2017 (7) TMI 165 - AT - Central Excise

100% EOU - Redemption fine - goods exported are not available for confiscation - Held that - reliance placed in the case of Commissioner of Central Excise Customs and Service Tax Versus M/s Sanjari Twisters 2017 (4) TMI 219 - CESTAT AHMEDABAD where it was 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:
- Violation of conditions of B-17 Bond by a 100% EOU
- Confiscation of goods and penalty under the Customs Act, 1962
- Imposition of fine in lieu of confiscation
- Interpretation of Section 125 of the Customs Act, 1962

Analysis:

The case involves an appeal by the Revenue against an order passed by the Commissioner, Central Excise, Customs & Service Tax, Daman, regarding the violation of the conditions of a B-17 Bond by a 100% Export-Oriented Unit (EOU). The EOU was accused of diverting raw materials procured duty-free into the domestic market instead of utilizing them in the manufacture of goods for export. The Commissioner imposed penalties but refrained from confiscating the goods. The key issue was whether goods exported in violation of the bond conditions could be liable for confiscation and fine. The Tribunal referred to a judgment by the Hon'ble Gujarat High Court and held that confiscation and imposition of a fine were warranted in such cases.

The Tribunal highlighted that the respondent-Unit had diverted goods illicitly into the open market, breaching the conditions of the B-17 Bond. Section 125 of the Customs Act, 1962 allows for confiscation of goods in such cases, with the option to pay a fine in lieu of confiscation. The Tribunal emphasized that once goods are authorized for confiscation due to breach of conditions, Section 125 applies. As the goods were not available for confiscation during adjudication, redemption of a fine was deemed appropriate. Previous court decisions were cited to support this interpretation, emphasizing the importance of bond conditions and the consequences of breaching them.

Based on the legal principles established by the Gujarat High Court and followed by the Tribunal, the impugned order was set aside, and the matter was remanded to the Adjudicating Authority to determine the quantum of fine to be imposed. The Tribunal allowed the Revenue's appeal by remanding the case for further assessment, emphasizing the necessity of imposing fines in cases of breach of bond conditions by EOUs. The judgment underscores the importance of upholding bond obligations and the consequences of diverting duty-free raw materials for unauthorized purposes.