2017 (5) TMI 807 - AT - Central Excise

Diversion of goods for local consumption - Goods cleared under ARE-3 to 100% EOU/SEZ units - non-production of re-warehousing certificates - demand of duty with interest - penalties u/s 11AC read with Rule 25 and 27 - Held that - Non submission of re-warehousing certificate is an admitted fact as the said re-warehousing certificate has to be on the reverse of the ARE-3 form. This in itself cannot be conclusive of fact that the appellant might have diverted the goods cleared under ARE-3 for local consumption - duty liability with interest upheld since appellant has not produced the re-warehousing certificate within the stipulated time. As regards the penalty of equivalent amount on the appellant under section 11AC of the Central Excise Act, 1944 read with Rule 25 and 27 of the CER 2002, this penalty is unwarranted for the simple reason that the departmental officers were aware that the goods were cleared from the appellant s factory under ARE-3 and CT3. Further certificate from recipient of goods is also categorical that they had received the goods - penalty set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Duty liability and interest on goods cleared under ARE-3 to 100% EOU/SEZ units.
2. Non-production of re-warehousing certificates.
3. Imposition of penalty under Section 11AC of the Central Excise Act, 1944 read with Rule 25 and 27 of the Central Excise Rules 2002.

Analysis:

Issue 1: Duty Liability and Interest
The appellant cleared consignments of final products under ARE-3 to their customers. The lower authorities alleged that the goods were diverted for local consumption due to the non-production of re-warehousing certificates within 90 days. The duty liability and interest were demanded along with penalties. The appellant had already discharged the duty liability and interest, which was confirmed by the concerned officers. The Tribunal upheld the duty liability and interest payment by the appellant as correct and valid.

Issue 2: Non-Production of Re-warehousing Certificates
The primary issue revolved around the non-production of re-warehousing certificates within the stipulated time. The Tribunal noted that the goods were cleared under ARE-3 to SEZ/100% EOU units, and the department was aware of this fact. The absence of re-warehousing certificates, although an admitted fact, was not conclusive evidence of diversion for local consumption. The Tribunal held that the non-submission of re-warehousing certificates did not automatically imply an intention to evade duty payment.

Issue 3: Imposition of Penalty
Regarding the imposition of penalties under Section 11AC of the Central Excise Act, 1944 read with Rule 25 and 27 of the Central Excise Rules 2002, the Tribunal found the penalties unwarranted. It was emphasized that there was no intention to evade duty payment through suppression, wilful misstatement, fraud, or collusion, as required under Section 11AC. The appellant had cleared the goods under proper documentation, and the recipients had confirmed the receipt of goods. Therefore, the Tribunal concluded that the penalties imposed by the lower authorities were incorrect and set them aside.

In conclusion, the Tribunal upheld the duty liability and interest payment by the appellant while setting aside the penalties imposed under Section 11AC and Central Excise Rules. The appeal was disposed of with the decision pronounced on 12/04/2017.