2009 (10) TMI 770 - AT - Central Excise

Summary

Issues Involved:
1. Diversion of imported polyester texturised yarn without payment of appropriate customs and Central Excise duty.
2. Liability of duty payment between supplier EOUs and GCUL.
3. Validity and forgery of CT-3 certificates and re-warehousing certificates.
4. Conspiracy and involvement of supplier EOUs and GCUL.
5. Invocation of extended period for demand.

Summary:

1. Diversion of Imported Yarn:
The Commissioner held that the two appellant companies diverted imported polyester texturised yarn (PTY) without paying appropriate customs and Central Excise duty into the domestic market under the guise of clearance to another 100% EOU.

2. Liability of Duty Payment:
The Commissioner ordered Sanand Textile Industries Ltd. (STL) to pay Rs. 1,22,82,067/- with interest and Karan Fibers and Fabrics Ltd. (KFL) to pay Rs. 33,59,013/- with interest. Penalties u/s 11AC and Rule 209A were also imposed on STL and KFL. The appellants argued that the responsibility to carry goods to the factory premises for production and manufacture of export goods shifted to GCUL once the goods were taken possession of by GCUL at Bhivandi, as per CT-3 certificates and B-16 bond executed by GCUL.

3. Validity and Forgery of Certificates:
The investigation revealed that GCUL obtained CT-3 certificates by replacing the raw material sheet attached to the MOU in the divisional office of Central Excise and forged project authority certificates. The Commissioner found that the CT-3 certificates and re-warehousing certificates were forged, making them null and void ab initio.

4. Conspiracy and Involvement:
The Commissioner concluded that the evasion occurred due to a conspiracy involving supplier EOUs, brokers, and GCUL. The supplier EOUs were found to have played a role in sending goods to the local market and completing paper transactions to avoid detection. The appellants contested this, arguing that there was no evidence of their involvement in the conspiracy.

5. Invocation of Extended Period:
The appellants argued that the demand was issued beyond the stipulated period of six months and was time-barred. The Commissioner, however, invoked the extended period due to fraud and forgery. The Tribunal noted that the rule provides for recovery of duty from the receiver who got the exempted goods and questioned the invocation of the extended period against the suppliers.

Conclusion:
The Tribunal found that the provisions of Chapter X procedure, terms and conditions in the bond, and the transactions between the supplier and the purchaser EOUs were not considered in depth. The matter was remanded back to the Original Adjudicating Authority for fresh adjudication, with instructions to consider the liability of GCUL in greater detail and only if legally there cannot be a liability on GCUL, consider the liability of appellant companies. The impugned order was set aside.