TaxTMI 
TaxTMI 
2024 (8) TMI 153
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....e Court be pleased to stay the operation and implementation of the order No.364-370/2023-CX(WZ)/ASRA/MUMBAI dated 28.9.2023 at Annexure-E to this petition." 3. The brief facts of the case are that the petitioner No.1 is a merchant exporter and a show cause notice dated 27.5.2010 was issued to recover the rebate already sanctioned as well as reject the claims of rebate which were pending for disposal. 3.1 The show cause notice was based upon the investigation carried out by the Directorate General of Central Excise Intelligence, Ahmedabad. During the course of investigation, it was found that the syndicate consisting of several entities who issued fake / bogus central excise invoices indicating payment of duty without any physical sale or purchase of grey fabrics or actual payment of central excise duty. 3.2 The petitioners had exported the fabrics which were processed by its processor on job work basis and the grey fabrics used for processing the exported fabrics was procured by the petitioners from various dealers and manufacturers of grey fabrics, who supplied such raw materials to the processors on behalf of the petitioners. During the course of investigation, it was fo....
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....urat only. In some cases they had procured the duty paid invoices of yarn. But they had not received and consumed the yarn. They have only fraudulently availed the cenvat credit of the duty shown to be paid on the yarn and issued the duty paid invoices of the grey fabric without any manufacture. Therefore, it appears that the above said grey fabrics manufacturers have not manufactured grey fabrics but supplied only the duty paid invoices of grey fabrics with sole intention to pass on fraudulent CENVAT Credit to M/s G Tex. 13.1.1 In view of the discussions held in aforesaid paras, it appears that Shri Brijesh Babulal Shah Proprietor of M/s Parth Impex, Shri Rajesh Shah, Proprietor of M/s Surbhi Corporation, Shri Deepak Shah, Proprietor of M/s Shah Fabrics, Shri Jitendra Rawal, Proprietor of M/s Shivam Textile, Shri Harnish D. Joshi, Proprietor of M/s Suryananrayan Textile & Shri Hiren S Bhat Proprietor of M/s Narayan Silk Mills & Shri Vijay H Shreemal Proprietor of M/s Shree Balaji Textile & Shri Awadh Narayan Singh, Proprietor of M/s Deepak Processors had established non-functional units and got the Central Excise registration only for enabling the merchant exporters to ta....
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....scounting agents etc. 13.4 Outcome of Investigations In respect of processors: In the view of investigations it appears that the processors had availed CENVAT Credit on the duty paying documents supplied to them by the merchant exporters. The processors did not have any system of verification and correlation of the duty paying documents and the grey fabrics. There were no markings on either the fabrics or the packing so as to establish identity of grey fabrics with its manufacturer. When they were confronted with the evidence gathered by DGCEI which revealed that aforementioned grey fabric suppliers had supplied only duty paying documents and no corresponding goods were ever supplied, they could not produce any positive evidence on their part to show that the duty paying invoices issued by M/s Surbhi Corporation, M/s Kesar Textile, M/s. Parth Impex, M/s Suryanarayan Textile, M/s Balaji Textile & M/s Shivam Textile on the basis of which they have availed CENVAT Credit were accompanied by corresponding goods. On being shown various evidences gathered by DGCEI, the processors confessed that the above said grey fabrics manufacturers/suppliers have apparently not supplied the p....
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....ak had not carried out any kind of manufacture on said the processed fabric. Thus it appears that availment of the cenvat credit and subsequent utilization by M/s Deepak is merely a paper transaction without actual manufacture and supply of the processed fabric. Thus it appears that M/s Deepak and its merchant exporters have claimed the rebate of the central excise duty which was never paid." 3.3 So far as the petitioners are concerned, the Adjudicating Authority arrived at the following findings : "13.6 Outcome of investigations in respect of the exporter: 13.6.1 In view of the discussions in aforesaid paras, it appears that M/s. G Tex has shown bogus purchase of duty paid polyester grey fabrics from M/s Parth, M/s Surbhi. M/s Kesar Textile, M/s Balaji Textile. Mis Shivam Textile, M/s Suryanarayan Textile and Mis Narayan Silk Mills. They had never ever supplied any kind of polyester grey fabrics to Mis. G Tex. Though M/s. G Tex had shown payments to M/s. Parth, Mis Surbhi, M/s Kesar Textile, M/s Balaji Textile, M/s Shivam Textile, M/s Suryanarayan Textile and M/s Narayan Silk Mills towards purchase of grey fabrics, the money had flown back to Mis. G Tex by way....
