2015 (1) TMI 322 - Commissioner - Customs

Demand of differential duty - Confiscation of goods - Exemption of Notification No. 21/2002-Cus., dated 1-3-2002 - Since, the appellant has paid C.V.D. and they were not manufacturing newsprint, the adjudicating authority has decided that the goods imported under exemption was not used for intended purpose and denied the exemption of Notification No. 21/2002-Cus., dated 1-3-2002 availed by the appellant - Held that - Appellant have not approached to the jurisdictional Assistant Commissioner of Central Excise for the required certificate but the preventive officers of Central Excise have searched the premises of the appellant as well as SPPML drawn panchnama, withdrawn records for investigation, recorded the statements and even recovered the Cenvat credit on the goods cleared to SPPML by the appellant. After in-depth investigation they found that the appellant have not complied with the condition (b) referred above and also diverted the 1275.201 MT of segregated white waste paper to SPPML a newsprint manufacturer. It was not found in the investigation that SPPML has further diverted the 1275.201 MT of Waste Paper received by them from the appellant. There is no allegation that SPPML has not manufactured newsprint from the 1275.201 MT of Waste Paper received by them from the appellant. The appellant has submitted a certificate dated 9-4-2014 duly certified by Chartered Accountant; certifying that the impugned goods of 1275.210 MTS of waste paper was received by SPPML and consumed in the activity of making newsprint. The substantive condition of the notification is the specified use of the imported goods and to verify the compliance of this substantive condition procedural condition of Sr. No. 20(b) was specified. It is proved beyond doubt that the appellants have complied the substantive condition of the notification. The show cause notice of the present case itself stands as certificate in this regard. Therefore, exemption of the Basic Customs Duty provided by the Notification No. 21/2002-Cus., dated 1-3-2002 as amended cannot be denied. Goods are not liable for payment of differential customs duty and confiscation. Since, there is no confiscation of goods and demand of differential duty is also not sustainable, penalties under Section 114A and 112 are also not imposable. - Decided in favour of assessee.

Summary

Issues Involved:
1. Violation of Notification No. 21/2002-Cus.
2. Non-payment of differential Customs duty.
3. Non-reversal of Cenvat credit.
4. Confiscation of goods.
5. Imposition of penalties under Sections 114A and 112 of the Customs Act, 1962.
6. Requirement of pre-deposit for appeal.
7. Compliance with end-use conditions and submission of certificates.

Issue-wise Detailed Analysis:

1. Violation of Notification No. 21/2002-Cus.:
The appellant No. 1 imported waste paper under Customs Tariff Heading 4707 90 00 at a concessional rate of duty for manufacturing kraft paper. The Central Excise Officers discovered that 1275.210 MT of waste paper was diverted to a sister concern, M/s. Shah Paper & Pulp Mills Ltd. (SPPML), without fulfilling the conditions of Notification No. 21/2002-Cus., dated 1-3-2002. The appellants admitted to this diversion without paying differential Customs duty or reversing Cenvat credit, violating the notification and the bond undertaking.

2. Non-payment of Differential Customs Duty:
The adjudicating authority confirmed the demand for differential Customs duty amounting to Rs. 10,34,744/- along with interest, as the appellants failed to use the imported goods for the specified intended purpose, thereby violating the conditions of the notification.

3. Non-reversal of Cenvat Credit:
The appellants did not reverse the Cenvat credit availed on 842.08 MT out of the 1275.210 MT segregated waste, further violating the conditions of the notification.

4. Confiscation of Goods:
The adjudicating authority confiscated the goods under Section 111(o) of the Customs Act, 1962, with a redemption fine of Rs. 16,00,000/-.

5. Imposition of Penalties:
Penalties were imposed on appellant No. 1 under Section 114A (Rs. 10,34,744/-) and on appellant Nos. 2 and 3 under Section 112 (Rs. 1,60,000/- each) of the Customs Act, 1962.

6. Requirement of Pre-deposit for Appeal:
The appellants initially sought waiver of pre-deposit, arguing no suppression of facts and non-liability for duty on unusable waste. The interim order directed them to deposit 50% of the duty and penalty. Subsequent modification applications were rejected. The Hon'ble CESTAT, Mumbai Bench, remanded the case back to the Commissioner (Appeals) to decide afresh on merits without insisting on pre-deposit.

7. Compliance with End-use Conditions and Submission of Certificates:
The appellants contended that the goods were used for manufacturing newsprint, supported by a chartered accountant's certificate. The investigation confirmed the substantive condition of the notification was met, as the goods were used for the intended purpose. However, the procedural requirement of obtaining a certificate from the jurisdictional Central Excise authority was not fulfilled.

Findings:
The Commissioner (Appeals) concluded that the substantive condition of the notification was met, as the goods were used for the intended purpose of manufacturing newsprint. The procedural lapse of not obtaining the certificate did not warrant denial of the exemption. The investigation by Central Excise confirmed the use of goods for the specified purpose, and no evidence suggested further diversion by SPPML.

Order:
The Commissioner (Appeals) set aside the impugned Order-in-Original No. 5114/2010 AM (I), dated 2-7-2010, and allowed the present three appeals, thereby nullifying the demand for differential duty, confiscation, and penalties.