. If the parties have chosen to conceal by a device the legal relation, it is open to the taking authorities to unravel the device and to determine the true char....
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....the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it. A hint of this approach is to be found in the judgment of Desai, J. in Wood Polymer Ltd. v. Bengal Hotels Limited [40 Company Cases, 597] where the learned judge refused to accord sanction to the amalgamation of companies as it would lead to avoidance of tax. It is neither fair nor desirable to expect the legislature to intervene and take care of every device and scheme to avoid taxation. It is upto the Court to take stock to determine the nature of the new and sophisticated legal devices to avoid tax and consider whether the situation created by the devices could be related to the existing legislation with the aid of 'emerging' techniques of interpretation as was done in Ramsay, Burma Oil and Dawson, to expose the devices for what they really are and to refuse to give judicial benediction." Agreeing with above view Hon'ble Justice Rangnath Mishra and other Justices in the bench observed as follows: "Tax planning may be legitimate provided it is within the framework of law. Colourable devices can....
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....oes any act in respect of warehouse opium; and any person who otherwise contravenes any such rule, shall, ... 4.14 Interpreting Section 112 (b) of the Customs Act, 1962 tribunal has in the case of Bhimraj Misrilal Jain [1986 (23) ELT 499 (T)], observed as follows: 6. "..... We do not also agree with the submissions of the appellant that acquisition is conditioned by physical possession. Such a concept of possession is opposed to well accepted principles of jurisprudence and a person without being in physical possession of an article can always be in law in constructive possession of the same. In the instant case, in respect of the penalty imposed on the appellant under Section 112(b)(i) of the Act the question that would fall for determination is whether on the basis of evidence available on record it could be found that the appellant had acquired possession or was in any way concerned in the carrying, removing of the goods under seizure or has in any other manner dealt with the goods under seizure knowing or having reason to believe that the same are liable to confiscation under Section 111 of the Customs Act, 1962. We have gone through the statement recorded ....
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....tement of Hava has been well corroborated by certain clinching circumstances like the appellant meeting the said Hava at the appointed time at a specified place and conversing with him. The appellant has also not chosen to crossexamine the said Hava. Therefore, we are convinced that the appellant is concerned with the watches under seizure. We are not going into the acceptability or otherwise of the alleged unsigned statement of the appellant dated 3-10-1983 since de hors the statement we find from the materials on record that the charge has been proved against the appellant. Having regard to the value of the watches, the quantum of penalty imposed on the appellant cannot be said to be either harsh or excessive. We therefore, dismiss the appeal." 4.15 In our view it has been settled by various authorities as follows that the word "possession" or similar phrases used in the statute do not imply physical possession of the goods but would imply possession in law. Some of significant decisions on the subject are reproduced below: Mangal Singh & Ors [1967 AIR 1786] Stroud in his Judicial Dictionary of Words and Phrases, Vol. 3, at p. 2238, has brought out this aspec....
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.... offence of possession of contraband substance also commenced prior to coming into force of NDPS Act as the FIR would clearly reveal that the theft was committed on the intervening night of 12th/13th November, 1985, whereas the NDPS Act came into force on 14.11.1985. Learned counsel would submit that the recovery of opium was done on 16.1.1986 pursuant to the disclosure statement made by the accusedappellant who was already under arrest in a different matter and under such circumstances, the appellant could not have been convicted under Section 18 of the NDPS Act, but should have been convicted under Section 9 of the Opium Act. Elaborating the said submission, the learned counsel has contended that the offence of possession of contraband substance was punishable under both the laws but there is a huge difference in the sentence prescribed. Under Section 9 of the Opium Act, the sentence was extendable to one year whereas under Section 18 of the NDPS Act, the prescribed punishment is minimum 10 years apart from imposition of huge fine. Learned counsel would submit that it is the settled principle of criminal jurisprudence that the accused cannot be subject to an offence under a new A....
