CESTAT Rules in Favor of Appellant in Alleged Clandestine Removal Case

Case Name:

Excise Appeal No. 12790 of 2014 - Crown Ceramics vs. C.C.E. & S.T.- Rajkot

Key Takeaways:

1. CESTAT ruled in favor of the appellant, setting aside the demand on certain trading turnover.

2. The demand based on a quotation was deemed not sustainable as it was only a quotation and did not indicate that any goods had been cleared under it.

3. No duty could be demanded merely for a procedural lapse in respect of admitted export of goods.

4. The demand related to Jangad (approval) was sustained as the appellant’s counsel did not press this issue and accepted the duty demand.

5. The penalty was deemed not imposable and was set aside by the tribunal.

Case Synopsis:

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT) West Zonal Bench at Ahmedabad, specifically the Regional Bench - Court No. 3. The case in question is Excise Appeal No. 12790 of 2014, arising out of OIA-RJT-EXCUS-000-APP-118-119-14-15 dated 10.07.2014, passed by the Commissioner of Central Excise, Rajkot. The appellant in this case is Crown Ceramics, located at National Highway 8-A, Hasanpar, Wankaner, Gujarat, and the respondent is C.C.E. & S.T.- Rajkot, located at Central Excise Bhavan, Race Course Ring Road, Income Tax Office, Rajkot, Gujarat-360001.

The case involves the alleged clandestine removal of goods based on documents recovered from the premises of the appellant. The department issued a show cause notice proposing the recovery of duty amounting to Rs. 39,43,754/- based on documents impounded during a visit by preventive officers on 07.12.2010. The show cause notice was adjudicated ex-parte on 16.11.2012, and the appellant appealed against this order. The Commissioner (Appeals) remanded the matter to the adjudicating authority to re-adjudicate the case based on 1178 pages of documents. After further submissions and verifications, the adjudicating authority set aside the demand on certain trading turnover but confirmed the demand on the issue of the value of clearances reflecting in quotation, export, rejection, and Jangad (approval) sale.

The appellant then filed an appeal before the Commissioner (Appeals), who rejected the documents relied upon by applying the provisions of Rule 5 of Central Excise Appeals Rules 2001. This led to the appellant filing the present appeal before the CESTAT.

During the hearing, the appellant’s counsel argued that there was no actual sale against the alleged transaction appearing in the quotation and that the chartered accountant certificate certifying export clearance, quotations, and trading activity should be accepted. The authorized representative for the respondent reiterated the findings of the impugned order.

After considering the submissions and perusing the records, the Hon’ble Members of the CESTAT found that the dispute related to the alleged clandestine removal based on quotations, export of goods, and Jangad (approval). They observed that the demand based on the quotation was not sustainable as it was only a quotation and did not indicate that any goods had been cleared under it. They also noted that there was no dispute about the physical export of the goods, and the form-H submitted by the appellant was sufficient compliance as proof of export. As a result, they held that no duty could be demanded merely for a procedural lapse in respect of admitted export of goods. The demand related to Jangad (approval) was sustained as the appellant’s counsel did not press this issue and accepted the duty demand.

The CESTAT also found that the penalty was not imposable and set it aside. They remanded the matter to the adjudicating authority for passing a fresh order considering their observations. The appeal was allowed by way of remand to the adjudicating authority.

In conclusion, the CESTAT’s final order was pronounced in the open court on 22.09.2023 by Hon’ble Member (Judicial) Mr. Ramesh Nair and Hon’ble Member (Technical) Mr. Raju.

FAQ:

Q1: What was the case about?

A1: The case involved the alleged clandestine removal of goods by Crown Ceramics, leading to the recovery of duty amounting to Rs. 39,43,754/- based on documents impounded during a visit by preventive officers.

Q2: What was the ruling of the CESTAT?

A2: The CESTAT ruled in favor of the appellant, setting aside the demand on certain trading turnover and finding that the demand based on a quotation was not sustainable. The tribunal remanded the matter to the adjudicating authority for a fresh order.

Q3: What were the key reasons for the ruling?

A3: The tribunal found that the demand based on a quotation was not sustainable as it was only a quotation and did not indicate that any goods had been cleared under it. Additionally, no duty could be demanded merely for a procedural lapse in respect of admitted export of goods.

