2010 (4) TMI 549 - AT - Customs

EOU - The present dispute relates to nylon yarn, raw silk yarn and nylon tube imported by the appellants duty free in the terms of Notification 133/94-Cus. dated 22-6-94. As per the appellants, they imported nylon yarn and subjected them to process of twisting and texturising and testing strength of the raw materials. They claimed that in respect of imported raw silk yarn also, they undertook twisting and texturising and strength testing. In respect of nylon tube, it is claimed by them that they imported nylon tube and subjected them to moulding, finishing and strength testing. The appellants claimed to have obtained the permission from the Development Commissioner and sold the finished goods in the DTA market after availing the benefit of Notification 2/95-C.E., dated 4-1-95. The original authority held that the appellants have sold the above imported materials without subjecting to processes which could be considered as amounting to manufacture under the Central Excise Act and that they have not exported any of the goods manufactured using the above imported raw materials and in fact they did not have any machineries to manufacture the final product as claimed by them and accordingly demanded Customs duty amounting to Rs. 32,90,827.13 along with interest and imposed equal amount of penalty under Section 114A of the Customs Act on the appellant s firm and also imposed a separate penalty of Rs. 10.00 lakh on Shri Iqbal Ahmed, the proprietor of the appellant s firm. Held that - not clear whether appellant made any claim before Development Commissioner regarding actual export or undertook to export in future. Demand denying benefit of Notification No. 133/94-Cus. Upheld. Prnalty of Rs. 10lakhs imposed on proprietor justified.

Summary

Issues:
Dispute over imported nylon yarn, raw silk yarn, and nylon tube duty-free import under Notification 133/94-Cus.; Claim of manufacturing processes undertaken by the appellant; Export of final products; Violation of Exim Policy; Ex parte order by the Commissioner; Principle of natural justice; Imposition of penalties.

Analysis:
The appeal before the Appellate Tribunal CESTAT Kolkata involved a dispute regarding the duty-free import of nylon yarn, raw silk yarn, and nylon tube by the appellant under Notification 133/94-Cus. The appellant claimed to have undertaken manufacturing processes on these imported materials, including twisting, texturising, and strength testing. They further claimed to have obtained permission from the Development Commissioner and sold the finished goods in the DTA market after availing benefits under Notification 2/95-C.E. The Commissioner found that the appellant had not exported any final products manufactured using the imported materials and demanded customs duty, interest, and penalties amounting to Rs. 32,90,827.13 along with a separate penalty on the proprietor of the appellant's firm.

The appellant argued that the processes undertaken on the imported materials should be considered as manufacturing under the Exim Policy, citing precedents where the term "manufacture" was interpreted liberally. However, the Tribunal noted that the appellant had not exported any of the specific imported materials after processing them. The Tribunal found that the permission granted by the Development Commissioner did not extend to the clearance of products that were not export products. Previous decisions cited by the appellant involved scenarios where part of the goods were exported, unlike the present case where all imported materials were sold in the DTA market.

Regarding the allegation of an ex parte order by the Commissioner, the Tribunal observed that the appellant had been given multiple opportunities for personal hearings, and there was no evidence of a request for adjournment on the specified dates. The Tribunal concluded that there was no violation of the principle of natural justice in the proceedings. As for the penalties imposed, the Tribunal set aside the penalty under Section 114A of the Customs Act but upheld the penalty of Rs. 10.00 lakh on the proprietor for violating the Customs Act and Exim Policy by diverting the imported raw materials to the DTA market.

In the final judgment, the Tribunal upheld the demand of duty and interest, sustained the penalty on the proprietor, and set aside the penalty under Section 114A of the Customs Act. The appeal was disposed of accordingly.

This detailed analysis of the judgment highlights the key issues involved in the case, the arguments presented by the parties, the Tribunal's reasoning, and the final decision rendered by the Appellate Tribunal CESTAT Kolkata.