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....ium poppy and opium.- Whoever, in contravention of any provision of this Act, or any rule or order made or condition of licence granted thereunder cultivates the opium poppy or produces, manufactures, possesses, sells, purchases, transports, imports inter-State, exports inter-State or uses opium shall be punishable with rigorous imprisonment for a term which shall not be less than ten years but which may extend to twenty-years and shall also be liable to fine which shall not be less than one lakh rupees but which may extend to two lakh rupees : Provided that the Court may, for reasons to be recorded in the judgment, impose a fine exceeding two lakh rupees." 8. When one conceives of possession, it appears in the strict sense that the concept of possession is basically connected to "actus of physical control and custody". Attributing this meaning in the strict sense would be understanding the factum of possession in a narrow sense. With the passage of time there has been a gradual widening of the concept and the quintessential meaning of the word possession. The classical theory of English law on the term "possession" is fundamentally dominated by Savigny- ian "corp....
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....nt knows of substance's presence, substance is immediately accessible, and defendant exercises "dominion or control" over substance. State v. Hornaday[8]." And again "Possession as necessary for conviction of offense of possession of controlled substances with intent to distribute may be constructive as well as actual, U.S. v. Craig[9]; as well as joint or exclusive, Garvey v. State[10]. The defendants must have had dominion and control over the contraband with knowledge of its presence and character. U.S, v. Morando- Alvarez[11]. Possession, as an element of offense of stolen goods, is not limited to actual manual control upon or about the person, but extends to things under one's power and dominion. McConnell v. State[12]. Possession as used in indictment charging possession of stolen mail may mean actual possession or constructive possession. U.S. v. Ellison[13]. To constitute "possession" of a concealable weapon under statue proscribing possession of a concealable weapon by a felon, it is sufficient that defendant have constructive possession and immediate access to the weapon. State v. Kelley[14]." 10. In Stroud's dictio....
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....egard to an object of whose existence he is unaware of, though he exercises control over the same or he may have clear intention to exclude other people from the object, though he has no physical control over the same. In all this variegated situation, states Harris, the person concerned may still be conferred the possessory rights. The purpose of referring to the aforesaid principles and passages is that over the years, it has been seen that courts have refrained from adopting a doctrinaire approach towards defining possession. A functional and flexible approach in defining and understanding the possession as a concept is acceptable and thereby emphasis has been laid on different possessory rights according to the commands and justice of the social policy. Thus, the word "possession" in the context of any enactment would depend upon the object and purpose of the enactment and an appropriate meaning has to be assigned to the word to effectuate the said object. Tribunal has in case of Kader babu [1988 (33) E.L.T. 741 (Tribunal)] on explaining the terms possession used in Section 8 of Gold Control Act, 1968 observed as follows: "5....... In such a situation, it would not ....
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....he phrases like "Any person who acquires possession of or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing, or in any other manner dealing with any good.." used in the statute, need not be restricted to their literary meanings or imply actual physical possession or handling of the contraband goods, but these phrases refer to possession and handling of the contraband goods in law. This view has been expressed by the Hon'ble Apex Court in the case of Mohan Lal, supra and any contrary view cannot be upheld. The Mumbai bench in case of Babulal Jain [Final Order No A/3314-3329/15/EB dated 29.09.2015] interpreted the provisions of the Rule 26 in similar manner holding as follows: "8. One of the common contentions by various learned counsels for the appellants was that penalty under Rule 26 cannot be imposed on the appellants, many of them are merchant exporters or Rule 12B manufacturers. It was the contention of the learned counsels that as per the department's case Muni Group of Companies have only supplied duty-paying invoices and the goods have come from some other sources and these goods along w....
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....h was purported to have been paid to Muni Group of Companies for purchase of material was not paid to them but either was taken back. by the appellants-merchant exporters, or in some cases, some amount was paid to certain dealers in fabric. (Perhaps, some fabrics might have been purchased from them.) Thus, it is evident that the invoices of Muni Group of Companies and the goods purported to be covered by such invoices were dealt by the merchant exporter-appellants. There can be no doubt, that these goods are liable to confiscation under Rule 25(1)(d) of the Central Excise Act, 1994. In view of the above said position, there can be no doubt that penalty is imposable under Rule 26 on the merchant exporter/manufacturer under Rule 12B 8.3. We also like to add the very fact that the appellants have procured invoices from a source other than the actual manufacturers of the goods would indicate that these goods were in reality not duty- paid goods. If these goods were dutypaid then there was no reason for the appellants-merchant exporters/manufacturers under Rule 12B to undertake the above mentioned fraudulent activity of approaching Muni Group of Companies and getting the ....
