M/S Shailja Polyester P Ltd vs Commissioner Of Central Excise, ...

[ Arising out of OIO-17/MP/2006 dtd 23.11.2007 Passed by Commissioner of Central Excise, CUSTOMS (Adjudication)-SURAT-II ]

1. M/s Shailja Polyester P Ltd ]

2. Shri Rajesh Kedia ] Appellant(s)

3. Shri Ganshyam S Agarwal ]

4. Shri Prasant D Somaiya ]

5. Shri Rajkumar S Dayama ]

6. M/s Shabnam Synthetics ]

7. Shri Alinawaz Y Waghbakriwala ]

8. Shri Rafiqbhai I Memon ]

9. Shri Tohid Haji Gaffar ]

Vs

Commissioner of Central Excise, CUSTOMS (Adjudication)-SURAT-II : Respondent (s)

Represented by :

For Assessee : Shri Dhaval Shah, Advocate Shri Mukund Chouhan, Chartered Accountant For Revenue : Shri J Nair, Authorised Representative

For approval and signature :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. H.K. Thakur, Honble Member (Technical)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. H.K. Thakur, Honble Member (Technical)

Date of Hearing / Decision : 11/5/2015 ORDER No. A/10747-10755/2015 dtd 11/5/2015

Per : Mr.P.K. Das,

These appeals are arising out of a common order and therefore all are taken up together for disposal.

2. The relevant facts of the case, in brief, are that M/s Shailja Polyester Pvt Ltd ( in short M/s Shailja) were engaged in the manufacture of Texturised Yarn classifiable under Chapter 54 of the Central Excise Tariff Act 1985. On 7.6.2002 the officer of the Customs (Preventive), Customs Division, Surat, visited the factory premises of the M/s Shailja and found that M/s Shailja received 51,852 kgs of imported Polyester Yarn (POY) through the brokers and 7200 kgs of imported POY from Shabnam Synthetics (in short M/s Shabnam) a 100% EOU, without the cover of any documents and without payment of any duty. The goods were seized by the Customs Officer on 7.6.2002. After thorough investigation, it was found that M/s Shailja indulged in purchase of POY without payment of customs duty, without cover of proper document ie., invoice, Challans, bills etc. The seized goods were released provisionally to M/s Shailja.

3. A show cause notice dtd 20.11.2002 was issued proposing to confiscate the seized goods and to demand customs duty as released provisionally and also to impose penalty on M/s Shailja and its Director, employees, brokers, its sub-brokers and M/s Shabnam and its employees. By the impugned order, the Adjudicating Authority confiscated the seized imported POY 51582 kgs under Section 111(d) of the Custom Act, 1962 and 7200 kgs of imported POY under Section 111(d) and 111(o) of Customs Act 1962 and as the goods were released provisionally on execution of Bond and Bank Guarantee, imposed redemption fine of Rs 11,00,000/-. It has also confirmed demand of duty of Rs 20,88,231/- on 51,582 kgs of POY on M/s Shailja and Rs 3,07,263/- on 7,200 kgs of POY on M/s Shabnam and as the duty amount already deposited at the time of provisional release by the Shailja which was appropriated against the demand. It has also confirmed the recovery of interest. It has also imposed the penalty of an equal amount of duty on M/s Shailja and M/s Shabnam under Section 112 of the Customs Act 1962. Penalty was imposed on various persons as under :

a) Rs 6,00,000/- on Shri Rajesh Kedia, Director of Shailja Polyester P Ltd

b) Rs 2,00,000/- lacs on Shri Ghanshyam S Agarwal, Manager Cum Authorised Signatory of M/s Shailja Polyester P Ltd.

c) Rs 75,000/- on Shri RafiqbhaiI Memon, Partner of M/s Shabnam Synthetics.

d) Rs 25,000/- on Shri Alinawaz Y Wagbhakriwala, Authorised Signatory of M/s Shabanam Synthetics

