2007 (10) TMI 17 - AT - Central Excise

EXIM DEEC scheme Demand were raised on appellant on the ground of non-fulfillment of export obligation and diversion of raw material but appellant view is that they fulfilled export obligation subsequent to visit of the officers and also no diversion of raw material Held that demand not sustainable

Summary

Issues Involved:
1. Mis-utilization of imported raw material.
2. Demand for duty and interest under Section 28(1) and Section 28AB of the Customs Act.
3. Confiscation of goods under Section 111(o) of the Customs Act.
4. Imposition of penalty under Section 114A and Section 112(a) of the Customs Act.
5. Jurisdiction of customs authorities in demanding duty post-certification by JDGFT.

Detailed Analysis:

1. Mis-utilization of Imported Raw Material:
The respondents imported 3196.973 MTs of slab ends under the DEEC Scheme, with an obligation to export 1000 MTs of non-alloy steel bars and rods. Upon investigation by DRI, it was found that only 273.950 MTs were exported by the respondents, and there was no stock of raw material to manufacture the remaining quantity required to fulfill the export obligation. The DRI alleged that 2826.09 MTs of imported raw material were misutilized for purposes other than fulfilling the export obligation, contravening Notification No. 203/92.

2. Demand for Duty and Interest:
The DRI issued a show cause notice demanding duty of Rs. 1,29,39,800/- on the misutilized raw material, with interest under Section 28AB of the Customs Act. The Chief Commissioner of Customs confirmed the demand with interest at 24% p.a. and imposed an equal amount of penalty under Section 114A. The respondents contested this, and the Commissioner of Customs (Exports) dropped the proceedings after remand by the Tribunal.

3. Confiscation of Goods:
The Chief Commissioner of Customs ordered the confiscation of goods under Section 111(o) of the Customs Act, with an option for redemption against a fine of Rs. 13.00 lakhs under Section 125. This was also contested and subsequently dropped by the Commissioner of Customs (Exports).

4. Imposition of Penalty:
Penalties were imposed on the company and its Chairman under Sections 114A and 112(a) of the Customs Act. The Tribunal remanded the case, and the Commissioner of Customs (Exports) dropped the penalties after re-evaluation.

5. Jurisdiction of Customs Authorities:
The respondents argued that they had sufficient stock of finished goods and raw materials to fulfill the export obligation and that JDGFT, Hyderabad had certified the discharge of export obligation. They contended that customs authorities had no jurisdiction to demand duty post-certification. The Commissioner found that the respondents had sufficient finished goods and raw materials to meet the export obligation and accepted the JDGFT's certification as valid evidence.

Conclusion:
The Tribunal found no merit in the Revenue's appeal. It upheld the Commissioner's findings that the respondents had sufficient stock to fulfill the export obligation and that the JDGFT's certification was valid. The Tribunal dismissed the Revenue's appeal, sustaining the order of the Commissioner and vacating the demand for duty and penalties. The decision emphasized that there was no evidence of physical diversion of raw materials for purposes other than fulfilling the export obligation under the VABAL.