Bombay High Court
The Principal Commissioner Of ... vs Filatex India Ltd on 8 September, 2022
Bench: Dhiraj Singh Thakur, Abhay Ahuja
1 Judgment-CEXA 204-2019.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
Digitally
signed by
NIKITA
NIKITA YOGESH
CENTRAL EXCISE APPEAL NO. 204 OF 2019
YOGESH GADGIL
GADGIL Date:
2022.09.08
16:03:24
+0530
The Principal Commissioner of Central
GST & C. Ex., Daman Commissionerate,
2nd Floor, Hani's Landmark, Vapi-Daman
Road, Chala, Vapi, Gujarat - Pin 396191. ... Appellant
Vs.
Filatex India Ltd.
Survey No.274, Demni Road, Dadra,
Silvasa, D & NH, Pin-396193. ... Respondent
-------
Ms. Maya Majumdar for Appellant.
Mr. Prakash Shah with Mr. Jas Sanghavi i/by PDS Legal for
Respondent.
-------
CORAM: DHIRAJ SINGH THAKUR AND
ABHAY AHUJA, JJ.
RESERVED ON : 24th JUNE, 2022
PRONOUNCED ON : 8th SEPTEMBER, 2022
JUDGMENT : (PER ABHAY AHUJA, J.)
1. By this Appeal, filed under Section 35G of the Central
Excise Act, 1944, the Appellant - Principal Commissioner of Central
GST & C. Ex., is impugning order No.A/10670-10673/2019 dated
Mugdha / SRS 1 of 19
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11th April, 2019 passed in Appeal No.E/1227/2011 by the CESTAT,
West Zonal Bench, Ahmedabad.
2. The Respondent, viz., M/s. Filatex India Ltd., is a
company engaged in the manufacture of polyester yarn of different
descriptions falling under Chapter 54 of the Central Excise Tariff
Act, 1985 and is holder of Central Excise Registration.
3. It is the case of the Appellant-Revenue that during the
inquiry conducted by officers of the Central Excise, Surat -I
Commissionerate, it was observed that there was a clandestine
removal of goods by the manufacturer without payment of central
excise duty. It is submitted that during the period 1 st April, 2004 to
6th July 2004, Respondent-Company had cleared 1687585.511
kilograms of yarn manufactured at their factory without payment
of the duty as well as without any payment to the six job workers for
manufacture of grey fabrics and its clearance was from their
premises. It is submitted that further investigation revealed that
out of six job workers, one job worker, viz., M/s. A A Textiles,
Sachin, Surat was not in existence, two job workers, viz., M/s. Rama
Filaments Pvt. Ltd., Jolwa, Surat and M/s. Geena Synthetics Pvt.
Mugdha / SRS 2 of 19
3 Judgment-CEXA 204-2019.odt
Ltd., Karanj, Surat were not having any machinery to manufacture
grey fabrics and their claim that they had got job work manufacture
done could not be established from records as well as from
statements of the transporters who claimed to have transported the
fabrics from their premises to buyers of the fabrics. It is submitted
that one job worker M/s. Mansa Synthetics Pvt. Ltd., Surat failed to
produce any documents in support of manufacture of fabrics and its
transportation to the customers of Respondent-Company and two
job workers M/s. Micro Polyester Pvt. Ltd. and M/s. Goodluck
Synthetics Pvt. Ltd. had stated that their records had been
destroyed in floods in 2006. It is submitted that summons issued to
the buyers of the grey fabrics were returned undelivered except one
buyer who denied having purchased any fabrics or having made any
transaction with the Respondent-Company.
4. It is submitted that during the inquiry, it was found that
in most of the cases the exact amount for which the cheques were
issued to Respondent-Company were deposited in cash or by
transfer into the bank account of the so called buyers to facilitate
the clearance of cheques. That the accounts of the so called buyers
of fabrics were opened to regularize the fictitious transaction of sale
Mugdha / SRS 3 of 19
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of fabrics by the Respondent-Company as the element of profit of
trading was not reflected in the account as is seen in the normal
course of such business.
5. It is submitted that based on the above, a show-cause
notice dated 8th June, 2009 was issued by the Commissioner,
Central Excise, Vapi, raising a demand of duty of Rs.3,11,76,080/-
under Section 11A(1) of the Central Excise Act, 1944 alongwith
interest and also a proposal to confiscate goods valued at
Rs.10,93,00,281/- with penalty under Section 11AC of the Central
Excise Act, 1944 and under Rule 25 of the Central Excise Rules,
2002 with penalty upon Shri Madhav Bhageria, the Joint Managing
Director and various officers of Respondent-Company as well as the
Director of M/s. Rama Filaments under Rule 26 of the Central
Excise Rules, 2002.
