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2019 (5) TMI 1362 - AT - Customs100% EOU - demand of Customs Duty on imported POY - case of the department is that PTY covered by the above consignments did not reach the premises of EOUs and were diverted in DTA - HELD THAT - The duty on finished goods (PTY) has already been demanded under the proviso to Section 3(1) of the Act, on the ground that the same did not reach the premises of EOUs and were diverted in DTA. From the adjudication proceedings initiated against the above EOUs, it transpires that the imported goods were consumed as per the requirement of the impugned notification and thus, no duty can be demanded on raw material used in the manufacture of such finished goods. Confiscation of POY - HELD THAT - Since the conditions of the notification dated 03.06.1997 has not been contravened. Material available in the case record proves the fact that the POY were used for the intended purpose and there was no contravention of post import condition. Even otherwise, the imported POY was not available for confiscation at the time of initiation of show cause proceedings, and as such - no redemption fine can be imposed in the absence of goods being available for confiscation. There is no reason to uphold the impugned order as no duty can be demanded on the inputs as no violation has been brought out on record vis- -vis raw material consumption in EOUs for the required purpose. Further, the impugned order imposing redemption fine and penalties on the appellants cannot also be sustained for judicial scrutiny. Appeal allowed - decided in favor of appellant.
Issues:
1. Confirmation of Customs duty demand on imported Partially Orient Yarn (POY). 2. Confiscation of POY under Section 111(o) of the Customs Act. 3. Imposition of redemption fine and penalties on the appellants. Analysis: 1. The case involved appeals filed against an order confirming Customs duty demand on PTY and ordering recovery under the Customs Act. The impugned order also imposed penalties and redemption fine on the appellants. The issue revolved around the diversion of PTY to the Domestic Tariff Area (DTA) instead of reaching the premises of the Export Oriented Units (EOUs). The department initiated proceedings against EOUs for duty demand on PTY purchased from the appellant. The subsequent Show Cause Notice (SCN) sought duty demand on imported POY used in manufacturing PTY. The appellants argued that duty demand on raw material cannot be imposed if duty on finished goods is confirmed, citing relevant judgments. 2. The Tribunal analyzed the duty demand on imported POY in light of previous judgments and found that duty on raw material cannot be demanded if duty on finished goods is confirmed clandestinely diverted to DTA. The Tribunal referred to various cases, including Amitek Silk Mills, Sanjari Twisters, and Sarla Polyester Ltd., where it was held that no duty demand can be made on raw material once duty on finished goods is confirmed. The Tribunal concluded that no duty could be demanded on the inputs due to no violation regarding raw material consumption in EOUs for the intended purpose. 3. Regarding the confiscation of POY under Section 111(o) of the Customs Act, the Tribunal found that the POY was not liable for confiscation as it was used for the intended purpose without contravening post-import conditions. Since the imported POY was not available for confiscation during the proceedings, no redemption fine could be imposed. Citing the judgment in the case of Commissioner of Customs (Import), Mumbai vs. Finesse Creation Inc., the Tribunal held that no redemption fine can be imposed in the absence of goods available for confiscation. Consequently, the impugned order imposing redemption fine and penalties on the appellants was not sustained. 4. In conclusion, the Tribunal set aside the impugned order, allowing the appeals with consequential relief. The decision was based on the findings that no duty could be demanded on the inputs, as there was no violation in raw material consumption for the intended purpose. Additionally, the imposition of redemption fine and penalties on the appellants was deemed unsustainable for judicial scrutiny.
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