TaxTMI 
TaxTMI 
2024 (12) TMI 666
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....n Organic Private Limited in terms of rule 14 of the Cenvat Credit Rules, 2004. The order also imposes penalties of varying amounts under the provisions of the statute, both on M/s Kaizen Organics Private Limited, as well as the third appellant, Shri Vikas Bajoria, the proprietor of the said firm. 2. The facts of the case are that M/s Koolmint Manufacturing Company said to be a manufacturer of methanol oil/ methanol flakes, and demantholised oil (DMO) availed exemption in terms of notification no. 32/99-CE dated 8/7/99 as amended. Acting on intelligence gathered by the department that M/S Koolmint Manufacturing Co (Koolmint for short) were paying Central Excise duty by misusing the notification benefit supra, by not actually manufacturing the excisable goods in their factory premises and by resorting to gross over invoicing and paying duty on their own (of which they availed cash refund), allowing subsequent cash discount, were resorting to conscious and deliberate misdeclaration and misrepresentation of facts with the intention of passing irregular cenvat credit to their customer, M/S Kaizen Organics Private Limited, Jaipur; the authorities undertook extensive investigati....
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.... cases in terms of provisions of section 4 of the Central Excise Act, read with rule 5 of the Central Excise Valuation, (Determination of Price of Goods) Rules 2000, the assessable value should have been the transaction value of the goods, excluding the cost of transportation from the place of removal to the place of delivery as the invoices did not indicate transportation cost separately. Contrary to this, Siri Suresh Bajoria, Proprietor of M/S Koolmint, in his statement recorded on 25 April 2006 had admitted that the invoice price was inclusive of transportation cost and that they had paid the duty on the entire invoiced value that was inclusive of transportation cost. He further added that the transporters raised bills on cost of transportation from the factory gate to the buyers premises and that they reflected these transportation charges as expenditure in the books of accounts. By way of quantity discount, the notice alleges that a total discount of Rs.2,18,61,750/- was passed on to the buyer Kaizen during the period April 2003 to October 2004, that was not deducted while computing the assessable value of the goods and paid duty on such discounts subsequently pass....
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....her Sri Suresh Bajoria, Proprietor of M/S Koolmint Manufacturing Company Pvt. Ltd. He is also charged of misleading the investigations by falsely stating the factual position, deliberately and knowingly paying Central Excise duty on the face value of the invoices, despite having gained significant amount of quantity discount. The notice alleges that the modus was carefully crafted with ill intents to benefit from illegal gains and alleges that all this was deliberately done very carefully, as he was a part of larger fraud perpetuated to seek undue benefit and financially enrich illegally with the idea of deceiving the Central Excise department and by making financial gains by adopting the unique modus operandi as conceived by him. The notice alleges that the records of the appellant's firm were cleverly manipulated to claim undue and illegal benefit of refund of duty and enable the buyer avail credit thereon only at his insistence and that he wilfully played fraud with clear intents to deprive the government of its legitimate dues, and unduly enrich themselves. 6. The learned consultant for the appellants outrightly dismisses the allegations levelled. He interalia submits ....
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....vehicles may have carried mixed goods. Further he submits they did carry raw material for Koolmint vehicles as confirmed by the transporting firm, Great Eastern Road Carriers. 8. On the legality and validity of the refund claims received, the learned Consultant submits that they were in effect governed by the exemption notification, which is a self-contained code, and there was no impropriety in sanction of the said refund claims. Further, for the adjustment required in terms of quantity discount passed on, he submits that it was for the jurisdictional officer to do wherever it was warranted by adjusting the said amounts in future refunds, admissible to the manufacturer. He submits that despite this, having provisionally assessed the refunds, the jurisdictional officer never called upon to show cause as to why the refund granted earlier on provisional basis, not to be adjusted in future refunds, and for such an action on the part of jurisdictional officer, which indeed is a reaffirmation of the refund becoming final, the appellant cannot be held to ransom. It was his plea that the limitation period for so to do had since expired and the department had lost its right for seeking ....
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....ain any material piece of admission in respect of the liability. He submits that from the various statements, it does not flow that the raw materials were not procured by Koolmint and finished goods not transported to Kaizen Organics Private Ltd. Finally, the learned Consultant submitted that the department failed in discharging the onus cast upon them and failed to overcome the burden of proof as was required to be discharged by the department. He submitted that the statements recorded by the department under section 14 of the Central Excise Act do not clearly make out a case of contravention of the provisions of the act and the department cannot raise the demand merely on the basis of surrounding circumstances seeking to rely upon secondary evidence. He contends that the department had failed to place on record any fact that may even create a presumption of evidence or a case of preponderance of probability against them, much less a sustainable demand, merely on the basis of certain incorrectly recorded vehicle numbers on invoices or to the departments reliance upon electricity consumption. It is the appellant's contention that the department's arguments are misplaced, the entire....
