2013 (6) TMI 685 - CGOVT - Central Excise

Duty demand - applicant having exported the goods under Rule 19, ought to have executed Bond in place of LUT - discrepancies in details of ER-1 returns and impugned AREs-1 - goods were exported neither by following self-sealing procedure nor by examination of goods under Central Excise supervision - Imposition of penalty - Held that - From provision contained in Condition No. (i) of the Notification No. 42/2001-C.E. (N.T.), it is clear that option of furnishing letter of undertaking (LUT) was available to manufacturer-exporter only. In this case the applicant is manufacturer of the goods but not the exporter. The goods were exported by the merchant-exporter - However, it is open for the manufacturer to furnish Bond on behalf of the merchant-exporter. In this case, since the goods were exported by the merchant-exporter there is no relaxation from executing Bond and export the goods under LUT. Applicant cleared goods for export without payment of duty but did not execute the bond in prescribed format. He had submitted LUT before sector officer whereas the LUT or bond is to be filed and executed before Assistant Commissioner/Deputy Commissioner of Central Excise. As such applicant violated this substantial condition of Notification No. 42/2001-C.E. (N.T.). The scrutiny of monthly ER-I returns as well as copies of ARE-1 reveal various discrepancies. The value and quality of goods cleared from factory did not tally with the value and quality of goods finally exported. The applicant has neither followed the self-sealing procedure while clearing goods for export nor cleared the goods under Central Excise supervision. The goods are first cleared to merchant-exporter who finally claimed to have exported these goods. There was no marks/numbers/Lot Nos. on the goods so the identity of goods cannot be established. In the absence of examination of goods in Central Excise supervision and also not having any marks/numbers/lot numbers on the goods, it cannot be established that goods cleared from factory have actually been exported by the merchant-exporter. As such, export of said goods is not established. The submission of Bond Form was substantial requirement and not a mere procedural requirement. When non-compliance of said requirement leads to any specific/odd consequences then it would be difficult to hold that requirement as non-mandatory. Applicant has not followed the condition and procedure laid down in Notification. There is no allegation of fraud, misdeclaration, suppression of fact or mala fide on the part of applicants. No facts have been brought by the department that the applicant s intentionally mis-declared facts to avail undue benefit. As such, penalty imposed on the applicant (1) & (2) i.e. M/s. Gola Steel & Castings Pvt. Ltd. and Shri Kuldeep Goyal, M.D. of said company is set aside. However the other applicant Shri J.L. Arora and Ramesh Chand Sharma were handling the day-to-day affair of company and they cleared goods without payment of duty when no bond or LUT was executed before ACCE/DCCE. They did not even respond to number of summons issued by Central Excise authorities. As such, penal action was rightly taken against them. - However, penalty is reduced - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Non-acceptance of Letter of Undertaking (LUT).
2. Discrepancies in export documentation.
3. Non-execution of Bond.
4. Alleged evasion of duty and penalties imposed.

Issue-wise Detailed Analysis:

1. Non-acceptance of Letter of Undertaking (LUT):
The applicant had furnished a LUT for exporting goods without payment of duty, which was not accepted by the Assistant Commissioner, Central Excise Division, Alwar. The LUT was returned due to objections and shortcomings. Despite this, the applicant continued to clear goods for export referencing the unaccepted LUT. The applicant argued that submission of LUT through the Sector Officer was sufficient compliance, citing departmental practices where the office of the Inspector or Superintendent of Central Excise is treated as an extension of the Assistant Commissioner. However, the adjudicating authority found that the LUT should have been furnished directly to the Assistant Commissioner, and not through the Sector Officer.

2. Discrepancies in Export Documentation:
The scrutiny of the monthly ER-1 returns and ARE-1 forms revealed various discrepancies. The value of goods exported shown in ARE-1s was Rs. 1,26,54,800/- while the value shown in ER-1 returns was Rs. 1,22,37,950/-, resulting in a difference of Rs. 4,16,850/-. Additionally, the quantity and number of packages shown in ARE-1s did not tally with respective Shipping Bills and Bills of Lading. Some ARE-1s were found mutilated, and the applicant failed to submit the required duplicate and triplicate copies of ARE-1s duly certified by Customs authorities.

3. Non-execution of Bond:
The applicant exported goods through a merchant-exporter but failed to execute the required Bond. Under Notification No. 42/2001-C.E. (N.T.), a Bond is mandatory for merchant-exporters, and the option of furnishing a LUT is available only to manufacturer-exporters. The applicant, being a manufacturer but not the exporter, should have executed a Bond in place of LUT. The adjudicating authority confirmed that the applicant violated this substantial condition by not executing the Bond.

4. Alleged Evasion of Duty and Penalties Imposed:
The adjudicating authority confirmed a demand of Rs. 20,69,741/- along with interest, and imposed penalties on the applicant and its officials. The applicant argued that they had submitted all corroborative evidence to establish that the goods were eventually exported and that minor discrepancies were due to damage during transit. They cited various legal precedents to support their case. The Government observed that the applicant did not follow the prescribed procedures for export, including self-sealing and Central Excise supervision, and failed to establish the identity of the goods exported. However, the Government found no allegation of fraud or mala fide intent and set aside the penalties on the company and its Managing Director. Penalties on other officials were reduced, considering their handling of day-to-day affairs and non-compliance with summons.

Conclusion:
The Government upheld the demand for duty and interest, confirming that the non-execution of Bond and discrepancies in documentation were substantial violations. Penalties on the company and its Managing Director were set aside, while penalties on other officials were reduced. The revision applications were disposed of accordingly.