DEPB scheme – misdeclaration and over-invoicing alleged for fraudulently availing benefit – Investigation showing goods exported were non-allot steel items – held, no case made out for waiver of pre-deposit – appellant directed to deposit 25% of penalty a

PJ/Case Laws/2012-13/1117

Case: M/s Girnar Impex Ltd. And Ors V/s CC, Amritsar

Citation: 2012-TIOL-136-CESTAT-DEL

Issue:- DEPB scheme – misdeclaration and over-invoicing alleged for fraudulently availing benefit – Investigation showing goods exported were non-allot steel items – held, no case made out for waiver of pre-deposit – appellant directed to deposit 25% of penalty and suppliers of invoices directed to deposit Rs.50 lakhs each.

Brief Facts:- Appellant i.e. M/s. Girnar Impex Ltd. of M/s. Siri Amar Exports were engaged in export of non alloy steel bars, rods bright bars etc. under the Duty Entitlement Pass Book (DEPB). Shri Adishwar Jain is the Director of M/s. Girnar Impex Ltd. and M/s. Siri Amar Exports. He was also the Managing Director of M/s. Sundesh Springs Pvt. Ltd., who is engaged in the manufacture of non alloy steels and bars and rods. The said unit was selling the goods manufactured by them to M/s. Girnar Impex Ltd and M/s. Siri Amar Exports. The business premises of all the appellants were put to search by the officers of DRI, Ludhiana and various incriminating documents including the blank letter heads of the State Bank of Bikaner and Jaipur as also of foreign buyer i.e. M/s. Azhad Trading Company, rubber stamps of various departments recovered along with parallel sets of invoices retrieved from the computer of Shri Adishwar Jain. Statements of various persons were recorded during the course of further investigations, based upon which show cause notice was issued.

The Adjudicating Authority held that M/s. Girnar Impex Ltd. and M/s. Siri Amar Exports have fraudulently availed DEPB incentive by mis-declaring the goods exported by them as also by over invoicing the same. The above findings are based upon the recovery of parallel invoices from the briefcase of Shri Adishwar Jain. The statements of Shri Adishwar Jain recorded during the course of investigations admitted that they had shown the export of alloy steel items whereas they had actually exported non alloy steel items. The value of the goods submitted to the Customs and the Banks in India was inflated, in order to avail higher DEPB benefits. He also admitted that the over invoicing of the export goods was to the tune of 10 to 20 times more than the normal value. Shri Rajesh Lakhanpal, computer operator in M/s. Girnar Impex Ltd. also admitted that Shri Adishwar Jain was using parallel sets of export invoices from his computer. The said parallel sets of invoices reflected the inflated value of the goods and the same was being shown to the Customs with the motive of availing higher DEPB benefits. During the course of investigations, various shipping bills were shown to Shri Adishwar Jain, who confessed that the items declared therein were mis -declared in quality and higher value was shown.

Revenue also conducted the enquiries from the Consul (Economic), Consulate General of India, Dubai who vide their office letter dated 12.05.04 sent the details of goods exported from India and confirmed that the invoices with lower values were presented at the Dubai Customs Clearance.

Shri Adishwar Jain in his further statement admitted the entries made in the recovered notebooks showing the details of hawala transactions and deposed that the differential amount of exported goods and inflated value of exported goods was being adjusted through hawala sources. He also decoded the expression RNP as referring to one Raju and Pinki who used to collect hawala payments from him. Shri Devinder Singh Narang, Partner in M/s. Simran Bright Bar Industries, Ludhiana and Erstwhile Director of M/s. Girnar Impex Ltd., in his statements admitted having handed over the money to Shri Pinki. Similarly Shri Amarjit Singh, Accounts Manager in the firms of Shri Adishwar Jain disclosed in his statements that he used to hand over the money withdrawn by him from his firms to Shri Bimal Prakash Jain, father of Shri Adishwar Jain who then used to speak in coded language with Raju, Pinki and Lucky regarding hawala.

Further enquiries were made from M/s. S.P. Industrial Corporation, Ludhiana and M/s. P.J. Sales Corporation, alleged manufacturer of the goods. Shri Prabjot Singh, Proprietor of M/s. S.P. Industrial Corporation admitted having only supplied the bills for alloy steels, without actual supply of material, on the basis of commission. He clarified that the bills were being issued in the name of the three firms M/s. Sundesh Springs Pvt. Ltd., M/s. Girnar Impex Ltd. and M/s. Siri Amar Exports, all belonging to Shri Adishwar Jain and as per the instructions of Shri Adishwar Jain, these transactions were never reflected in the account books, finance books, sales tax returns or income tax returns etc. The bill amount paid by Shri Adishwar Jain was subsequently being withdrawn by Shri Adishwar Jain through Shri Amarjit Singh, his employee, for which purposes he used to offer 10 to 20 blank self cheques in advance to Shri Adishwar Jain.

