2007 (9) TMI 168 - AT - Central Excise

If 100% EOU clear goods to DTA in pursuance to valid CT-3 certificate he cannot be alleged of goods diverted to open market Duty paid before SCN so penalty not sustainable

Summary

Issues:
Penalties imposed under Rule 25 read with Section 11A of Central Excise Act on 100% EOU for clearance of goods to another 100% EOU without payment of duty.

Analysis:

1. The appellants, a 100% EOU, filed appeals against penalties imposed for clearing goods to another 100% EOU without duty payment on production of necessary CT certificates. The revenue requested re-warehousing of certificates for the cleared consignments. The appellants failed to produce necessary certificates initially but later paid the duty with interest for the consignment in question.

2. Show cause notices were issued, demand and penalties were confirmed, and amounts deposited by the appellants were appropriated. The adjudicating authority found no willful intention to evade duty as goods were cleared against valid CT-3 certificates in the presence of excise officers. The authority dropped penalty proceedings considering the duty payment before the notice. However, penalties were imposed by the Commissioner (Appeals) in the impugned order.

3. The appellant contended that goods were cleared against valid CT certificates in the presence of excise officers, with no evidence of diversion to DTA. The jurisdictional officer confirmed non-receipt of goods against the CT certification in question. The appellant argued that since goods were cleared with valid CT certificates, there was no diversion.

4. The revenue argued that as goods were cleared without duty payment as per procedure, the appellants should prove intended use. Since they failed to do so, penalties were justified. The revenue relied on the Commissioner (Appeals) finding that goods were diverted to the open market.

5. The judgment noted that duty was paid with interest before the show cause notice. It was observed that the Commissioner (Appeals) held the appellants diverted goods to the open market without any evidence or affidavit from the appellants to counter this claim.

6. The judgment emphasized the lack of evidence showing diversion to the open market. Goods were cleared with valid CT-3 certificates, and the revenue did not dispute their validity. Citing a previous case, it was concluded that if duty is paid before the show cause notice, penalty imposition is not sustainable.

7. Considering the above discussion, the judgment found merit in the appellant's contention. The impugned order was set aside, and the appeals were allowed.