2009 (3) TMI 392 - AT - Customs

Collusion on part of departmental officers Defective SCN - Exemption under Notification 20/99-Cus., denied on the ground that condition that imported goods (Crude sunflower ol/soyabean oil imported at concessional rate of duty) to be used for refining not fulfilled and such goods diverted in violation of relevant rules - When the facts of verification/cancellation of bond by the departmental officers and the result of departmental investigation are put together, one cannot but infer that prima facie, there is collusion on the part of the departmental officers. If there is collusion, the longer period can definitely be invoked. In that case, the concerned departmental officers also should have been implicated in the Show Cause Notice. Only then the longer period can be invoked. In this case, no Show Cause Notice had been issued to the departmental officers. In fact, the investigation of the department ought to have covered even the concerned departmental officers. When there is clear acquiescence of the departmental officers, in our view, they all should have been made parties to the Show Cause Notice. This has not been done. To put it otherwise, suppression of facts/mis-declaration, etc, cannot be alleged, as the departmental officers were kept informed of the receipt of goods by the appellants. Very serious and fatal flaw in Show Cause Notice larger period not invocable Impugned order is set aside Appeals allowed

Issues Involved:
1. Jurisdiction of the Commissioner to adjudicate the case.
2. Allegation of misuse of concessional duty and fraudulent activity.
3. Compliance with the Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods (IGCRDMEG) Rules, 1996.
4. Validity of the Show Cause Notice and invocation of extended period for duty demand.
5. Procedural and evidentiary issues, including cross-examination and document supply.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner:
The appellants argued that the Commissioner lacked jurisdiction to adjudicate the case. They contended that only the Commissioner of Customs or proper officers subordinate to him are competent to demand duty on imported goods. The appellants cited the decision in CCE v. Pan Electronic India Ltd. to support their claim. However, the learned Commissioner referenced the Tribunal's decision in Samtel Color Ltd., upheld by the Supreme Court, affirming the jurisdiction of the Commissioner of Central Excise.

2. Allegation of Misuse of Concessional Duty and Fraudulent Activity:
The Department alleged that the appellants did not use the imported crude oil in their factory for refining but diverted it to other refineries, thus fraudulently availing the concessional duty under Notification No. 20/99-Cus. The Commissioner found discrepancies in the appellants' records and concluded that the crude oil was directly sold to other refineries. The appellants countered that the crude oil was sent for job work, and the refined oil was sold, not the crude oil. They provided lorry receipts and other documents to support their claim, which the Department found insufficient.

3. Compliance with IGCRDMEG Rules, 1996:
The Department's case was based on the appellants' non-compliance with the IGCRDMEG Rules. The Commissioner noted that the appellants' factory had a storage capacity of only 231 MTs, yet they claimed to have received and processed much larger quantities. The appellants argued that they followed the necessary procedures, including filing Annexure-V declarations and obtaining verification from jurisdictional officers. The cross-examination of officers revealed that they found no discrepancies during verification, and the Assistant Commissioner canceled the bonds after satisfying himself of compliance.

4. Validity of the Show Cause Notice and Invocation of Extended Period:
The Show Cause Notice was issued on 3-1-2005 for clearances made between March and July 2000, invoking the extended period under Section 28 of the Customs Act due to alleged suppression of facts. The appellants argued that the notice was time-barred and that there was no suppression of facts as the jurisdictional officers were aware of the transactions. The Tribunal found that the Department failed to establish suppression of facts, as the officers had verified the transactions and canceled the bonds. The Tribunal concluded that the longer period could not be invoked without alleging collusion and issuing notices to the officers involved.

5. Procedural and Evidentiary Issues:
The appellants raised several procedural issues, including the non-production of key witnesses for cross-examination and the non-supply of certain documents. The Commissioner attempted to justify the absence of witnesses, but the Tribunal found the reasons unconvincing. The Tribunal emphasized the importance of cross-examination and proper documentation in ensuring a fair adjudication process. The Tribunal also noted that the investigation covered only two out of eight refineries, leaving gaps in the evidence.

Conclusion:
The Tribunal set aside the impugned order, finding the Show Cause Notice defective and unsustainable due to the failure to establish suppression of facts and the absence of proper procedural adherence. The appeals were allowed, and the demand for differential duty and penalties was quashed.

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