2003 (6) TMI 400 - AT - Customs

Summary

Issues Involved
1. Confirmation of duty demand based on stock shortage.
2. Validity of stock verification methods.
3. Applicability of limitation period under Section 28 of the Customs Act.
4. Eligibility for remission of duty under Section 23 of the Customs Act.
5. Imposition of penalty under Section 112(a) of the Customs Act.
6. Recovery of interest under Section 28AA of the Customs Act.

Detailed Analysis

1. Confirmation of Duty Demand Based on Stock Shortage
The Commissioner confirmed a duty demand of Rs. 9,36,518.00 on the appellants for a shortage of 390.167 MT of LAM coke under Section 72 of the Customs Act, 1962. The appellants had taken over the assets and liabilities of M/s. OMC Alloys and found a shortage of 1648.949 MT of LAM coke, which was later reduced to 390.167 MT after physical verification and reconciliation. The appellants accepted this shortage, and the Commissioner demanded duty only on this quantity.

2. Validity of Stock Verification Methods
The appellants contended that the stock verification on 1-12-1997 should not be subject to the show cause notice issued on 20-9-1996. However, the Tribunal observed that the demand was based on the first show cause notice, and the second show cause notice was redundant. The shortage was initially found through volumetric measurement, and physical verification confirmed the actual shortage, which was accepted by the appellants.

3. Applicability of Limitation Period Under Section 28 of the Customs Act
The appellants argued that the demand for an unlimited period was not justified as there was no suppression of facts. However, the Tribunal found that the appellants did not voluntarily report the shortage to the department and held back information. Therefore, the charge of suppression was proved, and the demand was not hit by the limitation period under Section 28.

4. Eligibility for Remission of Duty Under Section 23 of the Customs Act
The appellants claimed that the shortage of 0.16% should be condoned as a loss due to natural causes, citing various case laws. However, the Tribunal noted that the cited cases involved different circumstances, such as petroleum products or shortages during transit. The Tribunal found that the appellants' plea of moisture content was not supported by relevant certificates from the time of the shortage and thus rejected the claim for remission.

5. Imposition of Penalty Under Section 112(a) of the Customs Act
The Tribunal observed that Section 112(a) deals with penalties for improperly imported goods. In this case, the goods were not improperly imported, so the penalty of Rs. 1,00,000/- imposed on the appellants was set aside.

6. Recovery of Interest Under Section 28AA of the Customs Act
The Tribunal noted that Section 28AA, which deals with the recovery of interest, was inserted by the Finance Act, 1995, whereas the dispute pertained to the period 27-9-1991. Therefore, the provisions of Section 28AA could not be invoked retrospectively, and the order for recovery of interest was set aside.

Conclusion
The Tribunal confirmed the duty demand of Rs. 9,36,518.00 but set aside the penalty of Rs. 1,00,000/- and the order for recovery of interest. The appeal was disposed of accordingly.