2009 (12) TMI 387 - AT - Customs

Confiscation-penalty- Illegal export of wheat to Nepal. No dispute that Indian wheat stored very close to Nepal border. Admitted that impugned goods meant for illegal export through unauthorized route. Goods rightly held liable for confiscation. However, neither SCN nor impugned order indicated any prohibition for export of wheat to Nepal. In case of non-prohibited goods, option for redemption to be necessarily given in terms of section 125 of Custom Act, 1962. since goods already auctioned, appellant eligible for refund of sale proceeds after adjusting fine and fine which also held as not excessive.

Summary

Issues:
1. Appeal against the order of the Commissioner (Appeals) dated 27-7-07 and 20-8-07.
2. Challenge regarding the demand of interest and imposition of penalty.
3. Interpretation of Rule 16 of the Central Excise Rules.
4. Validity of credit taken under Rule 16.
5. Payment of interest on credit taken but not regular.
6. Imposition of penalty based on the interpretation of Rule 16.

Analysis:
1. The appeal was filed against the orders of the Commissioner (Appeals) dated 27-7-07 and 20-8-07, arising from the same original order dated 26-2-2007. The issue revolved around the clearance of coconut hair oil, reprocessing of returned goods, and the validity of duty credit taken by the manufacturer.

2. The Department challenged the demand of interest and sought to enhance the penalty. However, the Commissioner (Appeals) rejected the Department's appeal and set aside the interest demand and penalty. The arguments focused on the bona fide actions of the manufacturer in reprocessing the goods and the validity of the credit taken under Rule 16.

3. The key aspect of the case was the interpretation of Rule 16 of the Central Excise Rules, which allows for the return of goods cleared on payment of duty for reprocessing. The rule specifies that only goods subject to reprocessing can avail of duty credit as "inputs."

4. The validity of the duty credit taken under Rule 16 was questioned as not all returned goods were reprocessed. The Tribunal found that only goods reprocessed and cleared on payment of duty were valid under Rule 16, while the rest did not qualify for duty credit.

5. Regarding the interest payment, it was determined that interest should be levied on the credit taken for goods not subjected to any process, as the credit was not regular. The original authority's decision to demand interest on the entire credit, including processed goods, was deemed incorrect and required modification.

6. The Tribunal concluded that the case did not warrant any penalty as it centered on the interpretation of Rule 16. The appeals were disposed of by rejecting the restoration/enhancement of the penalty and limiting interest to goods not subject to any process, with a direction to re-quantify the interest payable on those goods. The Cross-Objections supporting the Commissioner (Appeals) were also disposed of accordingly.