2009 (11) TMI 742 - AT - Customs

Summary

Issues involved: Customs duty demand u/s 28 of Customs Act, 1962, penalty u/s 114A of Customs Act, 1962, imported fabrics, duty payment, documentary evidence, Central Excise Act vs Customs Act.

The judgment by the Appellate Tribunal CESTAT AHMEDABAD dealt with the confirmation of customs duty demand of Rs. 12,82,601/- with interest u/s 28 of Customs Act, 1962, and penalty imposition u/s 114A of Customs Act, 1962, due to a shortage of grey fabrics in a 100% EOU premises. The Director admitted selling goods in the open market without duty payment or invoices, leading to the penalty. The appellant argued that the fabrics were not imported, but obtained locally under CT-3 certificates, supported by Annexure A showing purchases from local traders or EOUs. The Tribunal noted the lack of evidence supporting the claim that the fabrics were imported, emphasizing the need for verification from the appellant's records. Lower authorities failed to examine this aspect, leading to the decision that customs duty could not be demanded without proof of importation.

The appellant contended that the duty demand should have been under the Central Excise Act, not the Customs Act, citing precedents like Harshvardhan Exports v. CCE, Ghodela Impex v. CCE, and CCE v. Suresh Synthetics. The Tribunal agreed with the appellant, highlighting the lower authorities' failure to verify the claim that the grey fabrics were not imported. It was noted that the adjudicating authority's finding was not based on evidence, and the lack of proof of importation meant customs duty could not be levied. The Tribunal concurred with the appellant's argument that Central Excise duty was applicable to goods obtained from EOUs and local sources, not Customs duty.

In conclusion, the appeals were allowed, providing consequential relief to the appellant based on the lack of evidence supporting the importation of fabrics and the incorrect application of Customs duty instead of Central Excise duty.