By TIOL News Service

MUMBAI, AUG 07, 2015: THE brief facts of the case are that M/s Uday Chemexpo, M/s. Vighnesh Chemicals and M/s Yogendra Chemical Industries claimed rebate of CE duty from Office of Maritime Commissioner, Raigad under Rule 18 of CER during the period August, 2002 to November, 2003 and which have been sanctioned and paid. Similar rebate claims were also filed with Office of Maritime Commissioner, Mumbai-I and which have been disbursed.

During the course of post sanction verification of duty payment, references were made by the Chief Accounts Officer, (CAO) Central Excise, Mumbai-I, to the CAO, Belgaum Commissionerate and when it was informed that the referred three firms were not in existence and their addresses were fictitious.

Purportedly,the rebate claims were filed by submitting false, fabricated and forged documents with an intention to fraudulently claim rebate of duty and to defraud the Government, therefore, investigations were initiated in the matter by Maritime Commissioner, Mumbai-I.

During the investigation into the money trail and the financial transactions from the bank accounts statement of Hemant Patel, Proprietor of M/s Shreeji Traders was recorded and wherein he inter alia stated that an amount of Rs.8,22,290/- was credited to the current account of M/s Shreeji Traders on account of sale of goods to M/s Ruby Engineering, M.I.D.C, Thane Belapur Road, Thane; that the said sales transaction was through Shri Haresh Gordia, having office at Masjid, Mumbai; that the details regarding the purchaser i.e. M/s Ruby Engineering in the said bill was written as required and ordered by Shri Gordia and he had handed over the prepared sale bills and delivery challan to Shri Gordia who subsequently returned the said acknowledged delivery challans to him and hence he was not aware of the whereabouts of the receiver;that he did not have any corresponding purchase against the goods covered under sales bills issued to M/s Ruby Engineering and neither did he have any godown nor he maintained any physical inventory; that he had issued sales bills to M/s Ruby Engineering without physical supply of the goods shown in the said bills, on request by Shri Gordia; that he had taken demand draft of Rs.8,22,290/- favouring M/s Shreeji Traders from Shri Rakesh/Gordia and after deducting his commission of Rs.14,361/- for the paper transaction, he had returned the balance amount in cash to him; that out of his commission an amount of Rs.4,111/- has been paid to Shri Haresh Gordia as his share of dalali (commission); that there was similar paper transaction in September, 2003 for Rs.9,40,136/- in respect of sales of goods to M/s Encore Developers, S.T. Road, Khopoli for which he handed over cash of Rs.9,23,683/- to Shri Gordia after deducting his commission of Rs.16,453/-.

Thereafter, Shri Hemant Patel, Proprietor of M/s Shreeji Traders, tendered two cheques dated 23.08.2007 for Rs.10,00,000/- each, drawn on the Bharat Co-op Bank, Kandivali (W) Branch towards the rebate claim fraud amount received into the account of M/s Shreeji Traders from the bank account of M/s Vignesh Chemicals and M/s Yogendra Chemical Industries.

Statement of Shri Haresh Tribhovandas Gordia, was recorded on 23.08.2007 wherein he inter-alia stated that he procures brokerage business for M/s Shreeji Traders, for which he got a brokerage commission of 0.25% and he has been bringing such business for Shri Hemant Patel since the last five to six years; that he provided with the complete name and address of the company M/s Ruby Engineering in whose favour the fictitious sale bills were issued by M/s Shreeji Traders/Shri Hemant Patel;that these details were provided to him by Shri Manohar Vasudev Date, who was also a broker in the market; that the said sales bills were issued without any physical supply of any goods and were mere fictitious paper transactions only.

Thereafter, statement of Shri Manohar Vasudev Date was recorded on 23.08.2007, wherein he stated that he was in complete agreement with the facts and contents of the statement tendered by Shri Haresh Gordia. It is also stated that he has never transacted with company by name M/s Vignesh Chemicals, M/s Uday Chemxpo and M/s. Yogendra Chemicals and he could not offer any cogent explanation on being queried about the person behind the firms M/s Ruby Engineering and M/s Encore Developers.

All the above investigation resulted into a SCN being served to Shri Hemant Patel, Shri Haresh Gordia and Shri Manohar Sunil Date asking them to show-cause as to why:

(a) Penalty should not be imposed on them under Rule 26 & Rule 27 of Central Excise Rules, 2002.

(b) The amount of Rs.20,00,000/- (Rs. Twenty Lakhs) recovered from Shri Hemant Patel of M/s Shreeji Traders, should not be appropriated against the dues demanded as above.

As the CCE, Raigad did the needful, Haresh Gordia, Hemant Patel and Manohar Date are before the Tribunal.

Their submissions are as below -

Hemant Patel - The appellant is not involved in siphoning of any amount of rebate, inasmuch as since he had received consideration by cheques on 24.09.2003 which was much prior to sanctioning of rebate claims to the exporters on 19.04.2004. He further submitted that the appellant had not issued any Central Excise invoices based upon which the rebate claims could have been sanctioned to the exporter & therefore they can't be penalised under Rule 26/27 of Central Excise Rules, 2002. He also argues that the invoices issued by the appellant have not been relied upon in the show cause notice issued to them & there is no corroborative evidence in the form of statements of exporters which could hold them liable for penalty in the matter.

Haresh Gordia - The appellant is only a broker and has worked only for a commission and, therefore, penalty under Rule 26 & Rule 27 was not imposable on him.

Manohar V. Date - That like Shri. Harish Gordia he too was a broker who had introduced M/s Ruby Engg. to Shri Hemant Patel and whom Shri Patel had issued invoices, therefore, did not attract penalty under Rule 26/Rule 27 of Central Excise Rules.

Along with the above, it is also submitted that the show-cause notice has been served on them beyond the period of limitation; they are also not registered with the Central Excise Department and are only the commission agents;that there is no documentary evidence on record to substantiate that the appellants are involved in the fraudulent rebate claim; that case has been made only as the basis of statements.

The A.R. reiterated the findings of the lower adjudicating authority.

The Bench in a terse order observed -

"…I find that none of the conditions precedent as prescribed under Rule 26 of Central Excise Rules are satisfied for imposition of penalty. The conditions precedent is-

(i) acquires possession of, or is in any way concerned in transporting, removing, 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.

Thus in absence of satisfaction of the condition precedent, I find that learned Commissioner is in error in imposing penalty under Rule 26 of Central Excise Rules. It have nowhere been found that the appellants have acquired possession or handled any excisable goods in any manner, rendering the goods liable to confiscation."

All the appeals were allowed with consequential relief. The amount deposited during investigation or pendency of appeal was directed to be refunded with interest, within a period of 45 days.

In passing: This, perhaps is not the last that we hear of this case - interesting days lie ahead!

(See 2015-TIOL-1639-CESTAT-MUM)