IN THE COURT OF Honourable Bombay High Court

WRIT PETITION NO. NO. 2010 OF 2018

M/s. Merchant & Sons )

Mohatta Market, Office No. 8 )
1st Floor, Paltan Road )
Mumbai – 400 001 )…Petitioner

Vs.
1. The Union of India )
Ministry of Law &, )
Justice, Aaykar Bhavan, )
New Marine Line, Mumbai – 400 020 )

2. Government of India )
Ministry of Finance, Department of Revenue )
8th Floor, World Trade Centre, )
Centre-I, Cuffe Parade, )
Mumbai – 400 005 )

3. Commissioner of Central Excise, )

Mumbai-I, )
Maharshi Karve Marg, )
Churchgate, )
Mumbai – 400 020 )…. Respondents

AFFIDAVIT IN REPLY FOR RESPONDENT NO. 1, 2 & 3

I, Dharmender Singh, Assistant Commissioner of CGST & Central Excise,

Mumbai South Commissionerate, having my office at 1 st Floor, Meher Building,

Chowpatty, Bombay Garrage, Mumbai – 400 007, do hereby state and declared

on solemn affirmation as under:

Brief facts of the case

1. That the petitioner Merchant & Sons is a CHA. The petitioner along

with M/s. Khushi Impex, M/s. Khubpriy Enterprises and Mr. Ketan

Premchand Goasar filed revision application before the Revision

Authority. These revision application have emanated from a single

order of the Commissioner (Appeals), Central Excise, Mumbai Zone 1

Order No. SB(30 to 33)/MI/2011 dated 02.05.2011. In the said

impugned order, the Commissioner Appeals has upheld the O-I-O No.

18/MI/2010-11 dated 31.01.2011 passed by the Joint Commissioner,

Central Excise, Mubmbai-I in which the demand of erroneously

claimed rebate claims in which Penalty of Rs. 50,000/- was imposed

Page 1 of 13
in Merchant & Sons, CHA. engaged in the export of processed fabrics

falling under Chapter 54 of the First Schedule of the Central Excise

Tariff Act, 1985. During June 2004, the petitioner procured dyed

printed fabrics from M/s. Mansa Traders and claimed to have

exported these fabrics. Thereafter filed 14 rebate claims amounting to

Rs. 34,66,462/- under Notification no. 19/2004CE(NT) dated

06.09.2004 and Notification no. 40/2001 CE(NT) dated 26.06.2001. A

show cause cum deificienty Memo was issued to the petitioner to

produce the duty payment certificate in a sealed cover. Also

jurisdictional superintendent was requested to verify the genuineness

of Credit availed and dury paid on the impugned goods by the

manufacturers. Further, Jurisdictional Assistant/Deputy

Commissioner was asked to verify if the goods were sealed and self

certified by the manufacture under prior intimation. Assistnat

Commissioner (Prev), Central Excise, Thane-I vide letter No. V/PI/Th-

I/125/05 dated 02.05.0225 informed that a case of fraudulent

avaliment of Cenvat Credit and fraudulent claim of rebate has been

booked against M/s. Mansa Traders along with other entities. Further

the petitioner did not appear for the personal hearing and had failed

to produce the duty paying certificate in a sealed cover and the claims

were rejected. The petitioner preferred appeal, which was also rejected

by Commmisisoner(Appeals).Against the same, the petitioner pereffred

apeeal, against the same by way of revision application. Joint

Secretary (R.A) vide his order no. 193/10-CX dated 09.102.2010

allowed the revision application. Against this order order of Hon’ble

Joint Secretary(R.A>), revenue prefrred writ petition no. 6289/2010 in

Hon’ble Bombay High Court. Hon’ble Bombay High Court vide order

dated 27.06.2011 remanded the matter back to Joint Secretary(R.A.)

for fresh consideration in accordance with law. Pursuant to Hon’ble

Bombay High Court order dated 27.06.2011, Joint Secretary(R.A>)

vide his order No. 95-96/13-Cx dated 01.02.2013 remanded the case

Page 2 of 13
 back to the original authority for denovo adjudication after taking into

consideration the observations made by GOI and set aside the Order

in Appeal.

2. The Deputy Commissioner(Rebate), Central Excise, Mumbai-I

Commissionerate, decided both the cases. He rejected the rebate

claims filed by the petitioner under Rule 18 of the Central Excise

Rules, 2002 read with Section 11B of the Central Excise Act, 1944

vide Orders-in Original No. 23/MTC-R/denovo/2013-14 dated

14.05.2013 & 21/MTC-R/denovo/2013-14 dated 13.05.2013

respectively.

