2004 (4) TMI 459 - AT - Customs

Summary

Issues:

1. Application for waiver of pre-deposit of duty and penalty.
2. Recovery of duty, confiscation, and penalty due to availing input stage credit under Rule 57A.
3. Commissioner's decision based on presumption due to lack of reply.
4. Lack of evidence showing violation of notification conditions by importers.

Issue 1: Application for Waiver of Pre-deposit of Duty and Penalty

The judgment involves an application for waiver of pre-deposit of duty and penalty amounting to Rs. 2,95,551/- and Rs. 2,96,000/- respectively. The duty was confirmed due to the alleged failure of the applicants to provide evidence that the transferor had not availed input stage credit, contrary to Notification No. 203/92. The tribunal decided to proceed with hearing the appeal itself, with the consent of both parties, rather than focusing solely on the waiver application.

Issue 2: Recovery of Duty, Confiscation, and Penalty Due to Availing Input Stage Credit under Rule 57A

A show cause notice was issued seeking recovery of duty exceeding Rs. 17 lakhs, along with proposals for confiscation and penalty. The notice was based on the claim that the appellants had imported items duty-free but availed input stage credit under Rule 57A, violating condition v(a) of Notification 203/92-Cus. The appellants, as transferees of the license, stated they were unaware of whether the manufacturers had availed input stage credit. The Commissioner proceeded as if no reply was filed, presuming that the importers were not interested in responding and had taken double benefits. However, the tribunal found no evidence to establish that the transferors had availed input stage credit, leading to the setting aside of the impugned order confirming part of the duty raised in the show cause notice.

Issue 3: Commissioner's Decision Based on Presumption Due to Lack of Reply

The Commissioner's decision was influenced by the presumption that importers did not show interest in responding to the show cause notice regarding the availing of Modvat credit, as no reply was filed. This presumption was incorrect as a reply was indeed submitted by the importers. The tribunal highlighted that the lack of a reply did not automatically imply a violation of the notification conditions, especially when the reply was on record. The Commissioner's presumption was deemed unfounded, as there was no material to support the violation of notification conditions by the importers.

Issue 4: Lack of Evidence Showing Violation of Notification Conditions by Importers

The tribunal emphasized the absence of material on record indicating that the transferors had availed input stage credit, contrary to the provisions of the notification. The Commissioner's assumption that the importers violated the notification conditions due to the lack of evidence was deemed unjustified. Since there was no substantiated proof of any violation, the impugned order confirming part of the duty raised in the show cause notice was set aside, and the appeal was allowed in favor of the appellants.