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....edit not only on whatever dutiable inputs allegedly received, but capital goods as well. The mystifying Question that begs an answer however remains i.e. would any prudent businessman/manufacturer, forego an advantage, concession, credit, incentive etc. as offered by the government to which one was entitled to as a birth right. He submits that the fact that the appellant Koolmint did not avail Cenvat Credit even on capital goods clearly points out to two things, that in the first place there were not any capital goods worth and that as the design was to defraud revenue the refund operated by way of exemption would have got lowered to the extent of duty paid through credit scheme. He submits that no right thinking person would let go off any Cenvat Credit benefit as accrued to them. He also cites the testimony of the transporters as well as information collected by the department from border check posts, to discount any material movement both of finished goods as well as raw material. Finally, the learned AR places heavy reliance on the findings of the adjudicating authority and submits that as the manufacture of finished goods was stage-managed and records populated fraudulently th....
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.... our factory G-17 & 18, RIICO Ind. Area, Phase-II, Bagru on 15.3.08 between 3.30 a.m. to 4 a.m., causing loss of Plant and machinery, raw material, material in process (WIP), building, packing material etc., valuing about Rs. 10 crores. Submitted for information. Sd/- Surinder Police Proceedings: Verified that Shri Surinder Sankhla S/o Shri Banshi Lal, caste- Sankhla (Jain), aged-35 years R/o 43, Indraprastha Colony, Ram Nagar Sodala P.S. Sodala, District- Jaipur came at the Police Station and submitted the above-mentioned report, on the basis of contents of which, case of accidental fire is found. Therefore, the report of accidental fire is registered at Roznamcha. One copy of the report is given to the applicant and is freed. Report handed over to Sh Vijay Lahar No. 783 for investigations. Report is written. Sd/ Hari Ram No. 273 On 15.3.08, report in connection with accidental fire at the factory namely Kaizen Organics Pvt. Ltd. at RIICO Area Bagru on 14/15.3.08, at about 3.30- 4 a.m. was got registered at the report No. 795, Roznamcha Aam (General Diary) by Shri Surinder Sankhla at the present Police Station. Investigations in connection wit....
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.... examined in the context of all material that is available on record. The genesis of the case is the action as undertaken by Koolmint while the charge for Kaizen is only as a sequel to the outcome of action by Koolmint. The revenue has contended that the appellant Koolmint had not manufactured any goods and in order to avail undue advantage of the exemption notification number 32/99-CE dated 08/07/1999 and facilitate the availment of ineligible and undue credit by their purchaser Kaizen. 20. It is the claim of the department that the entire modus was hatched by the proprietors of the two firms S/Sri Suresh Bajoria and Vikas Bajoria son of Suresh Bajoria. In support of its argument, the revenue has placed reliance on the power consumption data, while page 16 of the show cause notice brings out a table indicating the average consumption of electricity for per KG manufacture during the relevant period. It is seen therefrom that the said electricity consumption varied from 2.91 KWH to 810 KWH. There is no satisfactory explanation emanating from the evidence on record or the response of Koolmint to such a wide variation of consumption data, except for a bland statement stating ....
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....sumed. There is no worthwhile claim of any manufacturing activity being undertaken, out of power generated by the operation of the DG sets. Moreover, the said statement of Sri Agarwal has neither been refuted, nor retracted till date. Thus the submission by the appellant does not lend any credence to the argument made in defence by them rather goes into strengthen the department's claim casting serious aspersions on the appellants claim for manufacture of finished goods used as inputs by their family concern. This is moreso when an analysis of stated manufacture is undertaken with energy source being power generated by DG sets vis a vis that supplied by Assam State Electricity Board. 22. For the second leg of the department's charge concerning labour employed, it is noticed from records that a maximum of 12 labourers were engaged by the appellant at any given point of time. And that was in the year 2002. Thereafter the number of labourers progressively declined and came down to a mere 3 sometimes in 2003 i.e in less than a year. The investigating authorities have also corroborated this statement of fact, from the records of the Assistant Labour Commissioner, Government of Assam.....
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.... the District Transport Office, Ambala reported vehicle number HR37 9325 as a Bajaj auto and vehicle number HR37 A8709 as a Vikram. Thus it is clear that sample evidence collected by way of this circumstantial piece of evidence, when the appellant has reportedly recorded 56523 kgs of raw material transported to the factory through these vehices completely negates the appellant's assertions. Mere denial of the department's charge of non-receipt of raw material in the face of such prominent evidence cannot be simply let go as a one off case or a wrong indication of the registration number. The appellant have not been able to explain and completely failed to counter the department's contention. The department's stance cannot also be brushed aside by simply resorting to stating that person concerned may have recorded wrong vehicle numbers when such piece of evidence originates from varying jurisdictions spread over different states. The authorities below have therefore, in our view rightly rejected the claim for transport of raw materials, said to have been supplied through these vehicles from Delhi to Goripur. We therefore do not find enough evidentiary value in the response to the de....
