2018 (5) TMI 685 - AT - Customs

Import of crude Palm oil at concessional rate of duty - Proof of manufacture of laundry soap - Principles of natural justice - directions given to cross-examine the said Shri Rajeev Singhal of M/s. Mega Sales - Held that - there is failure on the part of the Ld.Commissioner to exercise jurisdiction vested in him for ensuring the attendance of witnesses. As Mr.Raveev Sighal was the witness of Revenue, it was the duty of Revenue to produce him for examination and cross- examination, as required under the provisions of section 9D of the Central Excise Act. In absence of such examination/cross-examination of Mr.Rajeev Singhal, the evidence recorded from him has to be eschewed and/or excluded and cannot be relied upon for taking any adverse view against the appellant assessee. The appellant have maintained proper records and there are periodical remarks of checking by the appropriate officer of the Department. Further it is also admitted fact that the appellant have cleared laundry soap on payment of applicable state tax/VAT upon removal of laundry soap, which fact is not controverted on investigation. In view of these facts and circumstances, there is no violation on the part of the appellant under the provisions of the Customs Act read with Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. The allegations in the SCN are presumptive and unsubstantiated - the demand of penalty have been confirmed mechanically, without application of mind - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Confiscation of Crude Palm Oil (CPO) and denial of concessional duty benefits.
2. Demand of customs duty and imposition of penalties.
3. Denial of cross-examination of key witness.
4. Compliance with procedural requirements under Customs Act and related rules.
5. Adherence to tribunal's directions in the previous round of litigation.

Detailed Analysis:

1. Confiscation of Crude Palm Oil (CPO) and Denial of Concessional Duty Benefits:
The main appellant, M/s. Bhagwan Vanaspati Mills Ltd., faced confiscation of 9136.320 MT of CPO valued at ?17,16,48,616/- under Section 110 of the Customs Act. The benefit of concessional duty under Notification No. 21/2002-Cus was denied. The appellant had imported CPO at a concessional rate for manufacturing laundry soap, following all prescribed procedures, including obtaining end-use certificates from the jurisdictional Central Excise officer. The tribunal noted that the appellant maintained proper records and adhered to the required procedures, thus there was no violation under the Customs Act or related rules.

2. Demand of Customs Duty and Imposition of Penalties:
A demand for customs duty amounting to ?7,87,86,716/- was confirmed under the proviso to Section 28 of the Customs Act, along with interest and an equal amount of penalty under Sections 112 and 114A. Additionally, penalties of ?5.00 Lakhs each were imposed on the dealers of the appellant, and ?25.00 Lakhs each on the directors of the company. The tribunal found that the penalties were confirmed mechanically without substantial evidence or application of mind, thus setting aside the penalties.

3. Denial of Cross-Examination of Key Witness:
The denial of cross-examination of Shri Rajeev Singhal, Director of M/s. Mega Sales, was a significant issue. The tribunal had earlier directed the adjudicating authority to allow cross-examination, which was not complied with. The tribunal held that the failure to ensure the attendance of the witness and the reliance on his unexamined statement was unjustified. The evidence from Shri Rajeev Singhal was excluded, and no adverse inference could be drawn against the appellant based on his statement.

4. Compliance with Procedural Requirements under Customs Act and Related Rules:
The appellant had complied with all procedural requirements, including obtaining registration, executing bonds, maintaining proper records, and obtaining end-use certificates. The Central Excise officer had regularly inspected and verified the records, certifying the proper use of imported CPO. The tribunal acknowledged the appellant's adherence to the prescribed procedures and found no procedural violations.

5. Adherence to Tribunal's Directions in the Previous Round of Litigation:
In the previous round, the tribunal had directed the adjudicating authority to allow cross-examination of Shri Rajeev Singhal. The failure to follow these directions led to the setting aside of the impugned order. The tribunal emphasized that the adjudicating authority did not exercise its jurisdiction properly to ensure the witness's attendance, thus failing to comply with the tribunal's earlier directions.

Conclusion:
The tribunal set aside the impugned order, allowing all appeals and entitling the appellants to consequential benefits. The demand against the main appellant was annulled, and the penalties on co-noticees were also nullified. The tribunal highlighted the lack of substantial evidence and procedural lapses by the adjudicating authority, leading to the conclusion that the allegations in the show cause notice were presumptive and unsubstantiated.