2013 (10) TMI 360 - AT - Customs

Illicit diversion of the imported CPO / non edible vegetable oil - import was made at concessional rate of duty for manufacturing of soap - Non use of caustic soda - stay - Held that - the Appellant have not be able to establish a prima facie in their favour and, therefore, conditions have to be imposed for safeguarding the interests of the Revenue. In fact, the appellant appear to have committed a huge fraud, the ramifications of which go beyond mere tax evasion as it is common knowledge that non-edible vegetable oil imported for manufacture of soap are illicitly diverted on large scale for adulteration of edible oils. Such fraudsters do not deserve the dispensation under the provisions of first provision to Section 129E of the Customs Act, 1962. - Appellant directed to make pre-deposit of duty with portion of interest and penalty - stay granted in respect of portion of interest and penalty.

Summary

Issues Involved:
1. Illicit diversion of imported Crude Palm Oil (Non-edible grade) for purposes other than manufacturing soap.
2. Validity of End Use Certificates issued by the Jurisdictional Assistant Commissioner.
3. Evidence supporting the purchase of Caustic Soda, a key raw material for soap manufacturing.
4. Authenticity of transportation records for the manufactured soap.
5. Existence and authenticity of the buyers of the manufactured soap.
6. Outstanding payments indicating bogus transactions.
7. Imposition of custom duty, interest, and penalties on the Appellant.

Detailed Analysis:

1. Illicit Diversion of Imported Crude Palm Oil:
The Appellant, M/s. Satkar Enterprises, imported 2721.054 MTs of Crude Palm Oil (Non-edible grade) at a concessional rate of duty for the manufacture of soap. However, an investigation by DGCEI officers revealed that the imported oil was not used for the intended purpose. The factory was inspected, and it was found that there were no significant raw materials or workers present, indicating that soap manufacturing was not taking place.

2. Validity of End Use Certificates:
The Jurisdictional Assistant Commissioner issued End Use Certificates certifying that the imported oil was used for soap manufacturing. However, during the investigation, the Assistant Commissioner admitted that these certificates were issued based on records without any physical verification. Therefore, the certificates were deemed unreliable as evidence of compliance.

3. Purchase of Caustic Soda:
Caustic Soda, a crucial raw material for soap manufacturing, was claimed to have been purchased from M/s. Punjab Sales Corporation. However, the proprietor of this company denied any such transactions and stated that the payments received were returned to the Appellant. This contradiction undermined the Appellant's claim of manufacturing soap.

4. Transportation Records:
The Appellant claimed that the manufactured soap was transported by M/s. Garcha Transport. However, the proprietor of this transport company denied transporting any goods for the Appellant and stated that the GRs found were fabricated. This further supported the claim that no soap was actually manufactured or transported.

5. Existence and Authenticity of Buyers:
The Appellant listed several buyers for the soap, including M/s. Dee Ess Trading Co., M/s. Ellora Sales, and others. Investigations revealed that most of these entities were non-existent or denied purchasing any soap from the Appellant. This pointed to the fictitious nature of the sales transactions.

6. Outstanding Payments:
The ledger of the Appellant company showed substantial outstanding payments from the purported buyers, totaling Rs. 5,15,46,247/-. This amount of outstanding payment itself appeared to be a clear indication that the transactions regarding the sale of soaps were bogus.

7. Imposition of Custom Duty, Interest, and Penalties:
Based on the investigation, a Show Cause Notice was issued for the recovery of custom duty amounting to Rs. 2,82,66,966/-, along with interest and penalties under sections 112 and 114A of the Customs Act, 1962. The Commissioner confirmed the demand and imposed penalties. The Appellant's appeal was heard, and it was determined that they failed to establish a prima facie case in their favor. Consequently, the Tribunal directed the Appellant to deposit a significant amount towards duty, interest, and penalty within eight weeks, with the balance amount's recovery stayed upon compliance.

Conclusion:
The Tribunal concluded that the Appellant committed a substantial fraud by illicitly diverting the imported Crude Palm Oil and fabricating records of soap manufacturing and sales. The evidence, including statements from suppliers, transporters, and purported buyers, supported this conclusion. The Tribunal imposed strict conditions for pre-deposit to safeguard revenue interests, reflecting the severity of the violations.