2004 (3) TMI 192 - AT - Central Excise

Show cause notice (Customs) - Issuance of - Jurisdiction - Demand (Customs) - Maintainability of

Summary

Issues:
1. Jurisdiction of the Directorate of Revenue Intelligence in issuing show cause notice to 100% EOU.
2. Validity of show cause notice invoking extended period of limitation.
3. Sustainability of demand under Section 72 for duty short-levied.

Analysis:

1. Jurisdiction Issue:
The appellants contended that the show cause notice issued by the Director of DRI to the 100% EOU was improper. They argued that the Central Excise officer should be the proper officer for issuing such notices. However, the Tribunal dismissed this plea citing Circular No. 4/99-Cus., which authorized officers of the Directorate of Revenue Intelligence to investigate cases and issue show cause notices. The Tribunal held that the appellants' objection was not valid post the issuance of the circular, overruling their preliminary objection.

2. Extended Limitation Period Issue:
The appellants raised a submission challenging the show cause notice's invocation of the extended period of limitation. They argued that only the Commissioner of Customs or Addl. Director of DRI could issue such notices for cases involving intention to evade duty payment. The Tribunal rejected this submission as the demand was raised within the normal limitation period. The Tribunal found this argument devoid of merit and upheld the validity of the notice issued by the Asstt. Director of DRI.

3. Demand Sustainability under Section 72:
The appellants contended that the demand under Section 72 was not sustainable, as duty short-levied demands should be raised under Section 28. However, the Tribunal disagreed, citing the clear language of Section 72 which allows for demanding the full amount of duty in cases of goods improperly removed from a warehouse. The Tribunal upheld the demand as there was sufficient evidence that duty-free imported raw materials were diverted to the local market instead of being used in manufacturing export garments.

On the merits, the Tribunal found that the demand was justified based on evidence of diversion of imported raw materials. The confiscation of lady-gowns was also upheld. Penalties were deemed justified, but considering the circumstances, the penalty on the first appellant-company was reduced to Rs. 50 lakhs and on its Director to Rs. 5 lakhs. Consequently, the appeals were partly allowed, affirming the demand, confiscation, and penalties with reduced amounts for the appellants.