2013 (9) TMI 175 - AT - Customs

Benefit of Notification No. 43/2002 - Whether the benefit of Notification No. 43/2002 - Cus. and 46/2002-Cus available - Held that - Compliance of specification regarding sucrose content in SION was a must - Otherwise, the purpose of restriction imposed by Public Notice dated 29/12/2002 will be defeated - the imported materials require to be used for the manufacture of export product - The understanding of the Commissioner that the SION norms served the twin purposes of protecting domestic cane growers as well as preventing dumping of substandard raw sugar into the country had to be approved - Therefore, import of sugar below 98.5% of sucrose content being in violation of SION cannot be treated as fulfilling the condition of the exemption notification 46/2002 - Validity of Lab report - Whether the lab report was containing 98.1% sucrose content and the same was manipulated to read as 98.9% - Held that - The manipulation of figures 98.1% to 98.3% was done with malafide intention and to benefit the assessee - The daily analysis reports maintained by the assesses indicated the purity of the imported raw cane sugar only as 98.1% to 98.32% as duly noted by the Commissioner - This also gives credence to the fact that the sucrose content as per the customs lab report was only 98.1% which was tampered to read as 98.9% - The internal reports maintained by the assessee-company indicated the sucrose content as 98.1% to 98.3% - All these taken together along with other circumstantial evidences, clearly prove that the entries in the lab report and the sample register were tampered with by overwriting to make them read as 98.9%. Liability for manipulation - Who was the person or persons who were responsible for the manipulation of the Report - Held that - The beneficiary of the tampering of the lab report on sucrose content was clearly the assessee and the consequences were to be faced by them - notwithstanding the fact that the actual person/persons had not been identified. Whether a demand under Section 28 can be made without the department challenging the finalization of provisional assessment - Held that - Tampering of documents with intent to evade duty was involved, show-cause notice could be issued invoking the extended period of limitation reckoning the relevant date from the date of finalization of the provisional assessment - The fact of provisional assessment and subsequent finalization of provisional assessment are relevant in the context of determining the relevant date for the purpose of issue of show-cause notice under Section 28 - The relevant date had to be reckoned from the date of finalization of the assessment - Decided against assesse.

Issues Involved:

1. Eligibility for exemption under Notifications No. 43/2002-Cus. and 46/2002-Cus. based on sucrose content.
2. Alleged manipulation of the lab report indicating sucrose content.
3. Identification of individuals responsible for manipulation.
4. Validity of demand under Section 28 without challenging the finalization of provisional assessment.

Detailed Analysis:

1. Eligibility for Exemption Based on Sucrose Content:

The core issue was whether raw cane sugar (RCS) with sucrose content less than 98.5% was eligible for duty exemptions under Notifications No. 43/2002-Cus. and 46/2002-Cus. The tribunal noted that the Standard Input Output Norm (SION) E52 mandated a sucrose content between 98.5% and 99.5%. This restriction was intended to balance foreign exchange outflow and domestic sugar production. The tribunal upheld the Commissioner's understanding that importing sugar below 98.5% sucrose content violated SION, thus disqualifying the imports from the exemptions.

2. Alleged Manipulation of the Lab Report:

The tribunal found overwhelming evidence that the original lab report indicated a sucrose content of 98.1%, which was tampered to read 98.9%. This conclusion was supported by the forensic examination, the office copy of the lab report, and the sample register entry. Additionally, internal reports from the assessee-company corroborated the lower sucrose content. Attempts to discredit the lab report based on testing conditions and equipment were dismissed, as no relevant questions were raised during the cross-examination of the Chemical Examiner.

3. Identification of Individuals Responsible for Manipulation:

While tampering was established, the investigation did not pinpoint the individual responsible. The Commissioner noted that the tampered documents were accessible to multiple individuals, including customs officers and CHA employees. The tribunal agreed that suspicion alone could not justify penalties on individuals without concrete evidence. Consequently, penalties on the officials of the assessee-company, CHA, and customs officers were deemed unsustainable, except for the assessee-company itself, which was the clear beneficiary of the manipulation.

4. Validity of Demand Under Section 28:

The tribunal addressed whether a demand under Section 28 could be made without challenging the finalization of provisional assessment. It was held that the finalization based on tampered documents was invalid. Relying on the Supreme Court's decision in Union of India vs. Jain Shudh Vanaspati Ltd., the tribunal concluded that the issuance of a show-cause notice under Section 28 was permissible even if the final assessment was not challenged. The relevant date for the limitation period was the date of finalization of the provisional assessment.

Conclusion:

The tribunal upheld the Commissioner's order confirming the duty demand, interest recovery, and penalty imposition on the assessee-company. However, it set aside the penalties on other appellants due to insufficient evidence linking them to the tampering. The appeals by the officials and CHA were allowed with consequential relief, while the appeal by the assessee-company was rejected.

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