The issue involved is with regard to alleged clandestine removal of goods on the basis of some documents recovered from the premises of the appellant. After detailed investigation, the department had issued show cause notice dated 30.12.2011 proposing recovery of duty amounting to Rs. 39,43,754/- on the basis of documents impounded during the visit of the preventive officers on 07.12.2010. The said show cause notice was adjudicated ex-parte on 16.11.2012 vide order no. 136/ADC/12. Being aggrieved by the said order-in-original appellant had fled appeal along with relevant documents before the Commissioner (Appeals). After considering the submission and relevant documents, the learned Commissioner (Appeals) has remanded the matter to adjudicating authority to re-adjudicate the matter on the basis of the documents which are running into 1178 pages. On remand the appellant further produced the documents before the adjudicating authority which were got verified by the department through the office of the Assistant Commissioner. During the denovo, the appellant also filed submission vide letter dated 10.12.2013 along with copy of Chartered Accountant Certificate certifying the clearance of export and quotation. After verification of documents submitted by the appellant, the adjudicating authority accepted that there is some trading turnover and set aside the demand on such trading turnover. However, on the issue of value of clearances reflecting in quotation, export, rejection and Jangad (approval) sale did not agree and confirmed the demand. The appellant filed an appeal before Commissioner (Appeals) against the denovo adjudication order. The learned Commissioner (Appeals) rejected the documents relied upon by applying the provisions of Rule 5 of Central Excise Appeals Rules 2001. Being aggrieved by the said impugned order-in-appeal, the appellant filed the present appeal.

2. Shri Paresh Sheth, learned counsel appearing on behalf of the appellant submits that as regard the allegation of clandestine removal in respect of the alleged transaction appearing in quotation, he submits that there is no clearance against the all documents, it is only a quotation given to the probable buyers of the goods and no actual sale has taken place. He also referred to some quotations. He submits that the appellant have also submitted a chartered accountant certificate certifying export clearance, quotations and the trading activity. On the basis of which the export clearance and quotation do not involve any clandestine removal hence, the demand on that account is not sustainable. He submits that the chartered accountant certificate was accepted by the adjudicating authority in so far as it relates to trading activity therefore the chartered accountant certificate cannot be doubted. As regard, the export, the demand was confirmed on the ground that the appellant have not followed the procedure. He submits that there is no dispute that the goods have been exported and the appellant have produced the form-H which is admissible as proof of export, therefore, on the export clearance, demand cannot be confirmed. As regard, the demand relates to Jangad (approval), Shri Paresh Sheth does not press and accept the demand during the argument. In support, he placed reliance on the following circulars and judgments:

• Circular No. 648/39/2002-CX dated 25.07.2002
• Amar packaging industries 2016 (344) ELT 187 (Guj HC)
• Decorpac 2021 (376) ELT 759 (T-Del)
• Vishwas Traders 2013 (287) ELT 243 (Guj HC) confirmed by SC 2014 (303) ELT A24 (SC)
• Gupta Synthetics Ltd. 2014 (312) ELT 225 (T-Amd)
• Shree SidhbaliIspat Ltd 2017 (357) ELT 724 (Tri-Mum)
• Chhajsingh S kanwal 2011 (272) ELT 202 (Guj.)
• FlevelInternation 2016 (332) ELT 416 (Del.)
• Hingora Industries Pvt. Ltd. 2015 (325) ELT 116 (T-Amd.)

3. Shri A.K. Samota, learned authorized representative appeared on behalf of the respondent and reiterates the findings of the impugned order.

4. On careful consideration of the submission made by both the sides and perusal of records, we find that in the present appeal the dispute relates to the alleged clandestine removal on the basis of quotations, export of goods, Jangad (approval). As regard the quotation, we find that firstly the appellant’s representative have given statement which is exculpatory and have also explained that it is only quotation and no goods have been cleared under said quotation. The copy of such quotation is scanned below:

5. From the perusal of above quotation, it clearly shows that the aforesaid documents is only a quotation and does not indicate that any goods have been cleared under the aforesaid quotation. Moreover, the appellant have not accepted the detail mentioning the above quotation as clandestine removal. The Revenue did not adduce any other evidence such as transportation of goods, buyer’s statement etc., therefore, we are of the view that the demand on the basis of quotation is not sustainable. As regard the demand of excise duty on the goods cleared for export, there is no dispute about the physical export of the goods. The only reason for demand of duty is that the appellant have not followed the procedure. We find that so far as the form-H was submitted by the appellant, it is sufficient compliance as proof of export and on that basis no demand can be raised as held in various judgments, therefore, merely for a procedural lapse in respect of admitted export of goods, no duty can be demanded. As regard the demand relates to Jangad (approval), we find that learned counsel has not pressed this issue and accept the duty demand. Accordingly, we are not going into the facts of this case and the demand relates to Jangad (approval) is sustained.

6. Considering the overall facts of the case, the penalty is also not imposable, hence, the same is set aside. In view of our above observation, the duty needs to be re-quantified, accordingly, we set aside the impugned order and remand the matter to the adjudicating authority for passing a fresh order considering the above observation.

The appeal is allowed by way of remand to the adjudicating authority

(Pronounced in the open court on 22.09.2023)

(RAMESH NAIR)

MEMBER (JUDICIAL)

(RAJU)

MEMBER (TECHNICAL)