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....ocessors and grey fabrics manufacturers/dealers to defraud the exchequer by way of claiming fraudulent rebate of Central Excise duty which was never paid to exchequer." 3.4 On the basis of the above findings, the rebate claimed by the petitioners was denied and the penalty was also imposed upon the petitioners. 3.5 Being aggrieved, the petitioners challenged the order-in-original before the Appellate Authority. The Appellate Authority allowed the appeal of the petitioners and other persons against whom the penalty was imposed including the suppliers of the raw material, processors and the petitioners, who is the merchant exporter. The Appellate Authority on the basis of the submissions made before it, held that the petitioners are entitled to the rebate on the export of the goods as the Cenvat credit which was claimed by the processors on the basis of the invoices was reversed in the show cause notice itself. The Appellate Authority held as under : "10.1 So far as recovery of rebate of Central Excise duty amounting to Rs.10,60,193/- already granted to M/s. G. Tex and rejection of their pending rebate claims amounting to Rs.26,92,252/- is concerned, I find that the ex....
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....aims had already been sanctioned, the jurisdictional central excise officers had verified such duty payments also. Therefore, denying the rebate of duty on the basis of non-receipt of grey fabrics and/or suppliers non-existent etc. is not sustainable particularly when there is no one to one correlation of utilization of credit by the processor. Nothing has been brought out on record to suggest that the processors were involved in availment of fraudulent/wrong cenvat credits only and/or that they had not availed any cenvat credit on other duty paid grey fabrics. The payment of central excise duty from the accumulated cenvat credit does not mean that the whole credit was wrong. It is not forthcoming in the case that the processors had shown the payment of duty from the wrongly availed cenvat credits only Further, I find that there is no charge of any mutuality of interest, financial control, flow back of money funds and non bona fide nature of transactions between the merchant exporter (M/s. G Tex) and the processors Under the circumstances, the rebate of duty cannot be denied to M/s. G. Tex even if the processors had availed cenvat credit wrongly on the basis of bogus invoices as he....
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...., the rejection of pending rebate claims of Rs.26,92,252/ in the impugned order, is also not sustainable. Consequently, the penalty imposed on the partner of M/s. G. Tex is also not sustainable." 3.6 Being aggrieved by the aforesaid appellate order, the respondent No.2 preferred Revision Application before the Government, who, by the impugned order dated 6.10.2023, allowed the Revision Application setting aside the appellate order and restoring the order-in-original. 3.7 The petitioners, being aggrieved, have preferred this petition. 4. Learned advocate Mr. Nirav Shah for the petitioners submitted that the Appellate Authority has found that the petitioners are entitled to rebate on the export made by it in view of the fact that there is no dispute that the goods have been exported and such export has been accepted by the respondents. It was further submitted that there is no loss to the Government as the Cenvat credit availed by the processors has already been reversed and the excise duty is paid and, therefore, the condition for availing the rebate is fulfilled. It was also submitted that the petitioners have claimed the rebate on the basis of the goods exported and the e....
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.... petitioners were entitled to claim the rebate and the Revisional Authority ought to have upheld the order passed by the Commissioner (Appeals) on the basis of the findings recorded by the Commissioner (Appeals). 4.4 It was submitted that in the order-in-original also, there is no findings against the petitioners and the Adjudicating Authority has only on the basis of the inference has come to the conclusion that the petitioners were involved in the unique modus operandi with sole intention of avail fraudulent rebate of central excise duty which was never paid to the exchequer. It was submitted that the Revisional Authority also has come to such conclusion only on the basis of the findings recorded in the order-in-original ignoring the fact that there is nothing on record to point out that the petitioners were any way involved in fraudulent fraud which was revealed during the course of the investigation by issuance of the fake invoices without supply of goods. The petitioners have got the goods processed from its processors which were exported and the processors have also reversed the Cenvat credit after it was revealed during the course of investigation that such Cenvat credit ....