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....ot the invoices from the seller of the goods and could have claimed the rebate. The very fact that this fraudulent exercise has been done indicates that the goods which were exported and procured from the market were nonduty paid goods. In case of some appellants, the goods were produced in their own unit and if in their own unit they would have paid duty, there was no reason for them to procure the invoices from Muni Group of Companies. 8.7. Various counsels have submitted that Rule 26 was amended thus, prior to 01/03/2007 no penalty could have been imposed on the dealers. We have considered this submission. While Rule 26(2) is prospective in nature, we find that in this case almost all appellants are Rule 12B manufacturers or merchant exporters. In the case of 12B manufacturers even though they may not have the manufacturing facility themselves, but they were treated as manufacturer under the Central Excise law and hence penalty under Rule 26 as it was existing prior to 01/03/2007 can be imposed. Even in respect of merchant exporter they were not the dealer in the normal sense i.e., who were passing on the CENVAT credit along with the invoices. In fact all such dea....
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....ed to this decision by inserting sub-rule (2) in Rule 26 of the Central Excise Rules, 2002, w.e.f. 1-3-2007, by providing a penal clause even for those persons, who issue excise invoices without actual delivery of any goods]. The present case is not one of issue of the invoices without delivery of goods. Hence, the case of Steel Tubes (supra) is distinguishable. Further, a similar issue had come up before the Hon'ble Supreme Court in the case of Sachindananda Banerjee, A.C.C., Calcutta v. Sitaram Agarwala reported in 1999 (110) E.L.T. 292 (S.C.), which was deliberating over the expression "in any way concerned in any manner dealing with prohibited goods" appearing in Section 167(81) of the old Sea Customs Act, 1878, which is para materia with Section 112(b) of the new Customs Act, 1962, which in turn is para materia with Rule 209A of the Central Excise Rules, 1944 and Rule 26 of the Central Excise Rules, 2002. The Supreme Court held as under : "13. The main contention of the respondents which has found favour with the High Court was that Section 167(81) when it deals with persons and subjects them to imprisonment and fine on conviction by a Magistrate is also concerned wit....
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....imposed on the import of gold. It has also been proved that Sitaram did so after previous arrangement with the Chinese accused. If the constable who was following Sitaram had not interfered the deal would have gone through and Sitaram would have paid the money and purchased the smuggled gold. This was a case therefore where by means of previous arrangement with a person in possession of a smuggled article, the intending purchaser had gone to purchase it and the deal did not go through only because the police intervened. In such circumstances whereby previous agreement or arrangement a person goes to purchase an article which he knows to be smuggled it would in our opinion be a case where such a person must be held to be concerned in dealing with the prohibited goods. Where a person does any overt act in relation to prohibited goods which he knows to be such and the act is done in consequence of a previous arrangement or agreement it would in our opinion be a case where the person doing the act is concerned in dealing with the prohibited goods. In other words any transaction relating to prohibited goods which is done or attempted to be done after some kind of prior arrangement or ag....
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....r, though, admittedly the actual manipulations were done by Mr. Hebalkar. There is, therefore, a case for reducing the penalty imposed on Mr. Ketkar. Accordingly, we reduce the penalty to Rs. 3,00,000/- (Rupees Three Lakhs only) on Mr. Ketkar to meet the ends of justice." Hon'ble Punjab and Haryana High Court has in the case of Vee Kay Enterprises [2011 (266) ELT 436 (P & H)] held as follows: "8. Question for consideration is whether penalty could be levied on the person who did not actually deliver the goods and merely issued a fake invoice which enabled wrong availing of cenvat credit and the extent of penalty which could be levied. 9. As regards applicability of provisions introduced on 1-3-2007 to alleged acts committed prior to the said date, the matter is covered by orders of this Court referred to above which are not shown to be distinguishable. Accordingly, we hold that the amended provisions will not apply to the acts committed prior thereto. 10. Inspite of non-applicability of Rule 26(2), penalty could be levied as the appellant was concerned in selling or dealing with the goods which were liable to confiscation inasmuch as the appellant clai....
