By TIOL News Service

MUMBAI, JUNE 17, 2015: THERE was specific information that the company was evading Central Excise Duty by clandestinely manufacturing and removing MS/TNT Bars from the factory premises & purchasing unaccounted raw materials viz. MS ingots and billets.

Investigations revealed that during the period 1-1-2009 to 7-3-2011 the company had manufactured MS/TNT bars valued at more than Rs.140crore but had submitted in the returns to CE Department an amount of Rs.26.16crore.

The petitioner is share holder of majority shares of the private company. Shri. Shailesh Badjate and Shri. Sushil Badjate, two sons of the present petitioner, are the Directors of the company and they are conducting the business of this company. The petitioner and his two sons are living in the same premises situated in Jalna where the office of the company is also situated.

The officers of the DGCEI searched the premises "Shreyas" which was being used by the petitioner and recovered incriminating electronic data in the form of pen-drive, computer and laptop. Unaccounted cash of Rs.45 lakhs was also recovered from the premises.No satisfactory explanation was given by the petitioner who tried to say that it was his income from profession as Tax Consultant. There were no income tax returns in respect of such huge amount.

Suffice to say that a SCN came to be issued inter alia for recovery of CE duty of Rs.15.75crores and confiscation of the amount of Rs.45 lakhs seized, under section 121 and 124 of the Customs Act.

The Petitioner has claimed that he is not liable to aforesaid activities of the private company as he was simply a shareholder. It is his case that amount of Rs.45 lakh taken over from him is not liable to confiscation as it is not the amount of the factory. It is his contention that the aforesaid SCN was not given to him within six months from the date of seizure and so he is entitled to get back the amount in view of provisions of Section 110(2) of the Customs Act, 1962.

The High Court accepted the aforesaid proposition made by the petitioner inasmuch as that it was necessary to issue notice within six months from the date of seizure in the present case also.

Nonetheless the High Court observed -

++ Though the aforesaid position of law is in favour of the petitioner, the other circumstances of the present case cannot be ignored. The relevant material is already discussed and it shows that present petitioner was involved in running of the business and he was collecting sale proceeds. Thus, the proceeding can go on against him. There is no plausible explanation with the petitioner and there is nothing with him to show that he got such income from which he could have accumulated cash amount of Rs.45 lakh. He is a Tax Consultant. He has given undertaking to the High Court not to dispose of the property and this undertaking was given to see that his sons get bail. Liability of payment of duty, penalty and also interest is to be fixed.

++ Circumstance of fraud mentioned in section 11-A (4) of the Central Excise Act is prima facie made out in the present matter. There is prima facie case for evasion of excise duty and also non-payment of income tax on the income made by utilizing aforesaid modus operandi. Thus not only the duty payable is to be ascertained under the present Act but the Income Tax authorities need to take action in present case.

++ The provisions of sections 11, 11A, 11AA, 11E etc. are independent of the provisions giving power of confiscation. Provision of Section 226(4) and (5) of the Income Tax Act need to be kept in mind by officers of the Central Excise and it is their duty to see that in such cases information is given to the Income Tax Department also. When such matter comes before Court it is also duty of the Court to see that the Income Tax Department is heard in such a case and intimation of the incident is given to the Income Tax Department also. In view of these circumstances, this Court holds that the amount cannot be returned to the petitioner. Returning of the amount will amount to virtually disposing of the property which can also be attached under the aforesaid provisions.

++ The relief of quashing the adjudication proceeding started against the present petitioner also cannot be given to the petitioner in view of the material already discussed. The material is sufficient to make out a prima facie case that he was involved in running of the business and he was collecting money, sale proceeds in respect of the excisable goods. He was actively involved in evasion of the excise duty. Thus the proceeding of confiscation and imposition of penalty can go on against him.

++ The submission for the present petitioner that his arrest was illegal and the offence is bailable is also not acceptable. The material collected shows that false record was created for evasion of excise duty. Thus, it is a case of forgery and fraud also. There has been evasion of excise duty in respect of goods worth more than Rs.140crore. Provisions of sections 9, 9-A and 9-AA of the Central Excise Act show that this offence is cognizable and non-bailable. The duty evaded apparently exceeded Rs.50 lakh and there is such specific allegation of the Department. When a case is filed in Criminal Court, the Court has also power to forfeit such amount and that can be seen in the provisions of the Code of Criminal Procedure.

The writ petition was dismissed.

The High Court also directed the Registrar to send a copy of the order to the Income Tax Office, Jalna.

(See 2015-TIOL-1457-HC-MUM-CX)