e) Rs 2,00,000/- on Shri Rajkumar S Dayama, Yarn Broker

f) Rs 25,000/- on Shri Abhishek Anil Agarwal, Yarn Broker

g) Rs 2,00,000/- Shri Prashant D Somaiya, Yarn Broker

4. Shri Mukund Chouhan, the Learned Counsel, appearing on behalf of Shailja and its Director, employee and the brokers except Shri Prasant D Somaiya, submits that the imported goods are notified under Section 123 of the Customs Act 1962. He submits that M/s Shailja procured the goods 7200 kgs from M/s Shabnam (a 100% EOU). Further, some quantity of POY, out of 51,852 kgs were procured from M/s Lucky and no investigation was conducted with the brokers and the demand of duty on the appellant is not sustainable. He further submits that they have paid the duty at the time of provisional release of the goods and the Adjudicating Authority ordered recovery of the duty from M/s Shabnam in respect of 7200 kgs and the duty paid by them is to be refunded to M/s Shailja. He particularly submits that the duty was not properly quantified, as the Anti Dumping Duty cannot be sustained in view of the order of the Tribunal in the case of Tonira Pharma Ltd Vs CCE, Surat  2007(208)ELT.38 (Tri. Mumbai) held that Anti Dumping Duty would not form part of assessable value of goods for the purpose of levy of CVD and SAD. He also submits that POY is not prohibited item and confiscation of POY to the quantity of 51,852 kgs under section 111 (d) of Customs Act cannot be sustained. He relied upon the following decisions:

a) Rutu Auto Gas Pvt Ltd Vs UOI  2002.149.ELT.10 (Guj)

b) EMC Data Storage Systems (I) Pvt Ltd Vs CC, Bangalore  2008.227.ELT.99 (T.Bang.)

c) Tanej Toners Pvt Ltd Vs CC (G), New Delhi - 2002.150.ELT.493 (Tri.Del.)

d) Avlon Syntex P Ltd Vs CCE, Rakot  2007.213.ELT.706 (Tri. Ahmd)

5. The Learned Counsel, Shri Mukund Chouhan, also submits that the imposition of penalty on the Directors ands its employees are not sustainable. He relied upon the decision of the Honble Gujarat High Court in the case of CCE vs. Amin Chandrakant Bhailalbhai  2010.258.ELT.36 (Guj.) It has also submitted that the brokers and sub brokers in their statements categorically stated that they have no knowledge of the movements of goods. It is stated that they have just introduced the buyers and sellers. He submits that the Honble Gujarat High Court in the case of Commissioner, CCE vs Hanif Hingora  2010(258)ELT.35 (Guj.) held that respondent had no knowledge about the goods being liable for confiscation and imposition of penalty under Section 112(b) of the Customs Act 1962 is not justified.

6. The Learned Advocate, Shri Dhaval Shah, appearing on behalf of the M/s Shabnam, its Director, and employees, submits that the demand of duty on M/s Shabnam is merely based on statements. They have not supplied the goods to M/s Shailja and the statements were retracted in reply to show cause notice. It is further submitted that the penalty was imposed under Section 112 without specifying the provisions of the sub clause and therefore penalty cannot be sustained as held by the Honble Supreme Court in the case of Amrit Foods Vs CC, UP  2005.190.ELT.433 (SC) as followed by the Honble Madras High Court, in the case of CC, Madurai Vs Fenner (I) Ltd  2014(313)ELT.3 (MAD). He further submits that the demand is solely based on the statement of the director without corroborating any evidences, cannot be sustained, as held by the Allahabad High Court in the case of Commissioner Vs Sunil Kumar Gupta  2015(315)ELT.A89 (All.) and in the case of CC Vs Vikram Cement Pvt Ltd  2014(303)ELT.A82 (All.). He submits that penalty on the partner is not sustainable, once the firm has already been penalised, as held by the Honble Gujarat High Court in the case of CCE vs Jaiprakash Motwani  2010(258)ELT.204 (Guj.), and Pravin N Shah Vs CESTAT  2014(305)ELT.480 (Guj). Penalty is not imposable on employees as held by the Tribunal in the case of Associated Plastics and Rayons Vs CCE Vapi  2007(215)ELT.309 (Tri. Ahmd). Both the counsels submit that interest cannot be demanded under the Customs Act.

7. On the other hand, the Learned Authorised Representative for the Revenue reiterates the findings of the Commissioner. He particularly drew the attention of the Bench to the relevant portion of the Adjudication order. It is submitted that the Customs officers during the search found shortage of 7200 kgs of imported POY at the premises of M/s Shabnam (a 100% EOU) who cleared the goods without payment of duty to M/s Shailja. He further submits that M/s Shailja could not produce any evidence in support of procurement of 51852 kgs of imported POY. It is submitted that the brokers and sub-brokers, Director and employees of both the firms were involved in procurement of goods, without payment of duty and the penalties imposed on the appellants are legal and proper.

