2006 (8) TMI 402 - AT - Central Excise

Summary

Issues Involved:
(A) Whether 14.523 MTs of Stainless Steel Circles were smuggled by concealing them in a consignment of Stainless Steel Sheets and therefore liable for confiscation.
(B) Whether the Revenue has discharged the burden of proof to show that the said goods are smuggled as they are non-notified under Section 123 of the Customs Act, 1962.
(C) Whether the said goods are prime quality or not.
(D) Whether the penalties imposed have been correctly imposed.

Issue-wise Detailed Analysis:

(A) Whether 14.523 MTs of Stainless Steel Circles were smuggled by concealing them in a consignment of Stainless Steel Sheets and therefore liable for confiscation:

The appellants argued that the said goods were detained and seized along with Stainless Steel Sheets in a godown at Kalamboli, Navi Mumbai. The labels on the wooden boxes containing the goods matched the details in the packing list, bill of lading, and invoice, indicating that the circles were part of the consignment imported and assessed to duty. The documents were not disputed, and the correlation of labels with the import documents proved lawful importation. The Dock Appraiser's examination and the manufacturer's explanation further supported the claim that the goods were not smuggled. The department's evidence only traced part of the material, failing to show that the appellants imported more than the declared quantity, thus giving the benefit of doubt to the appellants.

(B) Whether the Revenue has discharged the burden of proof to show that the said goods are smuggled as they are non-notified under Section 123 of the Customs Act, 1962:

The appellants contended that the burden of proof was on the Department as the goods were non-notified. The Department failed to discharge this burden, relying on isolated document faults without a comprehensive view. Previous decisions supported that non-notified goods require the Department to prove smuggling, which was not done in this case. The charge of concealment was dropped in the first adjudication order, and there was no evidence of the actual weight exceeding the declared weight.

(C) Whether the said goods are prime quality or not:

The appellants argued that the SGS Report showed surface defects, indicating the goods were not prime quality. The reports from SAIL and the metallurgical expert were unreliable due to the denial of cross-examination. The goods were imported as surplus/stock lot without warranty, and the commercial understanding was that they were not prime quality. Therefore, the duty demanded on prime quality value was illegal.

(D) Whether the penalties imposed have been correctly imposed:

The show cause notice did not invoke Section 114A of the Customs Act, making the penalty without jurisdiction. The impugned order did not specify the role of the individual penalized, making the penalty liable to be set aside.

Conclusion:

The Tribunal found that the Department failed to prove the additional importation of 14.523 MTs of Stainless Steel Circles beyond the declared quantity. The appellants showed that the seized goods correlated with the import documents, negating the smuggling charge. The goods were found to be prime quality, requiring appropriate valuation and differential duty payment. The penalties were set aside, and the matter was remanded for calculating the differential duty on the stainless steel circles.