2008 (7) TMI 276 - AT - Central Excise

Goods cleared by 100% EOU against CT-3 Certificated re-warehousing certificate not produced goods not received by consignee goods diverted mid-way in open market liable to confiscation though not actually confiscated - penalties imposable u/r 25 of CER 2002 not u/s 72 of Customs Act said rule doesn t require order of confiscation to be passed - in respect of duty free procured raw material demand confirmation and the redemption fine in lieu of confiscation is not sustainable

Summary

Issues involved:
1. Duty demand on finished goods and raw materials
2. Imposition of penalty and confiscation of raw materials
3. Appeal against penalty imposition
4. Appeal against duty confirmation on raw materials and redemption fine

Analysis:

1. Duty demand on finished goods and raw materials:
The case involved a 100% Export Oriented Unit (EOU) engaged in the manufacture of texturised yarn and twisted yarn. The appellant cleared 5911.470 kgs of texturised yarn against CT-3 certificates to another EOU. However, as the re-warehousing certificate was not produced within the prescribed period and the consignee did not receive the goods, proceedings were initiated for duty recovery on the final product and duty-free procured raw material. The Dy. Commissioner confirmed the duty demand on finished goods and raw materials, along with imposing a penalty and confiscating the raw materials. The Commissioner (Appeals) confirmed the demand on final products but set aside the duty demand on raw materials and the confiscation, citing relevant Tribunal decisions.

2. Imposition of penalty and confiscation of raw materials:
The original Adjudicating Authority imposed a penalty and confiscated the raw materials, which was challenged by the appellant. The appellant contested the personal penalty, arguing that a cumulative penalty under Rule 25 of Central Excise Rules, 2002, read with Section 72 of the Customs Act, 1962, was impermissible since the final product was not ordered for confiscation. The Tribunal noted that the goods were diverted to the open market due to the absence of the re-warehousing certificate, constituting a violation of the law and attracting penalties. The Tribunal held that even without Section 72, penalties could be imposed under Rule 25 if the goods were liable to confiscation, regardless of whether a confiscation order was issued.

3. Appeal against penalty imposition:
The Tribunal rejected the appellant's appeal against the penalty imposition, emphasizing that penalties were rightly imposed due to the goods being diverted to the local market and being liable to confiscation, even though not actually confiscated by the authorities.

4. Appeal against duty confirmation on raw materials and redemption fine:
The Tribunal also rejected the Revenue's appeal against the duty confirmation on raw materials and the redemption fine, affirming the Commissioner (Appeals) decision based on relevant Tribunal precedents. The Tribunal found no infirmity in setting aside the duty confirmation on raw materials and the redemption fine.

In conclusion, both the appeals were rejected, upholding the duty demand on finished goods, setting aside the duty demand on raw materials, confirming the penalty imposition, and rejecting the redemption fine in lieu of confiscation of raw materials.