2012 (12) TMI 430 - AT - Central Excise

Penalty alleged that appellant neglected the obligations cast on him under Rules and Law and on this ground penalty under Section 11AC has been imposed Held that - No suppression of facts or misdeclaration has been clearly brought out for imposing penalty under Section 11AC - contravention of some statutory provision relating to accounting for the goods, furnishing the proof of export and re-warehousing certificates etc. and it is definitely not a case where duty is required to be demanded since the goods have been accounted for and exported, the question of demand of duty does not arise - there is no proposal in the show cause notice to impose penalty for contravention of rules and proposal is for imposing penalty under Section 11AC of the Central Excise Act, 1944 only - penalty under Section 11AC of the Central Excise Act, 1944 also cannot be sustained

Summary

Issues:
1. Failure to submit proof of export within the stipulated period.
2. Return of goods to the appellant's factory premises.
3. Duty demand, interest, and penalty under Section 11AC of the Central Excise Act, 1944.
4. Waiver of pre-deposit and grant of stay against recovery.
5. Imposition of penalty for neglecting obligations under rules and law.

Issue 1: Failure to submit proof of export within the stipulated period
The appellant had cleared goods to an SEZ unit without payment of duty under Rule 19 of the Central Excise Rules, 2002. However, they failed to submit proof of export within the required 45 days, leading to a show cause notice for duty demand, interest, and penalty under Section 11AC of the Central Excise Act, 1944. The appellant argued that due to commercial problems with their transporter, the goods were returned to their factory premises after more than six months. The Range Superintendent was only informed after this return, triggering the duty demand proceedings. The Tribunal noted that the purpose of the 45-day requirement is to prevent diversion of goods and ensure timely duty payment. In this case, as the goods were ultimately accounted for and cleared to the SEZ unit, the duty demand was deemed unsustainable.

Issue 2: Return of goods to the appellant's factory premises
The appellant informed the Range Superintendent about the return of goods to their factory premises due to delays and modifications requested by the SEZ customer. They requested the cancellation of relevant documents and dispatch afresh with new documentation. The appellant sought an extension of time to comply with the terms of the agreement with the SEZ customer. The Tribunal acknowledged the procedural lapses but emphasized that the goods were not diverted for domestic use, and duty demand was not justified in the absence of any failure to account for the manufactured goods.

Issue 3: Duty demand, interest, and penalty under Section 11AC
The show cause notice alleged that the appellant failed to apply for an extension of the time limit for proof of export and received the goods back without permission after more than six months. This led to a duty demand of Rs. 4,70,813/- with interest and penalty under Section 11AC. Despite the technical and procedural omissions by the appellant, the Tribunal found that the duty demand was not sustainable as the goods were accounted for and ultimately cleared to the SEZ unit. The Tribunal waived the requirement for pre-deposit and proceeded to decide the appeal on its merits.

Issue 4: Waiver of pre-deposit and grant of stay against recovery
Although the matter was listed for considering the request for waiver of pre-deposit and stay against recovery, the Tribunal, after hearing both sides, waived the pre-deposit requirement. The appeal was taken up for final decision due to the technical and procedural nature of the appellant's omissions in the case. The Tribunal considered the submissions in detail and concluded that the duty demand and penalty imposed were not justified given the circumstances of the case.

Issue 5: Imposition of penalty for neglecting obligations under rules and law
The adjudicating authority imposed a penalty under Section 11AC on the grounds that the appellant neglected obligations under rules and law. However, the Tribunal found that there was no suppression of facts or misdeclaration warranting such a penalty. The case was deemed a contravention of statutory provisions related to accounting for goods and proof of export, rather than a case necessitating duty demand. The Tribunal set aside the impugned order, allowed the appeal, and disposed of the stay petition.

In conclusion, the Tribunal set aside the duty demand, interest, and penalty imposed on the appellant for failure to submit proof of export within the stipulated period. The Tribunal emphasized that the procedural lapses did not warrant duty payment as the goods were ultimately accounted for and cleared to the SEZ unit. The waiver of pre-deposit and the allowance of the appeal underscored the technical and procedural nature of the omissions by the appellant, leading to the dismissal of the penalty under Section 11AC for neglecting obligations under rules and law.