6. The show-cause notice was adjudicated and the Order-in-
Original No.14/MP/VAPI/2011 dated 22nd June, 2011/7th July, 2011
confirming demand of duty amounting to Rs.3,11,76,080/-
alongwith interest and penalty equal to duty demanded under
Section 11AC of the Central Excise Act, 1944 came to be passed.
Mugdha / SRS 4 of 19
5 Judgment-CEXA 204-2019.odt
Penalties were also imposed on the Joint Managing Director and
other officers of the Respondent-Company. The Adjudicating
Authority dropped the proceedings to confiscate the goods as well as
to impose penalty upon the Respondent-Company under Rule 25 of
the Central Excise Rules, 2002.
7. Aggrieved by the Order-in-Original, Appeal was filed by
the Respondent-Company as well as the officers before the CESTAT,
WZB, Ahmedabad. By order dated 11th April, 2019 the CESTAT has
allowed the Respondent-Company's Appeal. Paragraphs 15 and 16
of the said order are set forth hereunder :-
"15. We find that only on the basis of above
allegations, it cannot be said that the Appellant
did not get manufactured the fabrics and instead
diverted the yarn in the market. No single
evidence has been adduced by the Revenue to
show that the Appellant had cleared yarn from
their factory for sale as such and thereby evaded
central excise duty. Not a single buyer of yarn has
been identified by the Revenue nor there are any
statements of the employee, authorized signatory
or the director of the Company that the Appellant
had cleared any yarn clandestinely and it is
coupled with the fact that no consideration has
shown to have been received by the Appellant.
There are no evidences of transportation of yarn
from the Appellant's factory or its diversion. It is a
settled law that the allegation of clandestine
Mugdha / SRS 5 of 19
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removal should be based upon clinching evidences
whereas in the present case, not a single evidence
of clearance and sale of Yarn by way of any
evidence in the form of clearance of yarn,
identification of buyers, receipt of consideration
and any single paper supporting the allegation of
the revenue has been found. In case of CCE, Rajkot
Vs. Kalyan Glaze Tiles 2008 (222) ELT 417 (TRI)
the Tribunal held as under :
"2. The appellants' main contention is that the
name given in the loading slips does not tally
with their names in as much as in most of the
slips had mentioned as "Kalyan Ceramics" and
"Kalyan Tiles", whereas the name of their unit
is "Kalyan Glazed Tiles". Further, it has been
contended that the entire case of Revenue is
based on the loading slips recovered from the
transporter's premises and the statement of
the partner. As regards the recovery of the
slips, it is seen that the transporter has not
been made a party to the proceedings. He has
placed an affidavit on record during the course
of adjudication, to the effect that the chits are
prepared to keep notes of requirements given
by the clients over phone and it is not always
that the trucks are booked and actually used by
such persons. The transportation does not get
executed due to various practical problems. It
has further been mentioned in the affidavit
that the trucks booked for the minimum
quantity due to freight reason which does not
mean that the quantity mentioned in chit is
also the loaded quantity. We find that the said
affidavit of the transporter has not been
considered by the Commissioner (Appeals).
Admittedly, the party has number of group
Mugdha / SRS 6 of 19
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companies under the main name of "Kalyan",
manufacturing the identical goods and in
absence of correct co-relation of the company
with the appellant, such transport chits cannot
be made the basis for arriving at finding of
clandestine removal, especially in the light of
the affidavit given by the transporter.
3. It is not understood as to when the names of
the buyers was also mentioned in the said
transport slip, what prevented Revenue
officers to take the investigation up to the
buyers' end and place on record more
evidences to substantiate the allegation of
clandestine removal. Since these have not been
done by Revenue, the benefit of doubt has to be
extended to the appellant in the absence of any
corroborative evidence and on the face of the
doubtful nature of transport slip. It is well
established that the charges of clandestine
removal cannot be confirmed on the basis of
surmises and conjectures and require positive
and tangible evidence. In the absence of such
evidence in the present case, we find no merits
in the findings of the authorities below. We may
note here that the Revenue's reliance on the
statement of the partner is also not justified in
as much as apart from the fact that there is no
corroboration to the said statement, it is seen
that the partner has deposed in the said
statement that anything showing clandestine
removal if found, they will pay the duty. The
language used does not inspire confidence to
the effect that the partner has admitted the
clandestine removal.
