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Confirmation of Customs duty and Central Excise duty with penalties against the company and its Managing Director based on allegations of diversion of imported raw materials and use of indigenous non-duty paid raw materials in manufacturing wrist watches. Analysis: The case involved two appeals filed against a common impugned order confirming Customs duty, Central Excise duty, and penalties against the company and its Managing Director. The company, a 100% Export-Oriented Unit engaged in manufacturing wrist watches, was accused of diverting imported raw materials to the Indian market and using indigenous non-duty paid raw materials in manufacturing watches. The officers observed discrepancies in the storage and identification of raw materials during visits to the factory premises, leading to the issuance of a show-cause notice demanding duties and penalties. The appellants denied the allegations, arguing lack of tangible evidence to prove diversion of imported raw materials or procurement of indigenous parts. The Commissioner passed the impugned order after considering the replies. The company's defense emphasized the absence of proof of clandestine removal or use of indigenous parts, challenging the basis for demanding duties and penalties. Upon review, the Tribunal found insufficient evidence to support the allegations. The appellants, being a 100% EOU, exported the manufactured watches, and there was no evidence of complaints from overseas buyers regarding the quality or origin of the watches. The Tribunal noted that the allegations were primarily based on observations at the factory premises and lacked concrete proof of diversion or use of indigenous parts. The opinions of external parties regarding the origin of parts were deemed inconclusive and biased. Furthermore, the Tribunal highlighted the absence of evidence regarding the purchase of indigenous parts from the market. No supplier names or statements were disclosed, and no documents were found to support the procurement of indigenous parts by the appellants. As duty is payable by the manufacturer at the time of clearances, the confirmation of Central Excise duty against the appellants without proof of procurement was deemed legally unsound. Conclusively, the Tribunal set aside the impugned order entirely, accepting the appeals of the appellants and providing for any consequential relief as permissible under the law. The decision was based on the lack of substantial evidence to support the allegations of diversion and use of indigenous parts, rendering the imposition of duties and penalties unjustified.
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