By TIOL News Service

NEW DELHI, JUNE 12, 2017: THE appellants (fifteen of them) are engaged in the manufacture of pattas/patties of Stainless Steel liable to central excise duty. During the period in dispute, the appellants were working under Compounded Levy Scheme and which envisages that the manufacturer has to discharge central excise duty on the goods manufactured by them, by making payment of a fixed amount as per the number of machines.

After payment of the applicable central excise duty, the appellants have to produce duly stamped, duty paid document to the jurisdictional Superintendent of Central Excise, who permits the clearance of excisable goods.

The issue involved is that the Appendix-II challans submitted by the appellants to the Central Excise Superintendent is not a genuine document of duty payment. Inasmuch as the duty quantum was not deposited in the bank account.

After conducting an inquiry and concluding that the duty paid documents were in fact forged documents, the Revenue initiated action against these appellants to recover central excise duty, which has not been paid to the Government account, and to impose penalty.

The demands were confirmed with equal amounts of penalty and this order was upheld by the Commissioner (Appeals).

So, the present appeals.

The appellants submitted that they have deposited the applicable duty through challans and produced the stamped duty paid challans to the jurisdictional officer;that it was later found that someone sitting in the bank premises unauthorized, took the money and forged the Appendix-II challans; that they are not involved in any fraudulent activity; that since the department did not reconcile the duty paid challans with the bank documents, in time and as the appellants are not involved in any fraudulent activity, the demand for extended period cannot be invoked.

It is further submitted that the entire fraud of misappropriation of Government duty has been committed within the bank premises, by one person named Sachin in connivance with the bank officials; that appellants filed Police complaint and Police Authorities conducted investigation and recovered fake stamps and fake challans from Sachin ; that CCTV footage and other evidences clearly indicate that the appellants followed proper procedure of visiting the authorized bank and depositing the duty in the said bank; that the persons, who perpetuated the fraud, are being prosecuted by the Police and the matter is pending in the Metropolitan Magistrate Court, New Delhi; that large number of similarly placed appellants have suffered due to fraud committed by Sachin in collusion with bank employees and, therefore, the appellants cannot be put to charge twice by again demanding duty.

The AR while reiterating the findings of the lower authorities submitted that forged documents were furnished by the appellants and the same resulted in loss of Government revenue and, therefore, the impugned order needs to be upheld.

To the submission made by the appellant that they are not party to the forgery and the Police case established that Sachin along with some bank employees perpetuated the fraud and, therefore, they cannot be put to demand again, the Bench observed -

++ I find that the said submission makes the whole issue simplistic. The background facts of the case will not support such simplistic assertion. Admittedly, it is the Department, which had certain information regarding such fraudulent activity and based on that, initiated an inquiry. I do not find that the failure of the Department to detect the forgery much earlier should extend the advantage to the appellants.

++ The appellants cannot gain, in any manner, on the basis of a forged document. Even if it is considered, for argument sake, that the Department should have found out the fraudulent activity much earlier, I do not find that the same can be the basis for keeping the appellants totally out of picture with reference to non-payment of duty. The appellants have submitted forged documents to the Department. The said documents have no recognition in law. It is clear that no clearance of excisable goods can be permitted based on the said illegal, non-recognised, forged documents. The appellants cannot take a plea that they have followed the procedure set out for payment of central excise duty. It is for them to follow the due procedure and to discharge duty with authorized bank. When such duty is paid to unauthorized person, it is not open to the appellant to plead innocence and to blame the bank and the Revenue.

++ In case, it is established in the Court of Law that the accused have perpetuated the fraud on the appellant and also possible compensation to the appellant, the same will be an outcome of the criminal proceedings. The fact remains that the appellants produced a fraud document claiming duty payment. The department is well within their right to proceed and recover the central excise duty, not paid to the Government.

As for the plea by the appellant that the demand is hit by limitation, the CESTAT relied upon the apex court decision in Aafloat Textiles (I)(P)Ltd. - 2009-TIOL-42-SC-CUS and concluded that since the documents have been established to be fraud/fake, this was sufficient to invoke the extended period of limitation. Reference is also made to the Tribunal decision in Orient Ceramics and Industries Ltd.- 2016-TIOL-984-CESTAT-DEL in this regard.

All the appeals were dismissed as being devoid of merit.

(See 2017-TIOL-1964-CESTAT-DEL)