3. Being aggrieved with the above Order in Original, the petitioner

preferred an appeal with the appeallate authority, who, vide impugned

order in Appeal dated 28.03.2014 rejected appeal on merits as well as

on time bar and upheld the Order-in-Original.

4. Aggrieved by the said order in appeal, the petitioner filed the revision

application with Government of India and the same was decided vide

order dated 22.05.2018. The same was decided in favour of revenue

on the basis of merit of the case.

GROUNDS OF PETITION

B.1 No comments

B.2 The petitioner has submitted that they were not aware of the fraud

however, the records have stated that and the same has been recorded in Para

19 of the Revision Authority order dated 22.05.2018 wherin it has been

categorically stated as per the statement recorded under the provisions of

Section 14 of the Central Excise Act, 1944 on 18.05.2006, Shri Ayush

Murarilal Agarwal has not only stated that in addition to M/s. Namaste

Exports, two more firms viz. M/s. Daffodil Exports(petitioner) owned by his

father Shri Murarilal Agarwal was also functioning from this premises and the

entire operations of all the three frrms were looked after by him but he also

furnished copies of the export documents in respect of goods purportedly

Page 3 of 13
received by M/s. Mansa Traders and and exported by the petitioner. Also, the

statement recorded under the act is a piece of evidence as per the Hon’ble

Supreme court Judgments(i) Surjit Singh Chhabra v. Union of India reported in

1997 (89) E.L.T. 646, Naresh J. Sukhawani v. Union of India – 1996 (83) E.L.T.

258(S.C.) ect.

B. 3 Plea of the petitioner that they have acted in bonafide manner is factually

incorrect that Shri Ayush Agarwal in his statement dated 18.05.0226, as a

proprietor of M/s. Namaste Exports and representative of two more firms, it

was seen that the actual benefecieries wer the discounters/shoroffs at Surat.

In the statement recorded the discounters have revealed the name of Shri

Ayush Agarwal to whom they havd given the cash after discounting. Similiarly,

payments made by M/s. Daffodil Exports to Mansa Traders, it was found that

cheques were ultimately credited into the account of M/s. Shrenik

Corportation. Shri Shrenik also identiedf Shri Agarwal having office at Golden

Plaza andh his phone number as the other party who also had taken cash on

discounting. . Thus the intvestigations provide tat through the exporters have

made an attempt to show that the transaction were genuine by issuing cheques

in the name of units of Muni Group, for the purported purchase of fbarics, the

flow the the amounts show in such chqeques back to the exporters (including

petitioner) indicates that no payments were made to Muni Group for claimed

purchase of fabrics. This pattern of Financial flwo indicated the very bougus /

fake nature of transaction.

B. 4 Sincee, the payment has not been made to the supplier. Also, the suppier

as well as the exporter is running from the same premises and that too by the

father(petitioner) and his son, the theory of believing in the declarations made

by supplier is false.

C.

C. 1 Facts of the case hence, no comments to offer

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C.2 Facts of the case hence, no comments to offer.

C 3. Findings of the Revision Order dated 21.05.2018, hence, no comments to

offer.

C. 4. The findings in the ground at point C.3 is are reasonably recorded in Para

14 of the order, the same is based upon the statement of Shri Ayush

Aggarawal, Shri Shrenik, Shri Yatindra Jain anf the Para(viii) of page no. 79

onwards of the Order in Original No. 03/BR-03/Th-I/2010 dated 29.01.2010

otherwise.Again the appeal was filed with Government of India by an

information was received from the CGST Commissionerate, Jodhpur that the

taxpayer M/s. Gajmukhi Bullion (GSTIN 08BTJPA0359R1Z9) has been found

non-existent at their declared place of business at 178, Veer Durga Das Nagar,

Pali (Rajasthan) and no business activity was found being carried out from said

premises. The Annexure-A and Annexure-B contained details of the suppliers

and recipient of Gajmukhi Bullion, Rajasthan which also contained name of

the M/s. Gajmukhi Bullion, Mumbai. Further, CGST Commissionerate, Belgavi

vide letter bearing File No. GEXCOM/AE/INV/GST/2473/2021-AE-O/o

COMMR-CGST-BELGAVI dated 22.03.2021 that they have come across an

organized syndicate who have availed and utilized ITC worth more than Rs. 50

Crore. The Annexure-A of the said letter contained name of the firms who may

have availed fraudulent ITC. The Annexure A of the said letter contained the

name of M/s. Gajmukhi Bullion having GSTIN 27BTJPA0359R1Z9.

5. Based on the above information received, investigation were initiated

against Gajmukhi, Mumbai under Section 67(2) of CGST Act, 2017.

