Fakhri Steels and Iron Vs Commissioner of Customs (CESTAT Delhi)
Held that revenue needs to establish that the goods lying or found in the shop/ godwon of the assessee are not duty paid.
Facts- During the course of search at M/s. NTPL it was alleged that unaccounted raw material was received by NTPL from clandestine manufacture and clearance thereof without payment of customs duty. NTPL cleared goods to some purchasers like M/s. Chamunda and M/s. Siddhi. Goods procured by M/s. Chamunda and M/s. Siddhi were further sold to different parties including M/s. Fakhri Steel (appellant).
Shri Hemant Sharma, Director of NTPL, has stated that major portion of the pipes removed without payment of customs duty were sold and delivered to the appellant.
Revenue issued show cause notice dated 07.08.2013 to M/s NTPL, its directors and others, including appellant, alleging inter alia that M/s NTPL, a SEZ unit was engaged in clandestine clearance of part of their production and accordingly duty was demanded from them and penalty was proposed on others including this appellant for alleged clandestine receiving and storage of goods, on which appropriate custom duty was not paid, allegedly removed by M/s NTPL clandestinely.
Conclusion- Held that it is a case of town seizure, the onus lies on Revenue to prove that the goods/ pipes lying in the premises of this appellant have been received by him in a clandestine manner from SEZ unit, on which Custom duty have not been paid. The General Rule is that the goods which are available in the open market, are presumed to have suffered the duty. If it is alleged by Revenue that the goods lying or found in the shop/godown premises of the assessee are not duty paid, it is the onus on Revenue to establish such allegation.
Held that the show cause notice is bad as the same has been issued by the Officers of DGCEI, who are not the proper officer as required under Section 28(1)/28(4) of the Customs Act.
FULL TEXT OF THE CESTAT DELHI ORDER
The appellant is a dealer of iron and steel products namely M.S. Pipes etc. They are in appeal against order of confiscation and redemption fine of Rs. 8 lakhs and penalty of Rs. 25 lakhs.
2. Brief facts of the case are that M/s New Tech Pipe Limited (NTPL in short) is a SEZ unit, Pithampur engaged in manufacture of M.S. Pipes. On the basis of intelligence that the said NTPL was engaged in evasion of duty by resorting to clandestine removal of finished goods, simultaneous searches were carried out by the Officer of DGCEI at eight places as follows:-
i) Factory of M/s New Tech Pipe Ltd., situated at F-21, 22, 23 SEZ, Pithampur.
ii) Factory premises of M/s New Tech Abrasive Ltd., situated at F-59, 60, 61, SEZ, Pithampur.
iii) Office of M/s Swastik Udyog Ltd., and residence of Sh. Hemant Sharma, Director at 84, Siddhipuram, Indore.
iv) Residence premises of Sh. Dinesh Sharma, Director, 2, Mahaveer Nagar, Dewas.
v) M/s Vipul Trading Co. 38, Kothi Road, Dewas.
vi) M/s Srikrishna Food & Beverages Ltd., E-99, Industrial Area, Dewas
vii) Residential premises of Sh. Ganpat, Machine Operator of M/s NTPL, 11, Kaanch Building, Jeevan Vihar colony, Pithampur.
viii) Business premises of M/s Fakhri Steel & Iron, Indore
3. During the search some incriminating documents were recovered. In the search at the residential premises of Sh. Ganpat, Machine Operator of NTPL, resulted in recovery of a computer. This computer had the data in respect of sales made by NTPL during the period 01.04.2009 to 23.11.2009 as well as partywise ledger for the same period. When this sales data was compared with the information in respect of clearances affected by NTPL (received from customs), a huge difference was noticed. On further scrutiny of documents which were recovered during search, it appeared that NTPL have been submitting information in respect of purchase, sales and stock to State Bank of India. Further, on enquiry from the bank officials, they stated that the information provided by NTPL was physically verified by them from time to time and was found in order. On enquiry with the security staff posted at the SEZ revealed that NTPL and its Director Sh. Dinesh Sharma used to receive the raw materials as well as clear the finished goods during the night when no customs personnel was available for checking the inward and outward movements of the goods. The security persons allowed the movement of the goods on the basis of invoices signed by the staff of NTPL. It further appeared that NTPL was clearing the goods both accounted (on payment of duty) and unaccounted or clandestinely. The payment for sales made clandestinely was collected in cash, which was deposited in various bank accounts as per the directions of Sh. Dinesh Sharma, Director of NTPL.
4. In his statement dated 25.11.2009 Sh. Dinesh Sharma, Director of M/s NTPL on going through invoices seized from the factory, admitted that these invoices pertain to clearance of goods without payment of duty leviable thereon. He further stated that the goods were removed in the night hours, when there was no customs staff on duty.
5. Scrutiny of documents seized and the data recovered from the seized CPU revealed that M/s NTPL had received huge quantity of unaccounted raw material in as much as per customs record of NTPL, during period 27.03.2009 to 23.11.2009, they have received and accounted 1083.82 MT valued at Rs. 3,22,60,098/-however, as per the data retrieved from CPU, during this period i.e. 27.03.2009 to 23.11.2009 they received 7134.117 MT of raw material valued at Rs.21,92,31,184/- from the various suppliers, as detailed in these documents. Thus, it appeared that 6050.29 MT (7134.117 – 1083.82) of unaccounted raw material was received by them for clandestine manufacture and clearance thereof without payment of customs duty.
6. Enquiry made with the respective supplier (as per records of M/s NTPL) also confirmed the supplies as detailed in the records of M/s NTPL. In his statements dated 06.04.2010 recorded during investigation, Sh. Dinesh Sharma, Director of M/s NTPL also admitted that they had received 7005.519 MT of raw materials (CR/HR Strips/ CRCA) in the unit and the total production during period March, 2009 to October, 2009 was 7284.11 MT.
7. M/s NTPL have procured term loan and cash credit limit from State Bank of India and therefore they were required to file periodical stork statement of their transactions to the bank authorities. As per these statements during period March, 2009 to Oct. 2009, M/s NTPL had received total raw material of 7157.238 MT valued at Rs. 22,03,66,150/-. The total pipes manufactured was CR Pipe 3081.64 MT valued Rs. 11,75,00,595+H.R. Pipe 3764.64 MT valued Rs. 13,01,90,349/- and clearances were CR Pipe 2698.13 MT valued Rs. 10,69,40,603/- H.R. Pipe 3415.97 MT valued Rs. 12,17,01,904/-
8. As per information received from the Appraiser, during period 27.03.2009 to 23.11.2009 M/s NTPL had cleared 509.73 M.T. of M.S. pipes, whereas, as per their own ledger actual clearance of pipes was 6532.19 M.T. valued at Rs. 24,46,47,724/-. This indicated that that M/s NTPL were engaged in massive evasion of Custom duty.
9. Scrutiny of seized documents revealed that while M/s NTPL had cleared goods to some genuine purchasers on payment Customs duty, they had also cleared goods on invoices to following six firms, on which they have not paid Cjustoms duty:
a) M/s Chamunda Iron & Steel P. Ltd. 2569.044 MT
b) M/s Neesa Infrastructure Ltd. Indore 1441.39 MT
c) M/s Siddhi Iron & Steel Ltd. Pithampur, 697.69 MT
d) M/s Swasik Udhog 993.215 MT
e) M/s Vipul Trading Company 304.48 MT
f) M/s New Tech Abrasive Ltd. Pithampur 16.642 MT
10. Investigation further revealed that these firms were created in the name of persons associated with M/s NTPL, which is evident from the following details:
