2019 (6) TMI 1273 - AT - Central Excise

Imposition of penalty - illegal diversion of goods - re-warehousing certificates were not received - appellant has alleged that the EOU was sourcing various raw material duty free from manufacturer and diverting the same in the open market in violation of the Central Excise Rules - HELD THAT - It is apparent that the appellants were not careful enough and were willing party to the diversion of goods by the consignee. In this regard, the affidavit filed by the transporter regarding delivery of goods at the premise of M/s Resham Exports also appears to have been obtained without knowledge of the transporter. In this regard the observation of the Commissioner in the impugned order reproduced above becomes relevant. From the said observation, it is seen that Shri Abhinandan Kataria, Manager of M/s Vardhaman and Shri Harish Natwarlal Bhatt, Proprietor of M/s Nirav in their statements have admitted that goods cleared by M/s Modern have been illicitely diverted. It is also seen that these submissions are supported by the statements of Shri Bodu Gulam Shaikh which was the representative of the consignee involving in the diversion of the goods. It is seen from the statements of Shri Anil Kataria dated 02.04.2004 that he was aware of the diversion of goods after clearance from the factory. It is also admitted position of the appellant that Shri Anil Kataria was their regular transporter. In the statements of Shri H.N. Bhatt dated 07.07.2004 he had reaffirmed that he has informed the representatives of appellant namely Shri Manmohan Agarwal about the diversion of goods and route. He also confirmed that Shri VK Sharma, was also aware of the facts. Another factor which is relevant is that during the short period of about 10 days they had cleared almost 100 consignments weighing 884 tonnes to one party. This fact itself should have raised alarm bells and doubts in appellant s organization. In any case, it was responsibility of appellant s to ensure delivery of goods - it is apparent that the appellants were aware of the diversion of goods en-route. Penalty upheld - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Confirmation of demand of Central Excise duty.
2. Imposition of penalty under Rule 25(1) of Central Excise Rules, 2002 and Rule 173Q(1) of the erstwhile Central Excise Rules, 1944.
3. Liability of interest under Section 11AB of the Central Excise Act, 1944.
4. Responsibility of the appellant in the alleged diversion of goods.
5. Validity of the re-warehousing certificates.
6. Applicability of precedents cited by the appellant.
7. Difference of opinion between the judicial and technical members of the tribunal.
8. Directions from the Hon’ble High Court for fresh examination.

Issue-wise Detailed Analysis:

1. Confirmation of Demand of Central Excise Duty:
The appellant was found to have dispatched 100 consignments of POY weighing 8,84,281 kgs involving Central Excise duty of ?1,57,53,846/-. Re-warehousing certificates were received for 55 consignments, but not for 45 consignments involving ?69,11,952/-. Consequently, the demand for Central Excise duty was made under Rule 156B, as amended by Rule 173N, of the erstwhile Central Excise Rules, 1944.

2. Imposition of Penalty:
The tribunal upheld the imposition of penalty on the appellant under Rule 25(1) of Central Excise Rules, 2002, and Rule 173Q of the erstwhile Central Excise Rules, 1944. The appellant's involvement in the diversion of goods was established based on statements from partners of M/s Resham Exports and transporters, which indicated that the appellant was aware of the illicit diversion of goods.

3. Liability of Interest:
Interest was demanded under Section 11AB of the Central Excise Act, 1944, in respect of 45 consignments for which re-warehousing certificates were not received. This was upheld by the tribunal.

4. Responsibility of the Appellant in the Alleged Diversion of Goods:
The tribunal found that the appellant was responsible for ensuring the delivery of goods to the consignee’s warehouse as per Rule 156A and 156B of the Central Excise Rules. The appellant's claim that they were not responsible for the diversion was rejected, as evidence showed that the appellant's representatives were aware of the diversion.

5. Validity of Re-warehousing Certificates:
The tribunal noted that the re-warehousing certificates were not received for 45 consignments. The appellant's failure to ensure the receipt of these certificates led to the confirmation of the demand for duty.

6. Applicability of Precedents Cited by the Appellant:
The appellant cited the case of Hytaisun Magnetic Ltd. and Santogen Textile Mill Ltd. The tribunal found that these cases were not applicable to the present case as they did not involve similar facts and circumstances. The tribunal emphasized that the appellant was aware of the diversion, which was not the case in the precedents cited.

7. Difference of Opinion Between Judicial and Technical Members:
There was a difference of opinion between the judicial and technical members regarding the imposition of penalty on the appellant and Shri Abhinandan Kataria. The judicial member set aside the penalty on the appellant and reduced the penalty on M/s Filatex, while the technical member upheld the penalties. This difference was referred to a third member.

8. Directions from the Hon’ble High Court for Fresh Examination:
The Hon’ble High Court quashed and set aside the tribunal’s order to the extent it related to the imposition of penalty on the appellant. The tribunal was directed to hear the appeal afresh regarding the clearance of 55 consignments of POY against CT-3 and under AR-3s to M/s Resham Exports.

Conclusion:
The tribunal upheld the demand for duty, interest, and penalties on the appellant, concluding that the appellant was aware of and complicit in the diversion of goods. The appeal was dismissed, and the penalties imposed were upheld. The tribunal also emphasized the responsibility of the appellant to ensure the delivery of goods to the consignee’s warehouse as per the Central Excise Rules.