2007 (10) TMI 533 - AT - Central Excise

100% EOU - penalty - Personal penalty - manufacture of Polyester Texturised Yarn (PTY) and Polyester Filament Yarn (PFY) - use of duty free imported raw material - imported goods diverted to local market

Summary

Issues:
1. Duty liability on diverted goods cleared for export.
2. Imposition of penalties on the appellant and other parties.
3. Verification of subsequent export of seized goods to determine duty liabilities.
4. Justification of penalties imposed on different parties.

Analysis:

Issue 1: Duty liability on diverted goods cleared for export
The case involved the diversion of goods meant for export to the local market by the intending agent and the transport company. The Commissioner confirmed the demand of duty on the duty-free imported and procured raw materials, as well as on the final products cleared in the local market. The appellant did not dispute the duty liability but claimed to be victims of the fraud. The appellant argued that they had redeemed and exported the balance seized goods, thus should not be liable to pay duty on those goods. The Tribunal remanded the matter to the Commissioner to verify if the goods were indeed exported, and if so, the duty liabilities on the raw materials and final products would not be payable.

Issue 2: Imposition of penalties on the appellant and other parties
The Commissioner imposed penalties on the appellant, the Director of the appellant company, and the transport company for their alleged involvement in the diversion of goods. However, the Tribunal found no evidence implicating the appellant company in the fraud. The Tribunal set aside the penalties imposed on the appellant and the Director, noting that they were victims of the fraud. The penalties imposed on the transport company were upheld due to evidence showing their involvement in tampering with the goods and clearing them to the local market.

Issue 3: Verification of subsequent export of seized goods to determine duty liabilities
The Tribunal highlighted that the seized goods were released to the appellant upon payment of a fine without insisting on duty payment. The appellant claimed that the goods were subsequently exported, which would negate the duty liabilities on those goods. The Tribunal remanded the matter to the Commissioner for verification, emphasizing that if the goods were indeed exported, duty liabilities on the raw materials and final products would not be payable.

Issue 4: Justification of penalties imposed on different parties
The Tribunal found no justification for the significant penalties imposed on the appellant and the Director, as there was no evidence of their involvement in the fraud. The penalties on the appellant and the Director were set aside. However, the penalty imposed on the transport company was upheld due to clear evidence of their role in tampering with the goods and diverting them to the local market.

In conclusion, the Tribunal disposed of all appeals by setting aside penalties on the appellant and the Director, upholding the penalty on the transport company, and remanding the matter to the Commissioner for verification of subsequent export to determine duty liabilities.