M/S. Sunshine Overseas vs Commissioner Of Central Excise & S.T., ...

(Arising out of OIA-RS/94-98/SRT-II/07 dated 26.02.2007, Passed by Commissioner (Appeals) Central Excise & Customs, Surat)

1. M/s. Sunshine Overseas : Appellant (s) 2. Shri Haroon Razaq Chhaya 3. Shri Irfan Gulam Rasool Saiyed 4. Shri Rashid Sadatali Saiyed 5. M/s. Vandevi Texturisers (P) Limited 6. Shri Sanjay Rattan Prakash Aggarwal

VERSUS

Commissioner of Central Excise & S.T., Surat : Respondent (s)

Represented by :

For Appellant (s) : None (Written submission) For Respondent (s) : Shri Jeetesh Nagori, Authorised Representative

For approval and signature :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. R.K. Singh, Hon'ble 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?

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. R.K. Singh, Hon'ble Member (Technical)

Date of Hearing / Decision : 15.01.2015

ORDER No. A/10066-10071/2015 Dated 15.01.2015

Per : Mr. P.K. Das;

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

2. None appears on behalf M/s. Vandevi Texturisers (P) Limited (M/s. Vandevi)and Shri Sanjay Rattan Prakash Aggarwal, Chief Executive of M/s. Vandevi. There is no application for adjournment in the file in respect of Appellant No. 5 and 6. On perusal of records, we find that learned Advocate on behalf of the appellant No. 1 to 4, by letter dated 15.01.2015, requested to decide their appeals on merits in their absence, after considering the synopsis and the copies of judgments enclosed therewith.

3. The relevant facts of the case in brief are that on 20/ 21.06.2003, the officers of Department of Revenue Intelligence (DRI) searched the premises of M/s. Sunshine Overseas (100% EOU) (Appellant No. 1). During investigation, it was found that appellant No.1 was procuring duty free raw materials Polyester Knitted Fabrics from various manufacturers including M/s. Vandevi (Appellant No.5) under Central Excise invoices/ AR-3s against CT-3. It was found that no goods were physically received under CT-3 from M/s. Vandevi by the appellant and the goods were diverted into domestic market. Officers of DRI also searched the factory of M/s. Vandevi. A show cause notice dated 21.3.2005 was issued by the Additional Director General, DRI, Zonal Unit, Ahmedabad. Adjudicating authority confiscated 2,31,415.217 Kgs of Polyester Yarn and imposed redemption fine of Rs. 50 Lakhs in lieu of confiscation and also confirmed demand of Central Excise duty amounting to Rs. 34,86,256/- foregone on 231415.217 Kgs. of Polyester Yarn along with interest under proviso to Section 11A (1) of the Central Excise Act, 1944 and imposed penalty of equal amount of duty on Appellant No.5 under Rule 25 of the Central Excise Rules 2002 and Section 11AC of the said Act, 1944 and directed to enforce B-17 Bond and security if any furnished with the Bond should be appropriated towards duty liability. Penalties were imposed under Rule 26 of the said Rules, 2002, as under:-

(a) M/s. Sunshine Overseas - Rs. 20,00,000/-

(b) Shri Haroon Razaq Chhaya - Rs. 10,00,000/-

(Defecto owner of M/s. Sunshine Overseas)

(c) Shri Irfan Gulam Rasool Saiyed - Rs. 10,00,000/-

(Defecto owner of M/s. Sunshine Overseas)

(d) Shri Rashid Sadatali Saiyed - Rs. 10,00,000/-

(Partner of M/s. Sunshine Overseas)

(e) Shri Sanjay Rattan Prakash Aggarwal- Rs. 10,00,000/-

(Executive of M/s. Vandevi)

The appellants filed appeals before Commissioner (Appeals). By the impugned order, Commissioner (Appeals) rejected the appeals except redemption fine was reduced to Rs. 30,00,000/- and in the case of Shri Rashid Sadatali Saiyed (Appellant No.4), penalty was reduced from Rs. 10 Lakh to Rs. 5 Lakh.

