2016 (1) TMI 1060 - AT - Central Excise

100% EOU - diversion of duty free material - Notification No.52/2003-Cus, dated 31.03.2003 - Whether non-accountal in statutory records but accountal in gate register and Form IV, etc. could be considered as due compliance for accountal of duty free receipts of goods and not liable to imposition of redemption fine and penalty - third member decision. Held that - As the entire Show Cause Notice is predicated upon the appellant having violated the said Rule 7(b), jurisprudentially Show Cause Notice is not sustainable and the lower authorities have travelled somewhat beyond the Show Cause Notice by involving condition 3(b) of Notification No.52/2003-Cus, which is not permitted for them to do. As has been brought out, the goods had arrived just a few days before the visit of the central excise officers, and re-warehousing was not complete and therefore the appellant s contention that the goods were not entered in the re-warehousing register as re-warehousing had not been completed is not unreasonable. However, it comes out that the goods were not only entered in the gate register as noted by the ld. Member (Technical) but also entered in the raw-material register. In addition, the goods were actually duly found in the factory and it is not a case that there was any shortage noticed. It is also to be noted that these goods are imported only after a certificate authorising their import is given by a central excise officer and thus, the central excise officers are in the know of the duty free imports authorised by them for the 100% EOU. Impugned order is set aside and the appeal is allowed with consequential relief to the appellant. - Decided in favor of assessee.

Issues Involved:

1. Non-accountal of duty-free imported goods in statutory records.
2. Applicability of Rule 7(b) of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.
3. Compliance with Notification No. 52/2003-Cus dated 31.03.2003.
4. Justification for confiscation and imposition of penalties.

Detailed Analysis:

1. Non-accountal of Duty-Free Imported Goods in Statutory Records:

The appellant, a 100% EOU, imported Greek raw cotton duty-free under Notification No. 52/2003-Cus. The goods were recorded in the gate register, stock register, and appendix 18. However, during a visit by Central Excise officers, it was found that the goods were not entered in the statutory records required under Rule 7(b). The appellant argued that the goods were recorded in the necessary registers and that the lapse was not intentional. The lower authorities confiscated the goods and imposed penalties based on this non-accountal.

2. Applicability of Rule 7(b) of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996:

The primary argument from the Revenue was that the appellant violated Rule 7(b), which mandates informing the Revenue about the receipt of imported goods within two days and maintaining a simple account of the goods. The appellant contended that Rule 7(b) did not apply to them as their imports were under Notification No. 52/2003-Cus, which does not prescribe adherence to these rules. The Tribunal noted that Rule 2(1A) specifies that the rules apply only if the exemption notification mandates it, which was not the case here.

3. Compliance with Notification No. 52/2003-Cus dated 31.03.2003:

The appellant maintained that they complied with the notification by recording the goods in the gate register, stock register, and appendix 18, and that these records were submitted to the department. The Tribunal found that the notification did not require adherence to Rule 7(b) and that the goods were properly accounted for in the appellant's records.

4. Justification for Confiscation and Imposition of Penalties:

The lower authorities justified the confiscation and penalties based on the alleged non-compliance with Rule 7(b). However, the Tribunal found that the goods were duly entered in the relevant registers and that there was no evidence of malafide intent to misuse the duty-free import benefits. The Tribunal concluded that the confiscation and penalties were not justified.

Separate Judgments:

Majority Judgment (Member Judicial and Member Technical R.K. Singh):

The majority found that the appellant was not required to follow Rule 7(b) as the notification did not mandate it. They noted that the goods were properly recorded in the gate register and stock register and that there was no evidence of intent to misuse the duty-free benefits. Consequently, the confiscation and penalties were set aside.

Dissenting Judgment (Member Technical Manmohan Singh):

The dissenting member held that the appellant failed to comply with the mandatory requirements of Rule 7(b) and the notification. He argued that proper accountal in the statutory records was essential and that the appellant's failure to do so indicated a potential for misuse of the duty-free benefits. He upheld the confiscation but reduced the penalty.

Final Order:

In view of the majority decision, the impugned order was set aside, and the appeal was allowed with consequential relief to the appellant.

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