This office has started the scrutiny of the suppliers of the applicant.

There are 85 suppliers as per GSTR-2A return (which is auto

populated).

6. Presently verification of the following suppliers as per GSTR 2A return of

M/s. Gajmukhi, Mumbai, he has availed Input Tax Credit from following
companies.

Sr. GSTIN Trade Name Amount Remarks

No. of ITC
availed(in

Page 5 of 13
 Crores)
1 29AMPPH5532H1ZR Karnataka 19.34 The said firm is
Jewellers a non existent
firm which is
run by a house
maid Smt.
Ramakka K.
Holkar
2 27CDOPB5494C1ZG Balaji Enterpries 6.99 The firm is
found non
existent during
Physical
Verification
Also, the firm is
a fake firm
created by Shri
Gautam Joshi
(employee of
M/s. Gajmukhi
Bullion)
3 08BTJPA0359R1Z9 Gajmukhi 4.50 The said firm is
Bullion non existent as
per letter
received from
CGST and
Central Excise,
Jodhpur
4 08EIUPR4039G1ZM Tirupati Trading 3.39 The said firm is
non existent
as per letter
received from
CGST and
Central Excise,
Jodhpur
5 27EPVPK7077B1ZC Kismat 3.37 The firm is a
Enterprises fake firm
created by Shri
Gautam Joshi
(employee of
M/s. Gajmukhi
Bullion)
6 27BUOPJ7767A2Z9 Creative 1.16 The said firm
Overseas was found non
existent during
physical
verification
7 27AMHPJ8625P1ZC Maple Fine 0.62 The said firm
Jewellery was found non
existent during
physical
verification
8 27AARCA8072C1ZH Alentraa 0.41 The said firm
Multitrading was found non
Private Limited existent during
physical
verification
9 27AAGCN1372B1ZS Nevaki 0.21 The said firm
Enterprises was found non
Private Limited existent during
physical
verification
10 27AAHCC9690C1ZF Centercore 0.1 The said firm
Multitrading was found non
Private Limited existent during
physical
verification

Page 6 of 13
11 27BBAPG8486Q3ZT Eagle Impex 0.02 The said firm
was found non
existent during
physical
verification
TOTAL 40.11

7. The total ITC (Input Tax Credit) availed from these suppliers

amounting to Rs. 40.11 Crores approx. Therefore, the ITC availed by

the Petitioner from these suppliers are not eligible in terms of Section

16 of the CGST Act 2017. This Hon’ble Court in case of M/s

Mahalaxmi Cotton Ginning Vs the State of Maharashtra & Ors on

11.05.2012 in the matter of MVAT’ 2002, wherein constitutional

validity of Section 48(5) was challenged seeking the words actually

paid to be read down as ought to have been paid. The Hon’ble Court

upheld the contention given by the Deptt that the transaction by the

defaulting selling dealers where invoice issued is not genuine, no set

off will be granted to the dealer claiming to be a purchaser and

accordingly rejected the petition. The statement of the Petitioner was

also recorded under Section 70 of the CGST Act’2017 in which he

himself confessed that he took only invoices from the 03 suppliers

namely M/s. Karnataka Jewellers, Kismat Enterprises and Balaji

Enterprises without any supply of goods and also not made any

payment to the 02 suppliers i.e. Kismat Enterprises and Balaji

Enterprises. The legal name of 3 suppliers is: - i) Ramakka K. Holkar

(Prop. of M/s Karnataka Jewellers), ii) Prakash Ravaso Lakade (Prop.

of M/s. Kismat Enterprises iii) Sunita Sunil Bhosle (Prop. of M/s.

Balaji Enterprises). The total Input Tax Credit availed from these 03

suppliers was to tune of Rs. 29.7 Crores. He also admitted that in

case of 2 supplier (M/s Kismat Enterprises and Balaji Enteprises) only

invoices were issued and no payment was received from them.

However, the Petitioner availed ITC from all these suppliers. The

confessional statement is also corroborated by the fact that the

supplier namely M/s. Karnataka Jewellers is registered in the name of

Page 7 of 13
 Smt. Ramakka K. Holkar who is a house maid and one supplier

namely M/s. Balaji Enterprises was found non-existent at their

registered place of business. Further, statement of one person Shri

Gautam Joshi was recorded under Section 70 of the CGST Act, 2017

wherein he deposed that the aforementioned 3 firms were opened by

him on the basis of documents arranged from various sources.

8.