The disclosers made by Shri Prabjot Singh were admitted by Shri Adishwar Jain in his subsequent statements, who elaborated his modus operandi and on being confronted on certain checks admitted having withdrawn the amounts on the basis of the pre-signed cheques given to him by Shri Prabjot Singh, Shri Darshan Kumar Sharma, Sales Tax Clerk in M/s. Sundesh Springs Pvt. Ltd. also confirmed the fact of withdrawal of money from the accounts of M/s. S.P. Industrial Corporation. The above practice was also confirmed by Shri Amarjit Singh, Accounts Manager in the firms of Shri Adishwar Jain. Shri Devinder Singh Narang, Partner in M/s. Simran Bright Bar Industries and Erstwhile Director of M/s. Girnar Impex Ltd. admitted that 90% of the iron and steel bars supplied by them to M/s. Sundesh Springs Pvt. Ltd. were non alloy steel bars for which false bills showing the sale of alloy steel bars were being raised by them on commission basis, without the actual supply of any material.

In addition to the above evidences, the Commissioner has also relied upon the chemical examiner's report dated 20.01.04 in respect of a sample drawn from the live export consignment. In terms of the said report the goods were found to be "other than alloy steel, whereas the same were declared as alloy steels of the appellants". The Commissioner has also referred to the evidences showing that the alloy steel items were actually net being manufactured by the various suppliers who have only raised the bills. The goods were being purchased by M/s. Sundesh Springs Pvt. Ltd., Ludhianaand after bringing the same to their factory premises, they were being repacked and exported by showing the same as alloy steel items. The above facts stand corroborated from the statement of Shri Rajesh Chopra, Production Supervisor of M/s, Sundesh Springs Pvt. Ltd. Similarly Shri Raghu vir Singh, Factory Manager of M/s. Sundesh Springs Pvt. Ltd. admitted that they have never manufactured alloy steel bars flanks or shorn etc. in the factory, not purchased these alloy steel items from outside. The Commissioner has also referred to the statements of various other suppliers admitting that alloy steel items were never manufactured and supplied by them to the various firms of Shri Adishwar Jain.

On the above basis, the Commissioner has come to a categorical finding that Shri Adishwar Jain along with his firms M/s. Girnar Impex Ltd., M/s. Siri Amar. Exports and M/s. Sundesh Springs Pvt. Ltd. had knowingly mis-declared and over invoiced the export goods with intention to defraud the exchequer by availing the undue benefit of DEPB to the tune of Rs.13,56,73,200/-. Accordingly, the Commissioner has imposed penalties on the appellants.

Appellants are in appeal before the Tribunal. Stay applications are also filed.

Reasoning of Judgment:- At this interim stage, the High Court was of the view that there is enough material on record to reflect upon the clandestine activities of Shri Adishwar Jain. The statements of Shri Adishwar Jain recorded during the course of investigations, read with the statements of the other co-noticees, revealing the modus operandi of the exporting firms, clearly indicate the misuse of the DEPB scheme. Further the recovery of the parallel set of invoices, the fact of encashing the cheques withdrawing the money from the banks, are all corroborative of the fact that the said exporting firms were indulging in over invoicing the exporting goods. As such the High Court was of the view that the said appellants have not been able to make out a prima-facie good case in their favour so as to unconditionally dispense with the condition of pre-deposit of penalties. As such taking into account the overall facts and circumstances of the case, the High Court directed Shri Adishwar Jain, M/s. Girnar Impex Ltd., M/s. Sundesh Springs Pvt. Ltd. and M/s. Siri Amar Exports to deposit 25% of the penalties imposed upon them within a period of 12 weeks from today. Subject to which the pre-deposit of the balance amounts of duties stand dispensed with and its recovery stayed during the pendency of the appeals.

As regards imposition of penalty of Rs. 3.50 crores each on M/s. Simran Bright Bar Industries and Shri Devinder Singh Narang, the High Court found that the penalties stand imposed upon them under the provisions of Section 114 of the Customs Act, 1962 in as much as they deliberately participated in the fraud of the exporting firms, by facilitating the issue of only the invoices, on commission basis, without the actual issuance of the goods. As such, High Court is of the view that they have also not been able to make out a prima-facie case in their favour so as to allow their stay petitions unconditionally. However, keeping in view that they were only the supplier of the invoices working on commission basis, High Court directed M/s. Simran Bright Bar Industries and Shri Devinder Singh Narang to deposit an amount of Rs.50 lakhs each as a condition of hearing of their appeal, in terms of the provisions of Section 35F. The said deposits are required to be made within a period of 12 weeks from today.

Decision:- Stay application disposed off.

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PJ/Case Laws/2012-13/1117

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