2017 (4) TMI 219 - AT - Central Excise

100% EOU - diversion of duty free goods in the domestic market without payment of excise duty and reflected such clearances against fake Advance Licence/Advance Release Order on paper only so as to fulfil their export obligation - whether charge of confiscation and penalty sustainable when the goods are not available for confiscation - Held that - as the goods were not available for confiscation as the goods were already diverted/permitted to be warehoused without payment of duty on furnishing the bond and the undertaking and thereafter the respondent-Unit clandestinely and illicitly diverted the goods to the open market the goods which otherwise were liable to be confiscated in lieu of confiscation redemption fine was imposable - the matter needs to be remanded to the Adjudicating Authority to ascertain the quantum of fine - appeal allowed by way of remand.

Summary

Issues:
- Appeal against order of not directing confiscation and imposition of fine by Ld Commissioner.
- Whether diversion of duty-free goods by an EOU in the domestic market without payment of excise duty is liable for confiscation and imposition of fine.

Analysis:
1. The case involves an appeal by the Revenue against the order of the Ld Commissioner, which did not direct confiscation and imposition of fine on M/s Sanjari Twisters, an EOU, for diverting duty-free goods in the domestic market without paying excise duty. The Revenue contended that the goods should be confiscated under relevant sections of the Customs Act and CEA Rules due to the diversion. The Ld AR for the Revenue argued that the EOU breached the conditions of the Bond by diverting goods meant for export to the domestic market.

2. The key legal question in this case was whether the diversion of duty-free goods by the EOU into the domestic market without payment of excise duty makes them liable for confiscation and imposition of fine. The Tribunal referred to a relevant judgment by the Hon'ble High Court of Gujarat in a similar case, where it was observed that the EOU illicitly diverted goods meant for export into the open market, breaching the conditions of the Bond. The Tribunal highlighted the provisions of Section 125 of the Customs Act, which authorize confiscation of goods in such cases and allow for the imposition of a redemption fine in lieu of confiscation.

3. The Tribunal noted that since the goods were already released on bond and warehoused without payment of duty, confiscation was not possible at the time of adjudication. Therefore, the imposition of a redemption fine was deemed appropriate in this case. The Tribunal emphasized that the breach of conditions of the Bond by the EOU justified the imposition of a fine. The judgment cited precedents from the Apex Court and Karnataka High Court to support the decision to impose a redemption fine in cases of diversion of duty-free goods.

4. Based on the legal analysis and precedents cited, the Tribunal allowed the Revenue's appeal by way of remand. The matter was remanded to the Adjudicating Authority to determine the quantum of fine imposable on M/s Sanjari Twisters for diverting duty-free goods in violation of the Bond conditions. The impugned order of not imposing a fine was set aside, and the case was directed for further proceedings to determine the appropriate fine under the circumstances of the case.