Parawise Comments

1. No comments to offer

2. No comments to offer

3. The statement that copy of panchnama is not given is not correct in

respect of the searches conducted at two premises. In respect of the

search conducted at address 13, Floor 3 rd Plot, 31-35, Rangwala

Building, Agiary 3rd Lane, Khara Kuva, Zaveri Bazar, Mumbai 400

002, the panchnama copy has been given to Shri Prakash Rajpurohit,

who is the driver of the applicant. Further, in respect of the second

search conducted at address 601, Floor, 6 th Floor, Artham Mall,

Vithalwadi, Kalbadevi, Mumbai-400 002, the panchnama copy has

been handed over to Shri Aniket Bharat Mane, who is the Accounts

manager of the applicant.

4. The applicant has stated that they have filed Writ Petition bearing

(St.) No. 7183 of 2021 before the Hon’ble Court. However, this office

has received Criminal Application No.(St.) 12882 of 2021. Hence, no

comments to offer.

5. With regard to the retracting of various statement and allegation that

the applicant has been denied opporturnity to give voluntary

statement. It is stated that during the statement recorded on

12.07.2021 under the provisions of Section 70 of the CGST Act, 2017,

the applicant deposed that the statements dated 31.05.2021,

16.06.2021 and 21.06.2021 have correctly been recorded. Further,

Page 8 of 13
 there has been no retraction in respect of the statement dated

25.06.2021 by the applicant.

6. No comments to offer

GROUNDS

a) The allegation that the Applicant is falsely implicated in the alleged

offence is not true as the applicant has himself admitted in reply to

question no. 7 in his statement dated 12.07.2021 that an ITC of Rs.

19.34 Crores has been transferred by him to M/s. Golden Bullion

without any supply of goods. Further, in his statement dated 16.06.2021

he had deposed that “Golden made payment to Karnataka Jewellers

through my company by giving me my commission.”

b) The applicant has availed ITC of Rs. 19.34 Crores from M/s. Karnataka

Jewellers as per GSTR 2A of applicant’s firm. The said firm is a bogus

firm created for passing on of Input Tax Credit. In the statements dated

16.02.2021 and 26.03.201 recorded of the proprietor Smt. Ramakka K.

Holkar of M/s. Karnataka Jewellers. She deposed that she works as a

house maid and a person named Gautam Doshi has taken documents

viz. Pan Card, Aadhar card etc. for opening of the firm named M/s.

Karnataka Jewellers.

c) The deposition made before the Hon’ble sessions court are as per the

information received from CGST & Central Excise, Jodhpur. This office is

undertaking investigation in respect of the Mumbai firm of the applicant

and hence no comments to offer.

d) As per the information received from CGST & Central Excise, Belgavi,

vide their letter dated 22.03.2021, it was informed that as per GSTR 1

filed by M/s. Karnataka Jewellers, the applicant’s Mumbai firm has

availed an ITC of Rs. 15,22,02,368/-. However, on further investigations

it was revealed that M/s. Gajmukhi Bullion, Mumbai has availed an ITC

of Rs. 19.34 Crores from M/s. Karnataka Jewellers which is a bogus firm

created for passing on of Input Tax Credit. The proprietor of the said

firm is Smt. Ramakka K. Holkar and during the recording of the

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 statement under Section 70 of the CGST Act, 2017, she deposed that she

is a house maid. She has only provided documents to a person named

Gautam Doshi for opening of bank account so that she will receive Rs.

3000 to Rs. 5000 in bank account monthly. The said fact has been

corrobarted by the statement of Shri Gautam Joshi.

e) With regards to the firm named Kismat Enterprises and Balaji

Enterprises, it is to submit that the said firms have been created by Shri

Gautam Joshi on the basis of bogus documents. In his statement

recorded on 08.07.2021 and 09.07.2021 under Section 70 of the CGST

Act, 2017, he deposed that he has created firms on the basis of bogus

documents as was the case with Karnataka Jewellers. Further, during

the physical verification of M/s. Balaji Enterprises, no such company

was found in existence.

f) It has been rightly said that the applicant has indulged into transactions

with various non-existent firms such as Maple Fine Jewellery, Alentraa

Trading Private Limited, Eagle Impex, Centre Core, Dolphin Multitrade

etc. As during the physical verification of the aforementioned companies

no firm was found to be existing and also registrations of some of the

firms have been suo motu cancelled.

g) It has been stated by the applicant that various statements have been

recorded and investigation has been completed is not true. As there are a

total of 85 suppliers spread all over India of applicant’s Mumbai firm

which need to be verified to ascertain the quantum of the GST involved.