4. After hearing the learned Authorised Representative for the Revenue and on perusal of the records, we find that during the investigation by the DRI Officers, it was found that M/s. Sunshine Overseas (Appellant No.1) was procuring the duty free materials from M/s. Vandevi. It is seen from the adjudication order that Appellant No. 5, a 100% EOU had shown clearances of knitted grey fabrics weighing 210377.470Kgs to M/s. Sunshine Overseas (Appellant No.1) under CT-3s issued by Appellant No. 1, on papers only without physically despatching the same. DRI Officers drawn samples of the fabrics sought to be exported by Appellant No.1 and the fabrics were found to be of Dyed/ Printed fabrics of polyester of GSL ranging from 58.4 to 78. It is evident that Appellant No. 5, with connive of the other appellants sold the Polyester Filament Yarn required to manufacture the quantity of fabrics shown to have been supplied to Appellant No.1, in the local market in cash and paid the premium to Shri Haroon Razak Chhayya and Shri Irfan Gulam Rasool Saiyed, defecto owner of Appellant No.1. It is also found that to cover up the illicit removal of the goods by Appellant No.5, M/s. Sunshine Overseas procured the quantity of cheaper quality fabrics from local market to fulfil their export obligations. This is supported by various statements of the appellants and other materials on record.

5. Appellant No. 5 (M/s. Vandevi) had contended before the Commissioner (Appeals) that they were not given proper opportunity of hearing before the adjudicating authority. It is observed by the Commissioner (Appeals) that four opportunities, on different occasions, were given to the appellant to appear before Commissioner (Appeals), but the learned Advocate could not avail the opportunity on one or the other grounds. We have noticed that Appellant No.5 and 6 also had not turned up before the Tribunal during the hearing. So, there is no force in the submissions of appellant No. 5 and 6.

6. It is contended by the appellant No. 5 and 6 that the entire case was made out on the basis of statements. We have noticed that the allegations of clandestine removal of duty free materials in Domestic Market is established on the basis of statements of various persons recorded by the DRI officers on different occasions alongwith other corroborative materials. It is seen that appellant No. 6 (Shri Sanjay Rattan Prakash Aggarwal), CEO of Appellant No. 5 was directly involved in the conspiracy and had admitted in his statements the fact of removal of goods. It is also established from the test reports of the Chemical Examiner that Appellant No.1 exported the inferior quality of goods. We find that the Appellants failed to counter the evidences placed by the Revenue to substantiate the illicit removal of goods by Appellant No.5 and the supply of goods was only a paper transaction. We also noticed that Commissioner (Appeals) has already reduced the redemption fine from Rs. 50 Lakhs to Rs. 30 Lakh. It is also noticed that appellant No. 5 and 6 evaded payment of duty and therefore, there is no reason to interfere the demand of duty and imposition of penalty and redemption fine on the Appellant No.5 and 6.

7. Learned Advocate on behalf of the Appellant No. 1 to 4, in his written submission contended that M/s. Vandevi had sold out duty free materials i.e. Polyester Yarn in the open market and that in order to keep the records straight they reflected manufacture and clearance of goods to M/s. Sunshine Overseas on papers only. It is also contended that the case of the department that the appellants were involved in paper transaction only and no goods were received by them and therefore penalty under Rule 26 of the Central Excise Rules, 2002 would not apply. It is further contended that Rule 26 would apply only if the person has had reason to know or belief that offending goods are liable to confiscation and the accused has physically dealt with such goods. He has relied upon the following decisions:-

(a) Steel Tubes of India Limited vs. CCE  2007 (217) ELT 506 (Tri. Larger Bench)

(b) CCE vs. Ashish Gupta  2010 RLT Online 714 (P&H)

(c) Aditya Steel Inds. Vs. CCE  1996 (84) RLT 229 (Tri.)

