2007 (5) TMI 376 - AT - Central Excise

Summary

Issues:
Admitted diversion of duty-free material from 100% EOUs, time-barred demand, cross-examination rights, composite penalty under Rule 25, separate penalties on partner and partnership firms, legality of duty demand at customs rates.

Analysis:
The case involves an appeal against the order of the Commissioner (Appeals) upholding the duty demand and penalties imposed on the appellant for the admitted diversion of duty-free raw materials. The appellant, a 100% EOU, procured raw materials from other EOUs and DTA units, leading to a clandestine removal from the customs bonded warehouse. The original authority confirmed duty of Rs. 9,97,274 along with interest and imposed penalties. The Commissioner (Appeals) upheld this decision.

The appellant's advocate argued that the demand was time-barred as the investigation was completed in August 2001, but the show cause notice was issued in 2004. Additionally, the appellant was not adequately informed about the availability of a witness for cross-examination. The advocate also contested the composite penalty under Rule 25, separate penalties on the partner and partnership firms, and the legality of demanding duty at customs rates.

The SDR countered by stating that the investigation continued beyond 2001, justifying the issuance of the show cause notice in 2004. He clarified that the penalty was imposed under Rule 25, indicating fraud and suppression of facts. The SDR argued that the duty demanded was equivalent to customs duty, considering the diverted materials as if they were imported by the appellant.

The judge noted the admitted diversion of duty-free materials by the appellant and partner, emphasizing the fraudulent activities. The judge rejected the argument for cross-examination of the recipient, stating it was unnecessary given the clear admission of diversion. The judge upheld the duty demand, explaining that the duty was rightly demanded under Section 11A, considering the diverted materials as subject to excise duty. The judge set aside the penalty on the appellant firm but upheld the penalty on the partner due to his involvement in the fraudulent activities.

In conclusion, the judge confirmed the duty demand and upheld the penalty on the partner while setting aside the penalty on the appellant firm. The appeals were disposed of accordingly.