2002 (11) TMI 227 - AT - Customs

Summary

Issues Involved:
1. Mis-utilization of duty-free imported raw materials.
2. Alleged mis-declaration of consumption norms.
3. Allegation of willful suppression of facts.
4. Validity of reliance on balance sheet figures.
5. Impact of corrigendum on the show cause notice.

Summary:

1. Mis-utilization of duty-free imported raw materials:
The Revenue alleged that CDL mis-utilized duty-free imported raw materials for purposes other than manufacturing "Ibuprofen," violating Notification Nos. 44/87-Cus., 116/88-Cus., and 159/90-Cus. The Senior Vice President of CDL admitted that 139 MT of Acetyl Chloride was used for domestic products due to quality issues in export-grade products, and there were no records to account for such conversions. The Tribunal found no evidence that the imported raw materials were dealt with in violation of the Customs Notifications or EXIM policy.

2. Alleged mis-declaration of consumption norms:
The demand for duty was based on varying consumption norms of raw materials as per balance sheets, Chartered Accountants' certificates, and applications for advance licenses. The adjudicating authority found these norms inconsistent and unreliable, describing them as "shifting sands." The Tribunal upheld this view, finding no substantial basis for the demand.

3. Allegation of willful suppression of facts:
The adjudicating authority held that there was no evidence of willful suppression of facts by CDL or its Chairman. The Customs Officers had endorsed the fulfillment of export obligations without objections, indicating satisfaction with the utilization of raw materials. The Tribunal agreed, noting that the Show Cause Notice did not specify any suppressed facts.

4. Validity of reliance on balance sheet figures:
The adjudicating authority found no rationale for relying on the 1989-90 balance sheet figures over the 1990-91 figures. The Tribunal supported this view, noting that the improved efficiency claimed by CDL was not reflected in the sudden increase in raw material consumption in 1990-91.

5. Impact of corrigendum on the show cause notice:
The adjudicating authority treated the date of the corrigendum as the date of the Show Cause Notice due to significant changes in allegations. The Tribunal found that the corrigendum did not materially alter the original notice but clarified the allegations. Thus, it did not affect the validity of the notice.

Conclusion:
The Tribunal dismissed the Revenue's appeal, finding no cause to initiate proceedings for duty and penalty demands against CDL and its Managing Director. The Tribunal emphasized that the Customs authorities had no jurisdiction over end-use verification and that the imported raw materials were not dealt with in violation of the relevant notifications.