By TIOL News Service

NEW DELHI, JAN 09, 2015: THE appellants are a 100% EOU. They "exported" polyester dyed and grey fabrics under 6 ARE-1 all dated 9.4.2002. They submitted proof of export in the form of (photo) copies of the relevant documents.

On perusal of the said proof of export, it was revealed that while the goods were cleared from the factory on 9.4.2002, the (14) shipping bills claimed to be related thereto were noted between 5.9.2002 to 18.9.2002 at Calcutta Custom House. On enquiry, the CHA whose seals appeared on the shipping bills categorically denied having dealt with the said documents or the goods. They also found that seals marks on the S/Bs were not identical to their seals. The enquiries at the port also revealed that the goods claimed to have been cleared under the said six ARE-1s were never presented at the port. On the copy of B/Ls, the seal of M/s Draft Cargo Ways India was found. On being contacted, their manager categorically stated that the said B/Ls were never issued by them and the pattern of the B/L numbers is also not theirs and that the said goods were never handled by them. The shipping agent M/s Parikh Marine Agencies Pvt. Ltd. also informed that no export in respect of the said (14) S/Bs has been done on the ships M.V. Achievers (rotation No. 1657/02) and Dalian (Rotation No. 1662/027) and supplied copies of Export General Manifests in respect of the said rotation numbers to documentarily establish that fact.

Further investigation inter alia revealed that the ARE-1 mentioned the name of the importer and the foreign country as M/s Super Fabric, Surat; shipping bills, show the consignor's name as Super Fabrics, Surat (name of appellant did not figure anywhere in the S/Bsor on B/Ls); Shoaib Sheikh in his statement submitted that at the behest of Shri Suresh Sharma (Director) he opened several firms including Super Fabrics; that he never received any goods from M/s DFL at Dewasbut gave LR receipts as per the instructions of Shri Suresh Sharma; that it was Suresh Sharma who helped him open accounts in the banks in the name of various concerns like Rohit Polyester, Super Fabrics and Arihant Merchants, all proprietorship concerns; that he was also made authorised signatory of appellants' bank account at Surat in which Suresh Sharma was also the authorised signatory.

Shri Suresh Sharma in his statement stated that he was Director of the company only up to February, 2002 and, therefore, he should not be held accountable for any activities of appellant; that he did not agree with the averments of Shoaib Sheikh . Shri Vijay Vishwaroop, Director of the appellant in his statements dated 19.1.2004 and 4.10.2004 admitted that he had not submitted original proof of export; does not possess the original proof of export; does not have contact details of Shoaib Sheikh; does not have copy of export orders, contact details of foreign entity etc.; that the said goods were removed under the B-17 bond executed by appellant and the responsibility to produce the original proof of export clearly lies on appellant/him.

Suffice to say that a CE duty demand of Rs.76,27,365/- along with interest and mandatory equal penalty was confirmed by the CCE, Indore against the appellant a nd penalty of Rs.10 lakhs each was imposed upon M/s Super Fabrics, Shri Suresh Sharma, Shri Vijay Vishwaroop, and Mohd. Shoaib Sheikh.

The appellant company and the Directors, past and present are before the CESTAT.

It is submitted that they were not allowed cross-examination of various persons whose statements were recorded; that they had exported goods through merchant exporter and details would be available with them and that the export proceeds had been received by the appellant in their accounts at Surat.

The Bench observed -

+ It needs to be clearly understood that the burden/onus to submit valid proof of export (in original) in the form of duly endorsed documents viz. S/Bs/ARE-1s/B/Ls is squarely on M/s DFL and not on Revenue as the goods were cleared for export under the B-17 bond executed by them ( M/s DFL );goods were not exported through any merchant exporter; cl aim that M/s Super Fabrics is the merchant exporter is absurd because M/s Super Fabrics did not execute any bond with Customs, did not obtain any authorisation from Customs to source goods (duty free) for export and thus had no locus standi as a merchant exporter.

