Case: Commissioner of Cus. (Preventive), Mumbai Vs. Creotex Industries

2. The facts giving rise to this civil appeal are as follows:  basis of information, officers of Customs Department (Preventive wing) carried out the search in the office of one Shri N.D. Pallaria who was the Director of M/s. Giriraj Impex Pvt. Ltd. During the search incriminating documents showing transactions with regard to the sale of duty free raw material imported under the Pass Book Scheme were seized. During the investigation statements of the partners of the Assessee firm as well as of Customs House Agent (CHA) (Transporters) were also recorded.  On the basis of the said investigation show cause notice was issued on 8th August, 1994 in which it was alleged, inter alia, that fifteen out of twenty one consignments imported were sold by the Assessee in the open market instead of actual consumption in their factory at Jaipur. In the show cause notice it was further alleged that fifteen consignments were sold to five parties whose names are given as M/s. Jallan Woolen Industries, M/s. Nik Polymer International, M/s. Ajanta Printers, M/s. Amar Dyes and Printers and M/s. Vinay Dye Chem Corporation. That, there was no sale to Actual Users as the said firms, namely, M/s. Ajanta Printers, M/s. Amar Dyes and Printers and M/s. Vinay Dyed Chem Corporation were non-existent.

Court's reasoning:
3. Having gone through the records of this case we are satisfied that the status of the above three firms remains in doubt. The Commissioner came to the conclusion that said three firms claimed to be SSI Units but they had no addresses from which they operated.4. The basic issue which arose for determination in this civil appeal before the Commissioner consisted of two-fold points, namely, whether the said three firms were genuine or bogus, particularly in the absence of proper addresses. Secondly, whether the Department on the facts and circumstances of this case was entitled to invoke the extended period of limitation on the ground of suppression as alleged. In this connection the Assessee herein contended before the Commissioner that they had sold the goods through Shri Pallaria the Commission agent (who was also a Director of Giriraj Impex), bona fide. That, the Respondent had placed before the Assessee the requisite registration certificates given by the three entities. According to the Assessee the said certificates showed that the three entities were registered as SSI units and therefore the Assessee had acted bona fide.5. Basically two points arise for determination which have not been examined properly by the Commissioner, namely, whether the three entities are genuine or bogus and whether the Assessee has acted bona fide on the basis of SSI registration certificates produced by Shri Pallaria - the commission agent. The Commissioner should also have decided whether there was any connection between the Assessee and the other Company in which Shri Pallaria was the Director.6. In the present case the demand is of about Rupees twenty five lakhs. That calculation is based on the CIF value (import value).