2023 (8) TMI 624 - AT - Customs

Clandestine removal - dyed grey fabrics - in the guise of making deemed exports to another EOU, goods were diverted - creation of fictitious clearance documents to M/s Neearj - goods were not physically transported to the EOU at West Bengal but instead diverted to the local market in contravention of Exim Policy and had evaded payment of duty - failure to get the goods re-warehoused at the said EOU - HELD THAT - The contract produced by the appellant clearly shown the delivery term as Ex-factory - It is also found that the appellant has contended that they had followed the procedure as laid down in law for clearances of goods to M/s Neeraj Exim and department has not disputed on the genuineness of CT-3 certificate issued by the department and re-warehousing certificate issued by the Jurisdictional officer of M/s Neeraj Exim - it is found that this aspect has not been considered by the Ld. Commissioner in the present matter. Since the department has made the allegation of non-re-warehousing of the goods at the consignee s end, it has to prove the same by substantial evidence and it cannot be made on assumption. It has to be shown as if the goods were not warehoused then where were the same diverted. In present case there is no evidence of diversion of goods. Appellant in the present matter produced the re-warehousing certificates duly signed by the Range Superintendent of Kalyani Range (Jurisdictional officer of M/s Neeraj Exim) before the Ld. Commissioner, however he has not given any finding on the said certificate that whether the said certificate are false or manipulated. He has not verified the correctness of said certificates. It is also found that on the one hand the Revenue has made demand of central excise duty on goods consumed in the finished goods and on the other hand it is demanding duty on the finished goods which is wrong. Even if there is any duty demand, the same shall be restricted only upon finished goods. The raw material duty cannot be demanded as the same were consumed for intended purpose of manufacture. This aspect also not properly considered by the learned Commissioner. Since the above issues have not been dealt with in a proper manner by the Ld. Commissioner, the matter needs to be reconsidered as a whole - Appeal allowed by way of remand.

Summary

Issues involved: Appeal against duty demand and penalty, confiscation of goods, violation of Exim Policy, evasion of duty, compliance with rules and regulations, demand on raw materials used in final products.

Appeal against duty demand and penalty:
The appellant, a 100% EOU, faced duty demand and penalty for diverting goods in contravention of Exim Policy. The show cause notice alleged diversion of goods to the local market instead of the intended EOU, leading to duty evasion. The demands were confirmed by the adjudicating authority, prompting the appeal. The appellant argued compliance with rules and regulations, presenting evidence of genuine transactions and following prescribed procedures. The circular by the Central Board of Excise & Custom was cited to support the appellant's position, emphasizing the department's failure to adhere to judicial discipline. The appellant also highlighted the genuineness of documents like CT-3 form, warehousing certificate, and payment, challenging the sustainability of duty demand.

Confiscation of goods and imposition of fine:
Apart from duty demand and penalty, the appellant faced confiscation of goods valued at a significant amount. The impugned show cause notice proposed confiscation under relevant rules and sections of the Customs Act, alleging illicit removal and diversion of goods. The appellant contested these allegations, presenting evidence such as re-warehousing certificates, proof of payment, and contractual agreements to demonstrate the legitimacy of transactions. The appellant argued that the responsibility for transportation lay with the consignee, and the department needed substantial evidence to prove diversion of goods. The issue of non-re-warehousing of goods at the consignee's end was a focal point of contention, with the appellant emphasizing procedural compliance and lack of evidence supporting the department's claims.

Demand on raw materials used in final products:
The appellant also challenged the demand on raw materials used in the final products, arguing that once duty is imposed on final products, demanding duty on raw materials is unjustified. The appellant cited relevant judgments to support this argument, emphasizing that duty should be restricted to finished goods only. The appellant contended that the raw materials were consumed for the intended purpose of manufacturing final products, questioning the validity of demanding duty on both raw materials and finished goods. The issue of duty imposition on raw materials consumed in manufacturing processes was a key point of dispute, highlighting the need for proper consideration by the adjudicating authority.

Conclusion:
In a detailed analysis, the tribunal found discrepancies in the lower authority's handling of the case, noting inadequacies in addressing key issues raised by the appellant. The tribunal set aside the impugned order and remanded the matter to the adjudicating authority for a fresh decision, emphasizing the importance of considering all aspects of the case, including compliance with rules, procedural correctness, and the validity of duty demands. The tribunal's decision aimed to ensure a fair and thorough reconsideration of the matter, granting the appellant an opportunity for a personal hearing and directing the adjudicating authority to review the case within a specified timeframe.