Mugdha / SRS 7 of 19
8 Judgment-CEXA 204-2019.odt
16. Further the judgments cited by the
Appellant are on the same ground that charges of
clandestine removal are not sustainable without
corroborative evidence. The revenue could not
produce any evidence or removal and sale of POY
and hence the demand on alleged removal of same
does not sustain. Thus as per our above findings
and observations, we are of the view that the
demand against the Appellant concern is not
sustainable. We thus set aside the impugned order
and allow the appeal filed by the Appellant
concern with consequential reliefs, if any. The
appeals filed by co- appellants are also allowed for
the same reasoning."
8. Aggrieved by the aforesaid order of the CESTAT, the
Appellant-Revenue is in Appeal proposing the following substantial
question of law :-
"Whether the Hon'ble CESTAT had erred in not
considering the outcome of the investigation that :
(i) no grey fabrics were manufactured from
the yarn cleared without payment of duty by M/s.
Filatex under Rule 12B of Central Excise Rules,
2002 to their job workers;
(ii) the yarns had been diverted and sold
elsewhere and records & payment transactions
had been manipulated for such fictitious sale of
fabrics,
(iii) POY has been diverted without payment of
duty under the garb of its clearance under the
Rule 12B of Central Excise Rules, 2002."
Mugdha / SRS 8 of 19
9 Judgment-CEXA 204-2019.odt
9. Ms. Maya Majumdar, learned Standing Counsel of
Appellant-Revenue submits that the Tribunal has completely erred
in ignoring the outcome of the investigation that no grey fabrics
were manufactured from the yarn cleared without payment of duty
by Respondent-Company, that the yarns had been diverted and sold
elsewhere and records and payment transactions have been
manipulated for such fictitious sale of fabrics, that the polyester
yarn had been diverted without payment of duty under the garb of
its clearance and under Rule 12B of the Central Excise Rules, 2002.
Learned Standing Counsel draws the attention of this Court to
Paragraphs 7.3, 7.4, 8.1, 8.2, 13, 14 and 15 of the Order-in-Original
in support of her contentions. She submits that no fabrics were
received by the job workers nor any payments were made to them.
She submits that in some cases they had shown vehicle numbers in
the challans through which material was sent to job workers for
conversion but no details of transportation through which the grey
fabrics were transported back from job workers has been shown.
Some of the so called job workers did not even have weaving
machines. She would submit that the investigation reveals that the
job workers did not know M/s. Rama Filaments Pvt. Ltd., that they
had never received yarn nor done any job work for M/s. Rama
Mugdha / SRS 9 of 19
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Filaments Pvt. Ltd. She would submit that the statement of Shri
Madhav Bhageria, Joint Managing Director of the Respondent-
Company was recorded and he had agreed with the authority's
findings. The summons issued to certain buyers also were returned
undelivered and the statements were recorded denying purchase of
any grey fabrics from the Respondent-Company or having made any
transactions with them.
10. Learned Standing Counsel submits that therefore the
findings of the Tribunal in Paragraphs 12 to 15 are contrary to the
record and deserve to be set aside.
11. Learned Standing Counsel has sought to rely upon the
judgment in the case of Collector of Customs, Madras & Others Vs.
D. Bhoormull, 1983 E.L.T. 1546 (S.C.) and draws our attention to
Paragraphs 30 and 31 thereof in support of her contentions :-
"30. It cannot be disputed that in proceeding for
imposing penalties under clause (8) of Section 167,
to which Section 178-A does not apply, the burden
of proving that the goods are smuggled goods, is on
the Department. This is a fundamental rule
relating to proof in all criminal or quasi-criminal
proceedings, where there is no statutory provision
to the contrary. But in appreciating its scope and
the nature of the onus cast by it, we must pay due
Mugdha / SRS 10 of 19
11 Judgment-CEXA 204-2019.odt
regard to other kindred principles, no less
fundamental, of universal application. One of them
is that the prosecution or the Department is not
required to prove its case with mathematical
precision to a demonstrable degree; for, in all
human affairs absolute certainty is a myth, and as
Prof. Brett felicitously puts it - "all exactness is a
fake". El Dorado of absolute Proof being
unattainable, the law, accepts for it, probability as a
working substitute in this work-a-day world. The
law does not require the prosecution to prove the
impossible. All that it requires is the establishment
of' such a degree of probability that a prudent man
may, on its basis, believe in the existence of the fact
in issue. Thus legal proof is not necessarily perfect
proof often it is nothing more than a prudent man's
estimate as to the probabilities of the case.
31. The other cardinal principle having an
important bearing on the incidence of burden of
proof is that sufficiency and weight of the evidence
is to be considered to use the words of Lord
Mansfield in Batch v. Archer (1774) 1 Cowp 63 at p.