+ It is clearly admitted by Shri Vijay Vishwaroop, Director that he /M/s DFL have not submitted the required valid proof of export; mere copies of the documents required (as proof of export) are obviously not acceptable unless those are certified to be true by Customs authorities; that the very fact that required proof of export has not been submittedis fully sufficient to uphold the impugned demand and the related consequences and the impugned order is thus unassailable.

+ The appellants have made a big deal of not having been allowed cross-examination of some 15 persons (CHAs/Customs Officers/Shipping Agents) to assert that, that vitiates the proceedings to the degree of unsustainability. Right to cross-examination in quasi-judicial proceedings can be taken away in circumstances specified in Section 9D of Central Excise Act, 1944 as held in J&K Cigarettes Ltd Vs. CCE - 2009-TIOL-478-HC-DEL-CX, and we shall scrupulously follow this settled position in law.

+ The fact that M/s DFL did not even make an attempt to get the copies of documents submitted by them (as proof of export) authenticated from Customs (when they could not produce the originals thereof) is ample proof that the said copies were not of genuine documents. In these circumstances, M/s DFL clearly attract penal provisions as their action of clearance of goods duty free unauthorisedly and consigning them to Surat to M/s Super Fabrics, made them liable to confiscation, more gravely so in the given circumstances when they also failed to produce the proof of export. Indeed as has been brought out, willful misstatement/ suppression of facts with a view to hoodwinking Customs and evade duty are writ large in this case. That M/s DFL claimed to have exported the impugned goods without having done so itself is a huge misstatement to evade duty. Thus there is no infirmity in the impugned order as regard imposing penalty on M/s DFL is concerned.

+ For recovery of duty on the impugned goods which were cleared without payment of duty but not exported, there is no time-bar as such clearances are covered by the bond which was executed by M/s DFL under which also such duty is recoverable.

+ Though M/s DFL is a legal person, it is evident from the foregoing that this entire operation was done with the knowledge and connivance of Shri Vijay Vishwaroop, Director . He has not denied this fact at all and has only said that the goods were exported through merchant exporter M/s Super Fabrics. Thus penalty imposed upon him in the impugned order is unexceptionable keeping in view the gravity and nature of this blatant fraud.

+ We find that Suresh Sharma's statement is exculpatory. No direct evidence of his involvement in this fraud is unearthed. He was nobody in M/s DFL at the time of clearances of impugned goods under ARE-1s. He has been implicated by Shri Sheikh in his statement but Shri Sheikh's statement cannot be relied upon to hold him guilty as he was not allowed the opportunity to cross-examine him. (i.e. Mr. Sheikh) Merely because he continued to be an authorised signatory for one of the bank accounts of M/s DFL at Surat, even if true, cannot be stretched to be sufficient evidence of his involvement in the (improper) duty free clearances of the impugned goods under the said ARE-1s and their subsequent non-export. Therefore, we are of the view that sufficient ground/evidence to penalise Shri Suresh Sharma do not exist. Therefore, penalty on him cannot be sustained.

Alternative argument by appellant:

Appellants contended that even if duty is recoverable on the impugned goods, they should be allowed the benefit of Notification No.20/2002-CE as the impugned goods were manufactured using indigenous material.

The Bench held -

Without going into the merit of their claim that the impugned goods were manufactured using wholly indigenous material, we note that the Notification No.20/2002-CE dated 1.5.2002 is applicable to only such domestic clearances of the EOUs which are made "under and in accordance with the provisions of sub-paragraph (a) or (b) of paragraph 9.9 or paragraph 9.20 of the Export and import Policy 1.4.1997 - 31.3.2002 "as amended.............". It is evident that the impugned clearancesunder ARE-1s were made in the garb of clearances for export. Even the appellants have avoided to be so absurd as to claim that their impugned clearances were made in accordance with the said paragraphs of Import and Export Policy. Therefore their plea for benefit to Notification No.20/2002-CE is absurd and untenable.

In fine the appeal of the appellant 100% EOU and the Director Vijay Vishwaroopwere rejected . However, the Appeal of Shri Suresh Sharma was allowed by setting aside the penalty imposed.

(See 2015-TIOL-71-CESTAT-DEL)