2016 (7) TMI 223 - AT - Customs

Demand of duty for non-export of imported marble after processing - Revenue alleged that There was discrepancy of imported marbles noticed on physical examination. Appellant did not maintain properly. There was diversion of imported material and indigenous material were only exported. - Held that - Revenue found stock discrepancy, that went against appellant. When the probability is weighed, the appellant failed to prove leading cogent evidence that exports were made out of the foreign materials imported. Physical verification results demonstrated discrepancy of stock which was acknowledges by appellant. Revenue need not prove where the discrepant goods have gone. It is assessee to explain the shortfall. But failed to do so. Demand of duty confirmed - redemption fine and penalty reduced to some extent - Decided against the appellant.

Summary

Issues: Alleged diversion of imported goods, imposition of redemption fine, imposition of penalties under various sections, improper maintenance of records

Alleged Diversion of Imported Goods:
The appellant argued that the imported goods, after being polished, were exported without discrepancies in the stock record. However, the Revenue contended that there were lapses in stock records, discrepancies in physical examination, and diversion of imported material, leading to the export of only indigenous material. The Revenue alleged that the exports were not made from the imported marbles, resulting in a breach of import conditions and loss of revenue. The Hon'ble Madras High Court precedent was cited, stating that stock discrepancies could indicate clandestine removal of goods. The appellant failed to provide credible evidence to reconcile the stock discrepancy, shifting the burden of proof to them. The physical verification revealed a stock discrepancy that the appellant acknowledged, but failed to explain satisfactorily. Consequently, the adjudication order was upheld based on the evidence presented.

Imposition of Redemption Fine:
Regarding the redemption fine, since the goods were exported under bond, a redemption fine was deemed justifiable for misdeclaration. The value of the goods was considered, leading to the imposition of a redemption fine of ?10 lakhs. However, the imposition of the fine was deemed to lack a proper basis, resulting in a reduction of the redemption fine to ?10 lakhs by the appellate tribunal.

Imposition of Penalties:
Three penalties were imposed under different sections. The penalty under Section 114(iii) was initially set at ?10 lakhs for attempting to export goods improperly. Despite the imposition of a redemption fine, this penalty was reduced to ?4 lakhs. The penalty under Section 114 AA, initially at ?5 lakhs for incorrect particulars furnished for exports, was reduced due to disproportionality but the exact reduced amount was not specified in the summary. The third penalty under Section 117, a residuary penalty, was reduced from ?2 lakhs to ?1 lakh. The penalty under Rule 27 of Central Excise Rules, 2002, for improper maintenance of records was upheld, denying relief to the appellant on this count.

In conclusion, the redemption fine was reduced to ?10 lakhs, penalties were reduced to ?4 lakhs under Section 114(iii), an unspecified amount under Section 114 AA, and ?1 lakh under Section 117. The penalty under Rule 27 of Central Excise Rules, 2002, was maintained. The appeal was allowed to the extent of the reductions in fines and penalties.