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.... is to be mentioned that the appellants have conceded that the invoices were issued without ever supplying any goods. As regards their contention that the order of Settlement Commission in respect of M/s. Talbros would cover them too, it is seen that the settlement Commission itself did not admit their case and such non-admission was not on the ground that they would be covered by the main order in case of Talbros. The judgment in the case in K.I. International Limited (supra) takes note of the judgment in the case of S.K. Colombowala (supra) and holds that the benefit of the Settlement Commission's order cannot be extended to those who never approached the Settlement Commission. The learned Advocate stated that the order in case of K.I. International Limited has been stayed by the High Court, but I find that the stay is an interim stay on condition of 50% deposit and bank guarantee for the remaining amount which obviously means that what has been stayed is the consequential recoveries in terms of that order. As stated earlier, the Settlement Commission itself did not consider that the appellants would be covered by their order in case Talbros. As such, the contention of the appell....
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.... way concerns himself in transporting, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with any excisable goods which he knows or has reason to believe are liable to confiscation under this Act or any rule made thereunder; (bbbb) Contravenes any of the provisions of this Act or the rules made thereunder in relation to credit of any duty allowed to be utilised towards payment of excise duty on final products; (c) fails to supply any information which he is required by rules made under this Act to supply, or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; Section 9C. Presumption of culpable mental state. - (1) In any prosecution for an offence under this Act which requires a culpable mental state on the part of the accused, the Court shall presume the existence of such mental state but it shall be a defence for the accused to prove the fact that he had no such mental state with respect to the act charged as an offence in that prosecution. Explanation. - In this section....
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.... or [five thousand rupees,] whichever is greater]. From the above it is quite evident that Rule 25, 26 and 27 of the Central Excise Rules, 2002 have been framed in terms of the Rule to provide for the penalties that may be imposed for the offences as have been provided in terms of the Central Excise Act, 1944. Rule 26 either before the amendment nor after the amendment has created any offence which was not an offence as per the provisions of Section 9 of the Act. In our view the fraudulent refund claim filed by the appellant would fall within the category of offence specified under sub section 1 (bbb) and 1 (c) of the Section 9 of the Act. For which penal provisions as per Rule 26 applies. The amendment made in 2007, do not create a new offence for which a separate penal provision has been provided but only enumerates the one more of the offence, which was even otherwise an offence as per Section 9. In case of Vijay Madanlal Choudhary vs Union Of India, Hon'ble Supreme Court has vide order dated 27 July, 2022 in Special Leave Petition (Criminal) No. 4634 OF 2014, held as follows: "40. The Explanation as inserted in 2019, therefore, does not entail in expanding the purpo....
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.... or activity connected with the proceeds of crime would constitute offence of money-laundering. This offence otherwise has nothing to do with the criminal activity relating to a scheduled offence - except the proceeds of crime derived or obtained as a result of that crime. 43. Needless to mention that such process or activity can be indulged in only after the property is derived or obtained as a result of criminal activity (a scheduled offence). It would be an offence of money-laundering to indulge in or to assist or being party to the process or activity connected with the proceeds of crime; and such process or activity in a given fact situation may be a continuing offence, irrespective of the date and time of commission of the scheduled offence. In other words, the criminal activity may have been committed before the same had been notified as scheduled offence for the purpose of the 2002 Act, but if a person has indulged in or continues to indulge directly or indirectly in dealing with proceeds of crime, derived or obtained from such criminal activity even after it has been notified as scheduled offence, may be liable to be prosecuted for offence of money-launderin....
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....in connection with statutory offences of being in possession of prohibited drugs and contraband substances. Conscious or mental state of possession is necessary and that is the reason for enacting Section 35 of the NDPS Act. 15. Having noted the approach in the aforesaid two cases, we may take note of the decision in Dharampal Singh v. State of Punjab[19], when the Court was referring to the expression "possession" in the context of Section 18 of the NDPS Act. In the said case opium was found in the dicky of the car when the appellant was driving himself and the contention was canvassed that the said act would not establish conscious possession. In support of the said submission, reliance was placed on Avtar Singh v. State of Punjab[20] and Sorabkhan Gandhkhan Pathan v. State of Gujarat[21]. The Court, repelling the argument, opined thus:- "12. We do not find any substance in this submission of the learned counsel. The appellant Dharampal Singh was found driving the car whereas [pic] appellant Major Singh was travelling with him and from the dicky of the car 65 kg of opium was recovered. The vehicle driven by the appellant Dharampal Singh and occupied by the appel....