(d) Commissioner of Customs vs. Pawan Kumar Gupta - 2011 (271) ELT 10 (SC)

(e) Woodmen Inds. Vs. CCE - 2004 (164) ELT 339 (Tri.) and 2004 (170) ELT A307 (SC)

8. On the other hand, the learned Authorised Representative for the Revenue reiterates the findings of the Commissioner (Appeals). He submits that the case laws relied upon by the appellants are not applicable in the facts and circumstances of the present case. It is submitted that it was the joint conspiracy of the appellants to remove the goods and to sale in the open market. Therefore, all the appellants are involved in clandestine removal of the goods. He relied upon the following decisions:-

(a) CC, Mumbai vs. Vaibhav Exports  2009 (244) ELT 527 (Bom.)

(b) Surjeet Singh Chhabra vs. UOI  1997 (89) ELT 646 (SC)

(c) CCE, Madras vs. Systems & Components Private Limited  2004 (165) ELT 136 (SC)

(d) Dr. Writers Food Products vs. CCE Pune  2009 (242) ELT 381 (Tri. Mum.)

(e) Twenty first century Wire Rods Limited vs. CCE  2010 (250) ELT 94 (Tri. Mum.)

(f) Sunil Mittal vs. CCE  2013 (289) ELT 441 (Del.)

(g) Agarwal Trading Corporation & Ors vs. Assistant Collector of Customs, Calcutta & Ors.  1983 (13) ELT 1467 (SC)

(h) Vee Kay Enterprises vs. CCE  2011 (266) ELT 436 (P&H)

(i) CCE Mumbai vs. Kalvert Foods India Private Limited  2011 (270) ELT 643 (SC)

(j) Asian Alloys Limited vs. CCE, Delhi  2008 (203) ELT 252 (Tri. Del.)

(k) S.K. & Company (P) Limited vs. CCE, Rohtak  2006 (203) ELT 137 (Tri. Del.)

9. We find that Appellant No.5 M/s. Vandevi Texturisers (P) Limited and its CEO Appellant No.6 indulged the whole conspiracy with Appellant No. 1, 2 and 3 in hand in gloves in clandestinely disposal of the goods. All were directly involved in disposal of the goods in open market in different roles as stated in the Adjudication order. Therefore, the case law relied upon by the appellants are not applicable. Considering the facts and circumstances of the case, in totality, the quantum of penalty are excessive. As regards the imposition of penalty on Shri Rashid Sadatali Saiyed, the Commissioner (Appeals) has already observed that the said person was exploited by Appellant No. 2 and 3 and was under compulsion. It is also noticed that the penalty was imposed on the partnership firm, so, the penalty on Shri Rashid Sadatali Saiyed (Appellant No.4) is not warranted. The Hon'ble Gujarat High Court in the case of Pravin N. Shah vs. CESTAT  2014 (305) ELT 480 (Guj.), held that separate penalty not imposable upon partner of firm because partner is not a separate legal entity and cannot be equated with employee of firm. In that case, the important question of law before the Hon'ble Court was, Whether in the facts and circumstances of the case, the Tribunal was right in upholding the penalty of Rs. 10,00,000/- imposed on the appellants under Rule 209A of the erstwhile Central Excise Rules, 1944 now Rule 26 of the Central Excise Rules, 2001?. The Hon'ble Court answered to the question in favour of the appellant and set-aside the penalty on the partner.

10. In view of the above discussions, the appeals filed by M/s. Vandevi Texturisers (P) Limited and Shri Sanjay Rattan Prakash Aggarwal are dismissed. Penalty imposed on Appellant No. 1, 2 and 3 (M/s. Sunshine Overseas, Shri Haroon Razaq Chhaya and Shri Irfan Gulam Rasool Saiyed) are reduced to from Rs. 10,00,000/- to Rs. 5,00,000/- (Rupees five lakh only) on each one. The appeal filed by Shri Rashid Sadatali Saiyed is allowed.

(Concluding/ Operative part of the order was dictated and pronounced in the Court)

(R.K. Singh) (P.K. Das) Member (Technical) Member (Judicial) ..KL

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