8. After hearing both the sides and on perusal of the records, we find that POY is a notified item under section 123 of the Act 1962 and the burden lies with the appellants. M/s Shailja are not disputing the demand of duty to the quantity of 51582 kgs except 15840 kgs. The Learned Counsel drew the attention of the Bench to the Adjudication order that Shri Tohid Haji Gaffar broker, Surat, had arranged supply of 15840 kgs of POY on 5.6.2002 and 6.6.2002 to M/s Shailja without cover of challan, invoice, Bill of Entry etc., without any payment of duty. It is contended that the investigating officers should have demanded the duty from the broker. We are unable to accept the submission of the Learned Counsel, for the reason, that M/s Shailja had not placed any documents that they received the goods from the brokers except the statements. So the confiscation of seized goods is justified and consequent demand of duty on provisional release of goods is liable to be upheld.

9. Regarding the confiscation of POY to the quantity of 7200 kgs received from M/s Shabnam, the main contention of the Learned Advocate Shri Dhaval Shah is that it was demanded on the basis of statements. We find from the Adjudication order that the Customs officers during search at the factory premises of M/s Shabnam, found shortage of 7200 kgs of POY imported under Bill of Entry No 7453410 dtd 22.5.2002. Shri Alinawaz Y Wagbakriwala, Authorised Signatory of M/s Shabnam stated that they have cleared the said short quantity of imported POY to M/s Shailja without payment of duty. It is also stated that the shortage of goods, imported by them under 100% EOU Scheme without payment of duty. Thus, the contention of the Learned Advocate cannot be accepted. Hence, the confiscation of the goods and the demand of duty are also liable to be upheld. It is noticed that the demand of duty was confirmed under Section 28(2) of the Customs Acct, 1962 and the demand of interest under Section 28AB of the Act is justified.

10. Regarding imposition of penalty on M/s Shailja and M/s Sabanam, the Learned Advocate submitted that the specific provision of 112 of the Act was not mentioned in the show cause notice. We find that in this case, facts of the case had been narrated in detail for invoking the penal provision, which was not disputed by the appellants and the case laws cannot be applicable in this case. The submissions of the appellant that the quantum of penalty is excessive and harsh required to be considered.

11. The Learned Advocate on behalf of M/s Shailja strongly submits that the items are not prohibited goods and confiscation of goods under Section 111(d) cannot be sustained. We find that M/s Shailja received the goods without any documents and also not recorded in the statutory records in contravention of various provisions of the Customs Act 1962 and Exim Policy. So, the confiscations of goods are warranted. The Honble Gujarat High Court in various cases held that the penalties imposed on the companies are sufficient for waiver of penalty on the employees, Director and partners. So, the penalties imposed on the other two appellants are not justified.

12. We find force in the submissions of the Learned Counsel Shri Mukund Chouhan that the quantification of the demand of duty in respect of Anti Dumping Duty would liable to be examined in the light of the decision of the Tribunal in the case of Tonira Pharma Ltd (supra). It has been held that Anti Dumping Duty would not form part of assessable value of goods for the purpose of CVD and SED.

13. Shri Rajesh Kedia, Director, and Shri Ganshyam S Agarwal, Manager-cum-Secretary of M/s Shailja in their statements stated that they had purchased the imported POY. Shri Prashant D Somaiya, Shri Rajkumar S Dayama and Shri Tohid Haji Gaffar, brokers, in their statements stated that they have acted as brokers of Yarn in common business parlour and introduced the seller and buyer. They have no knowledge that the goods supplied to M/s Shailja are liable to confiscation. Shri Rafiqbhai I Memon, Partner, and Shri Alinawaz Y Waghbhkriwala, Authorised Signatory of M/s Shabnam admitted that the goods were supplied without cover of any duty paying documents to M/s Shailja. We find that there is no material available to impose penalty on the brokers as they had no knowledge that the goods are liable for confiscation. Taking into account of the overall facts and circumstances of the case, in so far as penalties imposed on the employees, Director and partner of M/s Shailja and M/s Shabnam are required to be waived as held in various decisions of the Honble High Court.

14. In view of the above discussions, we upheld the demand of duty on M/s Shailja and M/s Shabanam except the demand of Anti Dumping Duty which would be examined by the adjudicating authority in the light of the decision of the Tribunal in the case of Tonira Pharma Ltd (supra). The demand of interest is also upheld on M/s Shailja and M/s Shabnam proportionately. The penalty on M/s Shailja and M/s Shabnam are reduced to Rs 2,00,000/- and Rs 50,000/- respectively. The confiscation of goods is upheld and the redemption fine is reduced to Rs 3,00,000/- . All other appeals are allowed.

(Dictated and pronounced in the Court)

(H.K. Thakur) (P.K. Das) Member (Technical) Member (Judicial)

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