2006 (8) TMI 385 - AT - Central Excise

Stay/Dispensation of pre-deposit - Confiscation of machinery - Redemption fine - Demand - Cross-examination - Forged signatures

Summary

Issues Involved:
1. Alleged diversion of raw materials and finished goods into the local market.
2. Non-accountal of goods in statutory accounts.
3. Non-fulfillment of export obligations and net foreign earnings.
4. Non-payment of excise duty on goods purportedly cleared to local market.
5. Non-receipt of goods by purported buyers.
6. Alleged sham transactions to evade excise duty.
7. Confiscation of goods and machinery.
8. Penalties imposed.

Detailed Analysis:

1. Alleged Diversion of Raw Materials and Finished Goods into the Local Market:
The notice alleged that M/s. STPL diverted raw materials obtained under CT3 Certificates and finished goods manufactured from such materials into the local market. The Commissioner found that the goods were not properly accounted for, leading to the conclusion of clandestine removal. However, the Tribunal noted that the duty demands on alleged non-receipt and diversion of raw materials obtained on CT3 cannot be upheld, as the liability for duty on such removals lies with the manufacturer of the raw material, not the consignee.

2. Non-accountal of Goods in Statutory Accounts:
The notice claimed that the goods were not properly accounted for in the statutory accounts, making it impossible to ascertain the stock position. The Commissioner found that the records submitted by the appellants were incomplete, manipulated, and not properly maintained. The Tribunal found that the appellants could not properly account for the stock found in the unit during the officers' visit and provided varying figures at different times, leading to the conclusion of clandestine removal.

3. Non-fulfillment of Export Obligations and Net Foreign Earnings:
The notice alleged that M/s. STPL did not fulfill their export obligations and did not achieve the required net foreign earnings. The Commissioner found that the appellants failed to substantiate that the goods shown to have been received under CT3s were duly accounted for and cleared from their unit in due discharge of the export obligation. The Tribunal noted that the appellants' claim of being engaged in trading activities was false, as they could not produce duty-paid invoices and no trading activities were reflected in their balance sheet.

4. Non-payment of Excise Duty on Goods Purportedly Cleared to Local Market:
The notice alleged that the goods were cleared into the local market without payment of duty. The Commissioner found that the appellants attempted to evade payment of duty by showing clearances to certain entities on payments made in foreign exchange. The Tribunal noted that the duty demands on clearances made on ARO, DFRC, and foreign exchange under Para 9.10 of the Exim Policy cannot be sustained, as settled by various Tribunal decisions.

5. Non-receipt of Goods by Purported Buyers:
The notice claimed that the finished goods shown to have been cleared to certain buyers were never received by them. The Commissioner found that the appellants could not explain inconsistencies and contradictions in the statements made by suppliers, buyers, and other parties. The Tribunal noted that the cross-examination of officers who denied the signatures on warehousing certificates was not allowed, resulting in a serious denial of natural justice.

6. Alleged Sham Transactions to Evade Excise Duty:
The notice alleged that the appellants engaged in sham transactions to evade excise duty. The Commissioner found that the purported sales were designed to circumvent legal provisions. The Tribunal noted that the findings on textile sales and bank invoices on yarn and non-receipt of job work goods need to be examined in detail, and no prima facie findings could be arrived at without hearing both sides.

7. Confiscation of Goods and Machinery:
The Commissioner ordered the confiscation of goods and machinery, imposing fines and penalties. The Tribunal found that the confiscation orders cannot be upheld, as the goods were within the premises of the EOU and not removed or cleared outside. The Tribunal also noted that the duty demands on capital goods and machinery cannot be upheld, as the EOU is not debonded, and the duty demand on capital goods must be determined as per the decision in the case of SIV Industries.

8. Penalties Imposed:
The Commissioner imposed penalties on the appellants and other notices. The Tribunal found that the penalties cannot be upheld, as the duty demands are not sustainable. The Tribunal granted full waiver of the pre-deposit requirements and stayed the recovery of duty, penalty, and interest pending the regular hearing of the appeals.

Conclusion:
The Tribunal set aside the confiscation orders and duty demands, granted full waiver of pre-deposit requirements, and stayed the recovery of duty, penalty, and interest pending the regular hearing of the appeals. The Tribunal emphasized the need for proper cross-examination and detailed examination of the findings on textile sales, bank invoices, and non-receipt of job work goods.