65 "According to the Proof which it was in the
power of one side to prove and in the power of the
other to have contradicted". Since it is exceedingly
difficult, if not absolutely impossible for the
prosecution to prove facts which are especially
within the knowledge of the opponent or the
accused, it is not obliged to prove them as part of
its primary burden."
12. Appellant-Revenue has in the circumstances, prayed
that the question framed is a substantial question of law and as such
the Appeal be admitted.
Mugdha / SRS 11 of 19
12 Judgment-CEXA 204-2019.odt
13. Mr. Jas Sanghavi, learned Counsel for Respondent-
Company vehemently opposes the submissions made on behalf of
the Appellant-Revenue and refers to Paragraph 12 of the order of
the Tribunal. He points out that the Tribunal has clearly found that
Respondent-Company before sending the goods for job work filed
intimation with the Department as required under the Central
Excise Rules, 2002, that copies of the said intimations have been
furnished and that it is undisputed that the Department was in
knowledge of the job work activities. He submits that while sending
the goods, the challans were prepared and the yarn was
acknowledged by the job workers of having been received; that job
work charges were paid to job workers and TDS was also deducted
on such payments as evidenced from the Form-16A issued to the six
job workers. He submits that during the investigation, the
statements of the employees and Director of the Respondent-
Company were recorded and all had stated that the goods have been
sent to the job work, that none of the statements from the job
workers recorded by the investigation deny the fact that they had
undertaken job work activity on behalf of Respondent-Company.
Learned Counsel would submit that these are findings of facts by the
Tribunal and cannot be faulted. He submits that the question
Mugdha / SRS 12 of 19
13 Judgment-CEXA 204-2019.odt
framed is a question of fact and not of law and therefore the Appeal
deserves to be dismissed.
14. We have heard Ms. Maya Majumdar, learned Standing
Counsel for the Appellant-Revenue and Mr. Jas Sanghavi, learned
Counsel for the Respondent.
15. Before proceeding further, it would be useful to refer to
Section 35G of the Central Excise Act, 1944 which is quoted as
under :-
"35G. Appeal to High Court. - (1) An appeal shall
lie to the High Court from every order passed in
appeal by the Appellate Tribunal on or after the
1st day of July, 2003 (not being an order relating,
among other things, to the determination of any
question having a relation to the rate of duty of
excise or to the value of goods for purposes of
assessment), if the High Court is satisfied that the
case involves a substantial question of law.
(2) The Commissioner of Central Excise or the
other party aggrieved by any order passed by the
Appellate Tribunal may file an appeal to the High
Court and such appeal under this sub-Section shall
be -
(a) filed within one hundred and eighty days from
the date on which the order appealed against is
received by the Commissioner of Central Excise or
the other party;
(b) accompanied by a fee of two hundred rupees
where such appeal is filed by the other party;
(c) in the form of a memorandum of appeal
Mugdha / SRS 13 of 19
14 Judgment-CEXA 204-2019.odt
precisely stating therein the substantial question
of law involved.
(2A) The High Court may admit an appeal after
the expiry of the period of one hundred and eighty
days referred to in clause (a) of sub-section (2), if
it is satisfied that there was sufficient cause for not
filing the same within that period.
(3) Where the High Court is satisfied that a
substantial question of law is involved in any case,
it shall formulate that question.
(4) The appeal shall be heard only on the question
so formulated, and the respondents shall, at the
hearing of the appeal, be allowed to argue that the
case does not involve such question :
Provided that nothing in this sub-section shall be
deemed to take away or abridge the power of the
Court to hear, for reasons to be recorded, the
appeal on any other substantial question of law not
formulated by it, if it is satisfied that the case
involves such question.
(5) The High Court shall decide the question of law
so formulated and deliver such judgment thereon
containing the grounds on which such decision is
founded and may award such cost as it deems fit.
(6) The High Court may determine any issue
which-
(a) has not been determined by the Appellate
Tribunal; or
(b) has been wrongly determined by the Appellate
Tribunal, by reason of a decision on such question
of law as is referred to in sub-Section (1).
(7) When an appeal has been filed before the High
Court, it shall be heard by a bench of not less than
two Judges of the High Court, and shall be decided
in accordance with the opinion of such Judges or
of the majority, if any, of such Judges.
(8) Where there is no such majority, the Judges
shall state the point of law upon which they differ
and the case shall, then, be heard upon that point
only by one or more of the other Judges of the
Mugdha / SRS 14 of 19
15 Judgment-CEXA 204-2019.odt
High Court and such point shall be decided
according to the opinion of the majority of the
Judges who have heard the case including those
who first heard it.
