2015 (4) TMI 1015 - AT - Customs

Duty demand - DTA Clearances - Shortage of goods - Confiscation - Imposition of redemption fine and penalty - Held that - Adjudicating Authority has not given option for payment of the penalty of 25% of the duty along with entire duty and interest within 30 days from the date of receipt of Adjudication order as per Section 11AC of Central Excise Act, 1944. The High Court of Gujarat in the case of CCE, Surat Vs Rajshree Mill Pvt Ltd - 2014 (9) TMI 291 - GUJARAT HIGH COURT . held that the assessee is entitled to get an option for payment of reduction of penalty 25% of duty within 30 days from the date of receipt of Adjudication order, by the Adjudicating Authority. Regarding the other issue, the Larger Bench of the Tribunal in the case of Shiv Kripa Ispat Pvt Ltd (2009 (1) TMI 124 - CESTAT MUMBAI) held that if the goods are not available for seizure, confiscation and redemption amount cannot be sustained. Regarding the demand of Customs duty on the raw material used in the manufacture of final products, we find that the Adjudicating Authority had also confirmed demand of Central Excise duty on the finished product, which has been paid by the appellant. The Tribunal in the case of Sanjay Twisters (2007 (9) TMI 369 - CESTAT, AHMEDABAD) rejected the appeal of the Revenue on the identical issue and held that duty demanded on duty free imported raw material by availing the exemption notification used in final product, cleared in DTA and demand of Central Excise duty was raised, Customs duty on raw material cannot be sustained. Regarding the imposition of penalty on the Director, it is noticed that separate penalties were imposed under the Customs Act and Central Excise Act, which cannot be sustained. - demand of Customs duty alongwith interest and penalty under the Customs Act are set aside. The confiscation of the goods which is not available and imposition of redemption fine are also set aside - Decided in favour of assessee.

Summary

Issues:
1. Demand of Central Excise duty, interest, and penalties on duty-free imported material used in finished products.
2. Demand of Customs duty on raw materials consumed in finished goods.
3. Confiscation of goods and imposition of redemption fine.
4. Imposition of penalties on the Director under Central Excise Act and Customs Act.

Analysis:

Issue 1: Demand of Central Excise duty, interest, and penalties on duty-free imported material used in finished products:
The appellants, a 100% EOU engaged in manufacturing Twisted Yarn, faced demands for Central Excise duty and interest amounting to Rs. 6,30,258 along with penalties. The Adjudicating Authority confirmed these demands due to the usage of duty-free imported material in finished products cleared in DTA. The Commissioner (Appeals) modified the order reducing the redemption fine. The Learned Advocate did not dispute the duty and interest payment but argued for a penalty reduction based on Section 11AC of the Central Excise Act. The Tribunal agreed, citing precedents and granted the penalty reduction option.

Issue 2: Demand of Customs duty on raw materials consumed in finished goods:
The demand for Customs duty on raw materials used in finished goods was contested by the appellants since Central Excise duty on finished products had already been paid. The Tribunal referred to previous rulings and rejected the Customs duty demand, aligning with the decision that duty on duty-free imported raw material used in final products cleared in DTA cannot be sustained.

Issue 3: Confiscation of goods and imposition of redemption fine:
The Tribunal found that if goods are not available for seizure, confiscation and redemption fines cannot be upheld. Therefore, the confiscation of unavailable goods and the redemption fine were set aside.

Issue 4: Imposition of penalties on the Director under Central Excise Act and Customs Act:
Separate penalties imposed on the Director under the Central Excise Act and Customs Act were deemed unsustainable by the Tribunal. Consequently, the penalty under the Customs Act on the Director was set aside, and the penalty under the Central Excise Act for the Appellant Company was allowed to be paid at a reduced rate within a specified timeframe.

In conclusion, the Tribunal modified the impugned order by setting aside the demand of Customs duty, interest, and penalties under the Customs Act, along with the confiscation of unavailable goods and redemption fine. The penalty on the Director under the Customs Act was also set aside. The Appellant Company was granted the option to pay a reduced penalty under the Central Excise Act within a specified timeframe.