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....on 35 of the Act gives a statutory recognition of this position because of the presumption available in law. Similar is the position in terms of Section 54 where also presumption is available to be drawn from possession of illicit articles. 27. In the factual scenario of the present case, not only possession but conscious possession has been established. It has not been shown by the accused-appellants that the possession was not conscious in the logical background of Sections 35 and 54 of the Act."" 16. From the aforesaid exposition of law it is quite vivid that the term "possession" for the purpose of Section 18 of the NDPS Act could mean physical possession with animus, custody or dominion over the prohibited substance with animus or even exercise of dominion and control as a result of concealment. The animus and the mental intent which is the primary and significant element to show and establish possession. Further, personal knowledge as to the existence of the "chattel" i.e. the illegal substance at a particular location or site, at a relevant time and the intention based upon the knowledge, would constitute the unique relationship and manifest possession. In ....
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.... tantamount to retrospective operation of law imposing penalty which is prohibited under Article 20(1) of the Constitution of India. Article 20(1) gets attracted only when any penal law penalises with retrospective effect i.e. when an act was not an offence when it was committed and additionally the persons cannot be subjected to penalty greater than that which might have been inflicted under the law in force at the time of commission of the offence. The Article prohibits application of ex post facto law. In Rao Shiv Bahadur Singh and Anr. v. State of Vindhya Pradesh[23], while dealing with the import under Article 20(1) of the Constitution of India, the Court stated what has been prohibited under the said Article is the conviction and sentence in a criminal proceeding under ex post facto law and not the trial thereof. The Constitution Bench has held that:- ".... what is prohibited under Article 20 is only conviction or sentence under an 'ex post facto' law and not the trial thereof. Such trial under a procedure different from what obtained at the time of the commission of the offence or by a Court different from that which had competence at the time cannot 'ip....
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....cle 20 of the Constitution of India. We are of the view that the said Notification dated 18-11-2009 cannot be applied retrospectively and therefore, has no application so far as the instant case is concerned." The present fact situation is absolutely different and, therefore, the said decision has no applicability to the case at hand. 19. Learned counsel for the State has contended that the offence in question is a continuing offence, for the offence is basically a possession of the contraband articles. He has commended us to the authority in State of Bihar v. Deokaran Nenshi & Anr.[24], wherein it has been held that:- "A continuing offence is one which is susceptible of continuance and is distinguishable from the one which is committed once and for all. It is one of those offences which arises out of a failure to obey or comply with a rule or its requirement and which involves a penalty, the liability for which continues until the rule or its requirement is obeyed or complied with. On every occasion that such disobedience or non-compliance occurs and reoccurs, there is the offence committed. The distinction between the two kinds of offences is betw....
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....ay, then from day to day a fresh offence is committed by the accused so long as the act continues. Normally and in the ordinary course an offence is committed only once. But we may have offences which can be committed from day to day and it is offences falling in this latter category that are described as continuing offences."" 22. We have dwelled upon the said submission, as the learned counsel for the State has seriously addressed that it is a continuing offence. We have already opined that on the date the NDPS Act came into force, the accused- appellant was still in possession of the contraband article. Thus, it was possession in continuum and hence, the principle with regard to continuing offence gets attracted." 4.20 In view of the discussions as above we do not find merits in the submissions made by the appellant. We are also not inclined to accept the plea of leniency in the case. (i) It is on record and we have referred to our earlier order in case of Appellant 1, who was the departmental officer earlier, wherein in case of similar fraud, committed by Munni Group of companies, the penalty of Rs 10,00,000/- was upheld by the tribunal. It transpires that ....
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....02 Act came into being. This declaration by the Parliament itself is testimony of compelling necessity to have stringent regime (enactment) for prevention and control of the menace of money-laundering. Be it noted that under Article 38 of the Constitution of India, it is the duty of the State to secure social, economic and political justice and minimize income inequalities. Article 39 of the Constitution mandates the State to prevent concentration of wealth, thus, to realize its socialist goal, it becomes imperative for the State to make such laws, which not only ensure that the unaccounted money is infused back in the economic system of the country, but also prevent any activity which damages the economic fabric of the nation. It cannot be gainsaid that social and economic offences stand on a graver footing as they not only involve an individual direct victim, but harm the society as a whole. Thus, the Law Commission also in its 47th report recommended an increase in punishment for most of the offences considered therein. Further, the quantum of punishment for money-laundering offence, being only seven years, cannot be the basis to undermine the seriousness and gravity of this off....