Unless the same is not verified the case cannot be concluded.

h) The applicant has quoted the Hon’ble Bombay High Court in case of

Daulat Samirmal Mehta v/s Union of India held in writ petition no. 471 of

2021 and stated that powers to arrest as prescribed under Section 69 of

CGST Act can be exercised only if there is subjective satisfaction in

respect of commission of crime. However, in the present case till date no

such proposals have been made. The issue involved in the present case

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 is anticipatory bail application filed by the applicant is not relevant with

the present case.

i) Since, the inquiry is under process and verification of suppliers who are

spread all over India has to be undertaken. Show cause cannot be issued

until the investigation is completed.

j) The applicant by quoting Section 7 read with Section 31(b) of GST Act,

2017 stated that supply of goods is possible without there been

actual/physical movement of goods. In this regard it is to submit that

the respondent’s case is “issuance of any invoice without supply of

goods”. The issuance of invoice without any supply of goods violates the

provisions of Section 132(b) and 132(c) of the CGST Act, 2017.

k) No comments to offer

l) The applicant as per the direction of the Hon’ble Sessions Court used to

appear before the respondent on Monday, Wednesday and Friday (3 days

in a week). It has been stated that investigation officer has consented for

reduction of Applicants visit to their office. In this regard it is to contend

that regular visits to the office will not serve any purpose. The

appearance of the person is required only when there are new

developments.

m) No comments as currently no such proposal for custodial interrogation is

under consideration.

n) No comments

o) There are a number of suppliers of M/s. Gajmukhi Bullion, Mumbai

which needs to be verified for the conclusion of the inquiry. In the event

of giving anticipatory bail to the applicant. He may influence the

witnesses in the case

p) No comments to offer

q) No comments to offer

r) Same as reply to para (o)

s) No comments to offer

Page 11 of 13
t) No comments to offer

7. No comments to offer

8. No comments to offer

PRAYER

9.

(a) The CGST Act 2017 was introduced w.e.f. 01.07.2017. Section 132

of the CGST Act dealt with punishment for certain offences and

offences are classified in clause (4) & (5) of this Section. The

Hon’ble Supreme Court by order dated 29.05.2019 in the case of

Sapna Jain [SLP 4322-4324/2019] had ordered that,

‘…..However, we make it clear that the High Courts while

entertaining such request in future, will keep in mind that this Court by

order dated 27.5.2019 passed in SLP(Crl.) No. 4430/2019 had

dismissed the special leave petition filed against the judgment and

order of the Telangana High Court in a similar matter, wherein the High

Court of Telangana had taken a view contrary to what has been held

by the High Court in the present case.’ It is pertinent to note that the

aforesaid order dated 29.05.2019 has been passed by Hon’ble

Supreme Court against the interim Order passed by this Hon’ble

Court in writ petition granting interim protection to the Petitioners.

This Hon’ble Court subsequently in the case of Ashish Jain has

dismissed the petition and refused to grant any relief pursuant to

aforesaid order of Hon’ble Supreme Court. The Hon’ble Supreme

Court by order dated 27.05.2019 dismissed the SLP against the

Judgment of Hon’ble Telangana High Court in the case of P.V.

Ramanna Reddy [SLP (Crl.) No. 4430/2019]. The Hon’ble Telangana

and Andhra Pradesh High Court in the case of P.V. Ramanna Reddy

[Writ Petition Nos.4764, 4769, 4892, 5074, 5130, 5329, 6952 And

7583 of 2019] by order dated 18.04.2019 had refused to grant relief to

the petitioners against arrest under the CGST Act, 2017. The Hon’ble

Page 12 of 13
 Supreme Court by order dated 13.05.2021 in the case of Mohit Bathla

[SLP 3668/2021] had ordered that,

‘…At this stage, the petitioner is granted ad-interim relief in the

nature of release on bail subject purely to the aforesaid conditions

regarding deposit being strictly complied with. Let the petitioner be

produced before the concerned court within three days from today

and the petitioner shall be released on interim bail on such terms

and conditions as said court may deem appropriate to impose. It is

made clear that in case any of the deposits are not made, the order

granting facility of ad-interim bail shall stand recalled and the

petitioner shall surrender himself before the concerned authorities,

failing which the bail bonds furnished for his release on bail shall

stand forfeited and the petitioner shall be taken in custody

forthwith. This shows that the Hon’ble Supreme Court has also

taken the view that interim Bail is to be granted only after deposit.

The current status of the investigation shows wrongful availment

of Input Tax Credit over 5 crores which as per sub-section (5) of

the Section 132 of the CGST Act’2017, is cognizable and non-

bailable offence. Therefore, the cited case law is not applicable.

(b)

Therefore, it is prayed that the anticipatory application filed by the applicant

may be rejected

Jitesh Kumar Jain

Deputy Commissioner
CGST & Central Excise, Mumbai South
Date :

Place: Mumbai

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