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Gopal Corporation Limited and Others V/S CCE, Delhi-II and Others.

    Excise Appeals Nos. 54509 of 2015, 50017-50018, 50077-50079 of 2016, Excise Appeal No. 50076 of 2016 (Arising out of the Order-in-Original No. 09/2015-16 dated 30/09/2015 passed by The Commissioner, Central Excise, Delhi - II, New Delhi) and Final Order Nos. 50229-50235/2018

    Decided On, 19 January 2018

    At, Customs Excise and Service Tax Appellate Tribunal Principal Bench New Delhi

    By, THE HONORABLE JUSTICE: DR. SATISH CHANDRA
    By, (PRESIDENT) & THE HONORABLE JUSTICE: B. RAVICHANDRAN
    By, MEMBER

    For Petitioner: Vivek Kohli, Ashwini Sharma and Archit Upadhyay, Advocates And For Respondents: R.K. Mishra, Authorized Representative (DR)



Judgment Text


1. These 7 appeals are on the common dispute and are accordingly taken up together. 6 appeals are by the assessee/appellants and one is by the Revenue. The brief facts of the case are that based on certain information that M/s. Gopal Corporation Limited, engaged in the manufacture of flavoured chewing tobacco with the brand name Gopal Zarda, has evaded central excise duty by clandestine manufacture and clearance of their product, the officers of Central Excise conducted search and verification in various premises connected with the said manufacturer and also in the premises of dealers of the said goods and various other units which were alleged to be dummy units created to avail ineligible exemption for central excise duty. Various documents and records were recovered; statements of connected persons were recorded and on completion of the investigation, a show cause notice dated 30/03/2012 was issued to various noticees by the ADG, DGCEI, New Delhi. Among other things, the notice demanded central excise duty of Rs. 7,33,29,882/- alongwith proposal to impose various penalties on different noticees. The noticees filed their defence submissions. The Original Authority after examining the case details and defence submissions adjudicated the case resulting i

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n the impugned order dated 30/09/2015.

2. The Original Authority held that M/s. Gopal Corporation Limited created three front units namely M/s. Shree Balaji Enterprises, M/s. V.L. Enterprises and M/s. Golden Leaf and availed ineligible SSI exemption in contravention of Notification 8/2003 dated 01/03/2003. He confirmed duty liability of Rs. 68,89,992/- on this account. He imposed penalty equal to this amount on M/s. Gopal Corporation Limited; Rs. 23,93,783/- on M/s. Shree Balaji Enterprises; Rs. 18,77,156/- on M/s. V.L. Enterprises and Rs. 26,19,053/- on M/s. Golden Leaf under Rule 25 of Central Excise Rules, 2002 read with Section 11AC of Central Excise Act, 1944. He further imposed a penalty of Rs. 10 lakhs each on Shri Shailendra Kumar Agarwal and Shri Gopal Gupta, Director and Managing Director, respectively, of M/s. Gopal Corporation Limited. He dropped proceedings initiated against M/s. Universal Enterprises, M/s. Bhagwati Enterprises, M/s. Heena Foods, M/s. Manav Enterprises, M/s. RBM Industries, M/s. R.K. Enterprises and M/s. Bhumika Perfumers. In other words, though the show cause notice proposed clubbing of clearance of 9 units for the purpose of SSI exemption, the Original Authority held that the clearances of only 3 units are to be clubbed and the proceedings against other 6 units could not be sustained. Both the Revenue and the assessee/appellants were aggrieved by the said order and filed these appeals.

3. The learned Counsels appearing for the appellants/assessee submitted that the Original Authority failed in appreciating the factual details submitted by the appellants during the course of adjudication. The 3 units whose turnover of clearance were ordered to be clubbed for the purpose of SSI exemption were legally recognized entities and they cannot be considered as fictitious dummy units. The learned Counsels elaborated on this submission categorically stating that there are no common partners, common owners/management, common manufacturing facility/premises. Each one of them have their own income tax registration and PAN number, VAT registration, separate list of employees, ESI number and separate books of accounts. There is no evidence of financial flow back, loan availment, sale or purchase, inter-se, of any goods. There is no sharing of profit, common purchase of raw material, packing material or any common arrangement for such procurement. Similarly, there is no common transaction for sale of finished goods. The same is not done by one on behalf of another. To sum up, the learned Counsel strongly contended that there is no evidence in law or fact warranting clubbing the clearances of one unit with another.

4. The learned Counsel further submitted that the show cause proceeding were substantially based on uncorroborated statements from buyers, suppliers and owners of units under reference. No reliance can be placed on these statements as there is no corroboration at all in the form of any records to add evidentiary value to such statement. There should be a evidence to collaborate a oral statement. The learned Counsel also relied on various decided cases to support his submission that such clubbing of turnover of legally existing independent units cannot be sustained. Documentary evidence are necessary to corroborate the oral statements and the evidences in the form of records maintained by these units should be considered rather than uncorroborated oral statements.