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....ces indicating duty payment were sent to the processors and hence the Cenvat credit availed by them on such invoices was improper and the rebate claimed of the duty paid using such improper Cenvat credit cannot be allowed. Government finds that the original authority upheld the charges in the Show Cause Notice and held that the rebate already sanctioned was recoverable and rejected the pending claims. Penalties were imposed on amongst others, all the eight respondent firms/persons. Government finds that the said eight firms/persons, as detailed above, filed appeals before the Commissioner (Appeals) against the Order-in-Original. The Commissioner (Appeals) dropped the charges against M/s GTEX, the merchant exporter, and dropped the penalties against the grey manufacturers viz., M/s Satyanarayı Textiles and M/s Narayan Silk Mills, whilst reducing the penalties on their proprietors. The processor M/s RDPM and its partner, having settled their case under SVLDRS, their appeals were treated as withdrawn. The Department aggrieved by the Commissioner (Appeals) order has filed the subject Revision Application seeking to set aside the same. 11. Government has examined the Order....
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....e any goods supplied nor was any duty paid. Documents withdrawn during the course of searches carried out at premises M/s Parth Impex, the main supplier of grey fabrics and registered as a 'Dealer' with the Central Excise authorities a registered Dealer clearly brings out the enormity of the entire fraud. Blank Invoices books of their supplier of grey fabrics were found along with blank LRs of the Transport Company whose challans were forged to indicate transport of grey fabrics. The transport documents were either non-existent or were found to be forged. The owners/persons in charges of these grey fabric suppliers have admitted that it was the proprietor of M/s Parth Impex who prepared all the documents including the Invoices indicating payment of Central Excise duty and that they did not manufacture or supply any grey fabrics. The transactions between these fraudulent firms indicate that the duty indicated as paid 14 bogus/fake invoices was finally encashed when the rebate of the same was claimed, in the present case by M/s GTEX The banking transactions examined during the investigation, indicate that all parties involved were beneficiaries to the fraud. The fraudulent de....
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....ame. Government finds that M/s GTEX played a vital role in the entire fraud as it was them who finally encashed the duty shown to have been paid by the fake/bogus invoices. Government finds M/s GTEX to be guilty on several counts; they have shown purchases from non-existent entities; they have shown supplies to their job workers without receiving any material from their suppliers and had in turn made available fake/bogus invoices on the basis of which their job-workers availed Cenvat credit and used it pay Central excise duty of which they claimed rebate; and finally were part of the financial racket wherein the illicit gains were shared by all the entities involved. M/s GTEX cannot deny their complicity in the creation of such fake paper transactions and fabrication of transport documents. Government finds that M/s GTEX played an integral part in this fraud which was perpetuated with the sole intention to avail/encash Cenvat credit on the strength of bogus/fake invoices fabricated by the syndicate. Government finds that the investigation, details of which has been discussed above, clearly indicate that M/s GTEX has colluded with the others in the syndicate with the intent to defra....
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....nt and orders for recovery of the rebate amount sanctioned to M/s GTEX along with appropriate interest." 6. In view of the above findings of fact arrived at by the Adjudicating Authority as well as the Revisional Authority, the decisions relied upon by the learned advocate Mr. Shah would not be applicable as in case of D.P. Singh (supra), this Court has categorically held in para-15 as under. "15. Before closing, however, we may reiterate that the facts in present case are peculiar. Had there been any allegations and evidence to show that respondent M/s. Roman Overseas was either part of the fraud in nonpayment of excise duty or had knowledge about the same or even had failed to take care as envisaged under subrule (2) of Rule 7 of the Cenvat Credit Rules, situation would have been different. In the present case, when no such facts emerge, we have no hesitation in confirming the view of the Government." 7. Similarly, in case of Diwan Brothers (supra), this Court did not grant the benefit of rebate on export on the ground that it was not proved that the supplier of the goods paid the duty on the very goods which came to be supplied and accordingly, held as under. ....