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.... department gathered during the course of its investigations, relate to the fact, that the vehicles whereby the claimed finished goods of Koolmint were said to have been carted for its buyer Kaizen were not the kind of vehicles/lorries which could transport the finished products packed in GI drums of 200 L capacity. It is on record that many of these Vessels were tankers to carry liquids like LPG, oil, petroleum products, chemicals and water. Goods as per description and packing as indicated in invoices like "Drums of 200 litres" obviously cannot be moved in these tankers. Even the statements of the employees of the appellant's firm recorded indicate that it would be too risky to carry their products in such modes of transport over long distances and may not have been actually feasible to so do. It is stated that it would be very risky to carry drums in two stacks in open trucks. We find there is no defence afforded by the appellant to this assertion of the department, except mainly attributing that they cannot be held liable for the fault of the transporters. We find the said assertion to be lacking objectivity and reasonableness and shorn of reality. Moreover, it is noticed from ....
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....acquired, is evident from the fact, that subsequent to the stated clearance, quantity discounts were extended and credit note raised to further palm off excess share of illegal amount collected and multiply the illegal profits. The adjudicating authority has also taken note of the fact that there was no agreement between the seller and the buyer, with regard to any sort of quantity discount being allowed, clearly thereby establishing that the said fictitious goods were shown to be of much higher value than actually so in order to claim greater amount of cash reimbursement by way of duty concession and exemption in terms of notification 32/99-CE supra, as during the relevant period, the appellant was eligible for refund of entire duty amount paid by them in cash. 28.1 It is also of interest to mention that the appellant Vikas Bajoria's father was earlier the Director of M/S Kaizen Organics Private Limited who resigned therefrom, only at the time of setting up of the factory at Dhubri. The family interests are clearly discernible from the nexus of the family web as indicated by the adjudicating authority in para 5.7 of the order. The same reads as under: ".--- it is....
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....alty or recovery of due amounts under Section 11D of Central Excise Act. We are not in agreement with the appellant that there was no suppression in the matter and they had filed all due returns and maintained all records as statutorily required. The unpleasant fact about all this is that such records/returns were manipulated forged and carefully constructed, with an eye on seeking various incentives and concessions in the form of duty refund or cenvat credit and did not portray true manufacturing activity, production and clearance of finished of goods, receipt of raw material by both Koolmint and Kaizen, that would have entitled them to avail of various fiscal benefits in law. Under the circumstances, we are of the view that the case laws of Lakshmi Engineering Works V. Collector of C. Ex. (1989 (44) ELT 353 SC) or that of Pushpam Pharmaceuticals Company V. Collector of Central Excise, Bombay (1995 (78) ELT 401 (SC)] actually go into strengthen the charge of the department on account of grave irregularities, suppression and manipulation of various factual aspects by the appellants; all bringing out to the fore, the intent for evasion of duty on their part. We also find other....
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....or of Kaizen, Shri Vikash Kumar Bajoria has been found to be deeply involved in the entire game plan of cheating and financially swindling the revenue, for sake of argument even if it is accepted that they were not aware of the misdeeds of Koolmint and had bonafidely availed of Cenvat Credit on alleged supplies received from them, we are of the view that Kaizen could not have availed of any Cenvat Credit, for the reasons:- (a) non physical receipts of material (b) merely on the basis of paper invoices and the fact of such documentation in itself, as held before, to be arising out of forgery and manipulation. Argument concerning lack of knowledge, is thus irrelevant in the matter. 34. As a case in point, it may be worth while to refer to the hon'ble apex court's decision in the case of Commr. of Customs, Kandla Vs. Essar Oil (2204 (172) ELT 433 SC), where all attempts were made by the assessee, and even in cahoots with certain revenue officials, to cover up for their fraudulent course of action, the apex court had taken a strong view in the matter, setting aside the Tribunal's order and holding the guilty liable to punitive action. It is too well known to rep....
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....0 (47) ELT 161 SC) the hon'ble apex court had held penalty to be ordinarily imposable in cases where the party had acted in deliberate defiance of law or was guilty of a contumacious or dishonest conduct. To similar ratio in law were the pronouncements of the apex court in the case of Hindustan Steel v. State of Orissa (1978 (2) ELT J 159 SC. Even the Tribunal's ruling in the case of Sumeet Industries V. Commissioner of Central Excise Surat (2004 (164) ELT 335 T) would objectively support the levy of penalty on the appellants in the matter on account of their contumacious and dishonest conduct and the conscious disregard and deliberate defiance of their obligation in law and misdeeds carried out as established by fraudulent acts in the matter. 39. Before concluding, we would like to state that the present case is a sordid saga of manipulated and forged records of production, clearance, duty payment. Aspects relating to consumption of electricity, transportation of raw materials, manufacture of excisable, goods and their transportation rests on a horrendous framework of suppression, misstatement and deceit of gigantic proportions promoting fraud intended to secure pecuniary benef....