2016 (8) TMI 1283 - AT - Customs

Levy of penalty - violation of import conditions - import of Non Alloy Steel melting scrap from Singapore during the period 1999 to 2001 - the allegation is that such scraps were not used in the manufacture but were diverted elsewhere - According to appellants the allegation made as above was merely on the basis of certain statements recorded without any evidence - main argument which has repeatedly been adduced by the learned Advocate is that the end use certificate issued by the Deputy Commissioner Srimati Parvathi Kailasam proves the receipt of the imported scrap in the factory of the appellant and its use in the manufacturer. Held that - in the Central Excise Act and Customs Act the adjudications are done under distinct provisions of different statutes under different premises of law in order to effectuate provisions of that Act only. Besides the standard of burden of proof is different in the case of cenvat credit and in the case of availing exemption notification. It is settled law that the conditions for availing the exemption notification have to be strictly interpreted Further acceptance of certificate given by Deputy Commissioner Smt. Kailasam in the import of pipes cannot validate the end-use certificate for other imports. The circumstances of the issuance of this certificate being abnormal and contrary to established procedures with no physical examination of goods raises serious question about its admissibility. In view of these facts the argument that the certificate should be accepted is not tenable particularly given dubious methodology of issuance of certificate writ large on the circumstances - the certificate of the Deputy Commissioner Mrs. Parvathi Kailasam is not an admissible piece of evidence. The main basis of examination was whether there was mens rea in her action or not. Any finding on that fact cannot take away from the entire set of evidences in the present proceedings which point to issuance of a dubious end use certificate. The appellant failed to produce production records before the search party for verification of any clearance. No proof was shown that the imported scrap was received in the factory and used in the manufacture. As a matter of fact no document of import was available in the said premises and the investigating team were told that the documents were with the CHA. When the CHA was examined he denied the possession of the said documents. Thus the appellant not only could not produce the documents they also tried to mislead the investigating team. This show that the statement of Shri A.V. Subba Reddy MD of the appellant company was false and misleading. The appellants have argued that there was presumption by the Customs Commissioner that the goods without being transported to the factory of the appellant were diverted from the premises of Kothari Group of Companies or elsewhere. The plea of the appellant is that the goods were transported through alternate routes which were economic for them. We find that the appellant have failed to substantiate transport of the imported scrap from godown of Kothari Group of Companies. While the bills of entry had destination as Cuddapah in Andhra Pradesh imported scrap after clearance appears to have been unloaded in godown at Thondiarpet and M/s. Kamachi Steels in Chennai which belonged to Kothari group of Companies. Transport from those premises to the factory of the appellant has not been proved or documented by them. Since it was a question of availment of exemption notification burden of proof was squarely on the appellant which was not discharged. As for cross examination of the Commercial tax officer no prejudice has been caused to the appellants as their own claim is that they transported entire 15, 000 tons via alternate routes. The appellant have also argued that there has been no enquiry for transport of the goods from Kothari godown to the factory nor source of replenishment was investigated. In this regard we find that the present case is about availment of duty exemption for the basic customs duty. In the case of availment of exemption the burden is on the importer to improve that the goods have actually been received in the factory and used for manufacture. We find that the appellants have failed to discharge that burden. he impugned goods never reached the factory of the appellant and were not used in the factory for intended manufacture. As a result the appellant failed to fulfill the condition of the notifications mentioned in the show cause notice rendering the goods liable to confiscation. Commissioner has therefore rightly confirmed the demand of duty from appellant no1 and imposed penalty on appellant no 1 - he role of Shri A.V. Subba Reddy and Sh. D. Ramana Reddy in diversion of the impugned goods and rendering them liable to confiscation has been correctly analysed by the Ld. Commissioner in para 20 and 21 of the impugned order. Penalties imposed against both of them are also upheld. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Validity of the end-use certificate issued by the Deputy Commissioner.
2. Whether the imported scrap was transported to and used in the appellant's factory.
3. Compliance with the conditions of the exemption notifications.
4. Adequacy of evidence and burden of proof.
5. Role of other parties (Shri Shantilal Kothari, Shri Pradeep Kabra, CHA, and transporter).
6. Admissibility of statements and other evidence.
7. Penalties imposed on the appellants.

Detailed Analysis:

1. Validity of the End-Use Certificate:
The end-use certificate issued by Deputy Commissioner Smt. Parvathi Kailasam was deemed unreliable. The Deputy Commissioner issued the certificate at the appellant's request without mandatory verification from the concerned field office or keeping a copy in office records. The certificate was based on records presented by the appellants without physical verification of the receipt or use of imported scrap. Inconsistencies in her statement further cast doubt on the validity of the certificate. Consequently, the certificate was not considered admissible evidence.

2. Transportation and Use of Imported Scrap:
The investigating team could not find any imported scrap in the appellant's factory during their visit on 5.3.2002, despite the RG-23A Part-I register reflecting a closing balance of 3489 MT. The representative of the appellant, Shri D. Ramana Reddy, failed to demonstrate the existence of this quantity. The appellant's claim of transporting the scrap via alternate routes was unsubstantiated, as they failed to produce any documentation to support this claim. The burden of proof was on the appellant to establish the transport and use of the imported scrap, which they failed to discharge.

3. Compliance with Exemption Notifications:
The appellant failed to comply with the conditions of the exemption notifications (Notification No.20/99-Cus, 16/2000-Cus, and 17/2001-Cus). The goods were not transported to the factory as claimed, and the end-use certificate was found to be unreliable. Consequently, the goods were liable for confiscation, and the demand for duty was confirmed.

4. Adequacy of Evidence and Burden of Proof:
The appellant failed to produce production records or import documents during the investigation. The claim that the documents were with the CHA was refuted by the CHA's denial. The appellant's inability to produce evidence of transport and use of the imported scrap in their factory led to the conclusion that the goods were diverted elsewhere. The burden of proof was on the appellant, which they failed to discharge.

5. Role of Other Parties:
The roles of Shri Shantilal Kothari, Shri Pradeep Kabra, CHA, and the transporter were analyzed. The appellant argued that these parties were involved in the diversion of the goods. However, the Commissioner found that the responsibility for the receipt and use of the imported scrap lay with the importer (appellant). The exoneration of these parties was based on the analysis of their roles, and the appellant's claims were deemed inadequate to form any conclusion.

6. Admissibility of Statements and Other Evidence:
The statements of Shri Subba Reddy and other evidence were analyzed. The appellant's failure to produce documents and the misleading statements of Shri Subba Reddy led to the conclusion that the imported scrap did not reach the factory. The appellant's claim of transporting the goods via alternate routes was not supported by any evidence. The denial of cross-examination of the Commercial Tax Officer was upheld, as no prejudice was caused to the appellants.

7. Penalties Imposed:
The penalties imposed on the appellants were upheld. The role of Shri A.V. Subba Reddy and Shri D. Ramana Reddy in the diversion of the goods was correctly analyzed by the Commissioner. The penalties were deemed appropriate based on their involvement in the diversion and the failure to comply with the conditions of the exemption notifications.

Conclusion:
The appeals were dismissed, and the order of the Commissioner was upheld. The imported goods were found not to have reached the appellant's factory and were not used in the intended manufacture. The appellant failed to fulfill the conditions of the exemption notifications, and the penalties imposed were justified.