(9) Save as otherwise provided in this Act, the
provisions of the Code of Civil Procedure, 1908 (5
of 1908), relating to appeals to the High Court
shall, as far as may be, apply in the case of appeals
under this Section." (Emphasis
supplied)
16. It is clear from the above Section that an appeal shall lie
against the order of the Appellate Tribunal if the High Court is
satisfied that the case involves a substantial question of law.
17. The Revenue appears to be agitating factual aspects in
the matter. A perusal of the Tribunal order indicates that the
Tribunal after having heard both sides and after having perused the
case records has given a fact finding on the issues raised on behalf
of the Appellant-Revenue. It has found that in the present case the
fabric was shown to have been manufactured from six job workers,
viz., M/s. Rama Filament Pvt. Ltd., M/s. Geena Synthetics Pvt. Ltd.,
M/s. A. P. Textiles Ltd., M/s. Mansa Synthetics Pvt. Ltd., M/s. Micro
Polyester Pvt. Ltd. and M/s. Good Luck Synthetics Ltd.
Mugdha / SRS 15 of 19
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18. Further, it has been found by the Tribunal that
Respondent-Company before sending the goods for job work filed
intimation with the Department as required under the Central
Excise Rules, 2002 and that the copies of the said intimation had
been annexed to the Appeal before the Tribunal. The Tribunal has
given a finding that it is undisputed that the Department was in
knowledge of the job work activities, that while sending goods, the
challans were prepared and the yarn was acknowledged by the job
workers of having been received. Respondent-Company has paid job
work charges to the said job workers and also deducted TDS on such
payments as found by the Tribunal from Form-16A issued to all six
job workers. It is also recorded by the Tribunal that during
investigation, the statements of the Joint Managing Director,
Director and employees of Respondent-Company were recorded and
all of them has stated that the goods were sent for job work. The
Tribunal also records that in respect of M/s Geena Synthetics, M/s.
Rama Filaments, M/s. Mansa Synthetics, M/s. Micro Polyester and
M/s. Good Luck Synthetics were existing at the time of
investigation. It is further recorded that none of the statements
from the job workers recorded by the investigation deny the fact
that they had undertaken job work activity on behalf of
Mugdha / SRS 16 of 19
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Respondent-Company.
19. The Tribunal has in Paragraph 13 of its order given a
finding that M/s. A. A. Textiles was a registered unit and that the
Respondent-Company has shown the acknowledgment receipt of
goods by the said M/s. A. A. Textiles and job work payment. The
Tribunal has found that the remaining five job workers in their
statements have clearly stated that they had undertaken job work
of manufacturing of fabrics on account of the Respondent-Company.
We agree with the Tribunal that only on the ground that some job
workers could not be found or that some of them refused to have
done job work, it cannot be concluded that no activity of job work
manufacturing of fabrics was undertaken. The statement of few
transporters that they did not transport the fabric cannot be a
ground to hold that no fabric was manufactured as the main job
workers have accepted the manufacture of fabric on job work. Even
the clearance/sale of fabric and duty payment thereupon is not
under dispute. There are no evidences that job work charges paid by
the Appellant to the job workers flowed back to them. True it is that
even if some of the buyers of the fabrics could not be found, it cannot
lead to the conclusion that the Appellant did not sell the fabrics to
Mugdha / SRS 17 of 19
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such parties. The Tribunal has found that majority of job workers,
i.e. 5 job workers out of 6 investigated, have accepted the job work
manufacturing of the fabrics from the Yarn supplied by the
Appellant and that no evidence has been adduced to the effect that
the Respondent-Company had clandestinely removed the yarn from
their factory for sale by evading central excise duty. On these
factual findings, the Tribunal has dismissed the Appeal.
20. In our view, all the factual aspects raised on behalf of the
Revenue, appear to have been answered by the Tribunal. Before us,
the Revenue has not been able to controvert any of these findings
nor is there any material shown to us that demonstrates anything
to the contrary.
21. The decision in the case of Collector of Customs, Madras
& Others (supra) relied upon by the learned Counsel for the
Revenue, in our view, would therefore not assist the case of the
Appellant-Revenue.
Mugdha / SRS 18 of 19
19 Judgment-CEXA 204-2019.odt
22. These are all findings of fact by the final fact finding
Authority viz. the CESTAT which cannot be faulted with. Besides,
even the question as framed does not propose a question of law but
is a question of fact which cannot be gone into by this Court. There
is also no perversity demonstrated. In the circumstances, neither
the Appeal nor the question as framed raises any substantial
question of law.
23. There is therefore no merit in this Appeal. The Appeal
stands dismissed. No costs.
(ABHAY AHUJA, J.) (DHIRAJ SINGH THAKUR, J.)
Mugdha / SRS 19 of 19