5. The learned AR contested the appeals by the assessee/appellants stating that the officers conducted detailed verification in numerous premises and recorded statements of all the relevant parties. After careful analysis of the evidences gathered, a cogent sustainable case was brought out against the various noticees. The Original Authority while accepting that 3 of the units were dummies and are to be treated as one for SSI exemption, erred in not appreciating the full facts which are similar in respect of other 6 units. It is the case of the Revenue that all the 9 units have been floated by Shri S.K. Agarwal, Director of M/s. Gopal Corporation Limited. The proprietors or person incharge of these all 9 manufacturing units and the trading unit, M/s. Bhumika Perfumers were either relative of Shri Gopal Gupta or Shri S.K. Agarwal or otherwise connected with them closely. All the 9 manufacturing units were procuring all the raw materials from the same suppliers as per the directions of M/s. Gopal Corporation Limited. The arrangement for purchase of raw material and sale of finished goods as unearthed during investigation clearly reveals that the units which are purported to be independent legal entities are nothing but front companies acting as dummies in order to split up the turnover. All these units were acting to further the profit of M/s. Gopal Corporation Limited.

6. Elaborating the grounds of appeal by the Revenue, the learned AR submitted that the finding of the Original Authority with reference to 6 units against whom he dropped the proceedings were erroneous. The confessional statements of Shri S.K. Agarwal to the effect that the partnership firm (M/s. Universal Enterprises) was a dummy unit and was not engaged in the manufacture of flavoured chewing tobacco has been discarded, without reason, by the Original Authority. The said confessional statement also admitted the dummy nature of M/s. RBM Industry and others. The Original Authority erred in relying on certain contrary submissions without supporting evidence. The learned AR submitted that all the 9 units had closed down abruptly immediately after the search operation conducted by the officers. The payment of rent of the premises of each of these units were either arranged or paid by M/s. Gopal Corporation in cash. All the 9 units were under pervasive and complete control of Shri S.K. Agarwal, Director of M/s. Gopal Corporation. The learned AR finally prayed for setting aside the impugned order in so far as it pertains to dropping the proceedings against 6 units and remand the matter to the Original Authority for a fresh consideration of all the evidences and facts as brought out in the show cause notice.

7. We have heard both the sides and perused the appeal record. At the outset, we notice though the impugned order is running into 316 pages, we find substantial portion of a order is only reproduction of contents of show cause notice and various statements and written submissions made by the noticees. Even in the discussion and finding which starts somewhere in page 281 of this order, again repetition of allegations and defence submissions on such allegation were recorded. The findings on some of the crucial aspects regarding the factual and legal status of these 9 units were in fact contradictory. After analyzing the documents referred to in the show cause notice, the impugned order (at para 74.6) holds that "from the evaluation of relied upon documents it is apparent that these documents fall short of culling out any inference towards the allegation of commonality leveled in the show cause notice. No other documentary evidence of financial transaction or any other evidence reflecting a commonality between GCL and the remaining dummy units is on record". He further concluded that the elements of mutual control and financial relationship cannot be proved in this case on the basis of documents relied upon in the show cause notice. Referring to other factors mentioned in the notice, the Original Authority examined the validity of statement in the absence of corroborations. The Original Authority recorded that the confessional statements recorded under Section 14 of the Central Excise Act, 1944 have not been retracted during the investigation and before the issue of the notice. The allegations were denied only through replies to the notice. Relying on various decisions of Apex court, he held that these statements are valid piece of evidences though there are no documentary evidences to support the facts contained in the statements. He proceeded to record that if the facts emerging at the stage of adjudication are contrary to the facts recorded in the statements, these statements will loose their evidentiary value.

8. On the above reasoning, the Original Authority proceeded to examine the status of each one of the units alleged to be dummy units in the show cause proceedings. He held that 3 of these units (M/s V.L. Enterprises, Shree Balaji Enterprises and Golden Leaf) are to be considered dummy units for the purpose of calculating the SSI exemption. The Original Authority recorded that though there is no positive corroborative evidence to support the allegations, "in view of the noticees inability to put up a defence to counter the accusations, the confessional statement of the noticee becomes relevant under the circumstances of the case rendering it a vital piece of evidence".

9. One important thing that emerges on examination of the impugned order is inconsistent appreciation of similar set of evidences by the Original Authority. At one place, he records that confessional statement which remained un-retracted till the issue of notice shall form an evidence. In other place, he concludes that the evidences produced by some of the units will have primacy over the un-retracted confessional statement. We note that relying on certain sporadic documentary evidences, the Original Authority discounted the un-retracted confessional statement though the said confessional statement was accepted in respect of some of the noticees. The evidences gathered and the allegations made in the show cause notice proceedings show that the modus operandi alleged is common in nature. The appellants defence in respect of all the 9 units were also almost on the same lines. In such scenario, the analysis of the Original Authority in recording different findings for difference noticees appears to be not sustainable. When the confessional statements which were un-retracted were relied upon by the Original Authority, the same has not been found sustainable in respect of some of the noticees only on the ground that certain counter evidences have been produced.

10. On overall analysis of the impugned order with reference to various allegations made in the show cause proceedings, we note that the grievances now placed before us by all the appellants (both Revenue and assessee) are having sufficient force to persuade us to hold that the impugned order as it stands cannot be sustained. Some of the serious infirmities in appreciation and analysis of evidences were recorded by us, as above. We are of the considered view that the Original Authority has to be directed to examine the whole case afresh in order to arrive at a categorical, consistent finding on the basis of available evidences and the submissions made by all the parties in the dispute. Adequate opportunities shall be provided to the appellants/assessee to submit their side of the case. We note that the Revenue's grievance regarding inconsistent appreciation of factual and legal basis of the allegation in the notice also requires consideration. As such, setting aside the impugned order, we remand the case back to the Original Authority who shall examine the evidences afresh for a decision. We have not expressed any opinion regarding the merits of the case as pleaded by any one of the appellants. The appeals are allowed by way of remand
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