2013 (6) TMI 206 - AT - Customs

Demand of duty/penalty - Shortage - Held that - Revenue has not advanced any evidence to show that short quantities stand either cleared by the appellant clandestinely or used in the manufacture of their final product which stand cleared clandestinely. It is noted that variation is only to the extent of 3% which stand attributed to various reasons as discussed by the appellate authority. Revenue has also not contested the finding of Commissioner (Appeals) that weighment of raw cotton is governed by provisions of Bylaws made in the form of International Cotton Association and the Rules framed there under which allow variation in weight and such variation are on account of moisture components which may result in gain or loss all way. Thus, no reason to disturb the finding of the Commissioner (Appeals). Appeal is rejected.

Summary

Issues:
1. Import of raw cotton without payment of customs duty under specific notifications.
2. Allegation of shortage in the imported raw cotton.
3. Confirmation of demand and penalty by adjudicating authority.
4. Appeal against the order passed by the Commissioner (Appeals).

Issue 1: Import of raw cotton without payment of customs duty under specific notifications

The respondent, engaged in the manufacture of cotton yarn, imported raw cotton in bales without payment of customs duty under notifications No. 53/97-Cus dated 3.6.97 and No. 52/03-Cus dated 31.3.03 for manufacturing yarn meant for export. They executed a B 17 Bond as required under the notification. The quantities of imported raw cotton were verified by Central Excise officers, entered in records, and rewarehousing certificates were issued. The raw material quantities were further entered in form IV register for manufacturing yarn. However, a portion of the imported raw cotton was not issued for manufacturing, leading to an allegation of shortage.

Issue 2: Allegation of shortage in the imported raw cotton

The adjudicating authority issued a show cause notice proposing confirmation of basic customs duty on the alleged shortage of raw cotton. The Commissioner (Appeals) examined the case records and noted that the appellant had not issued a specific quantity of raw cotton, reflecting it as shortages in private records. The appellant argued that the variation in weight of raw cotton was due to moisture content, as allowed by the rules governing weighment of raw cotton. The appellant contended that the imported raw cotton was used for manufacturing export goods as per the final weight ascertained by inspecting agencies, and there was no diversion of quantity during re-warehousing.

Issue 3: Confirmation of demand and penalty by adjudicating authority

The adjudicating authority confirmed the demand of customs duty on the alleged shortage and imposed a penalty. However, the Commissioner (Appeals) set aside the confirmation of demand and the penalty based on the submissions of the appellant. The Commissioner found merit in the appellant's arguments supported by the rules and regulations governing the weighment of raw cotton. The Commissioner held that there was no evidence to suggest that the imported raw cotton was not used in manufacturing export goods or diverted elsewhere, leading to setting aside of the demand and penalty.

Issue 4: Appeal against the order passed by the Commissioner (Appeals)

The Revenue appealed against the Commissioner (Appeals) order, contending that the short quantities might have been cleared clandestinely or used in the manufacturing of final products that were cleared clandestinely. However, the appellate authority noted that the variation in weight was within the permissible limit of 3% and attributed to various reasons, including moisture content. The Revenue failed to provide evidence to refute the findings of the Commissioner (Appeals) regarding the weighment of raw cotton governed by specific rules. Consequently, the Revenue's appeal was rejected, and the cross-objection was disposed of accordingly.

This judgment highlights the meticulous examination of the issues related to the import of raw cotton without payment of customs duty, allegations of shortage, confirmation of demand, and penalties imposed. The decision emphasizes the importance of adherence to rules and regulations governing the import and manufacturing processes, ultimately leading to the setting aside of the demand and penalty based on the lack of evidence supporting the Revenue's claims.