2014 (3) TMI 718 - AT - Customs

End use base import of Cannulae and Needles as duty free for use in the manufacture of Disposable syringes with or without needles - despite request no details were provided in respect of needles - But entire quantity of Cannulae was claimed to be waste as no finished goods were produced out of this quantity. - Similarly 2,24,19,597 pcs of Needles claimed to be waste and scrap was beyond the permissible limit of 5% during the period December, 2000 to April, 2003. - Extended period of limitation - Held that - It is strange that the ld. Authority below has not looked into arise of waste and scrap relating to each financial year covering November 1996 to April 2006. He only looked into the wastage for the financial year 2002-2003. When he made a finding that no records were maintained by the appellant to establish generation of waste and scrap, quantum of goods destroyed does not provide any basis to pass a summary order by him. His order is not self speaking. Appellant after providing information for solitary period again requested to ignore the same having mistakes crept therein. No records being maintained by the appellant to provide year wise reconciliation, ld. Authority should have carefully examined quantum of import of input and issue thereof for use in manufacture, arise of output out of such manufacture and quantum of loss occurred in the process in each case to apply the low. A sketchy picture was drawn by him without year wise analysis. When there is fraud against Revenue no plea of time bar is available to appellant following the ratio laid down in CC Vs. Candid Enterprises 2001 (3) TMI 101 - SUPREME COURT OF INDIA since fraud nullifies every solemn act. Matter remanded back with a direction that the Adjudication Authority to look into the quantity of input (both goods) imported in each financial year, quantity there of issued and waste and scrap generated out of use thereof in manufacture of finished goods during different financial years covered by the period from November 1996 to April 2006 and ascertain whether each year s wastage was within the prescribed limit of SION. - Decided in favor of revenue.

Summary

Issues:
1. Duty-free import of Cannulae and Needles for manufacturing Disposable syringes.
2. Lack of proper records and information provided by the Appellant.
3. Excess waste and scrap generated beyond permissible limits.
4. Interpretation of relevant notifications and policies regarding duty exemption.
5. Imposition of Customs duty, interest, and penalty.
6. Deboning and non-fulfillment of export obligations.
7. Applicability of Board's Circular regarding export obligations.
8. Barred limitation for duty demand.
9. Examination of the destruction certificate and loss incurred during manufacturing.

Analysis:
1. The Appellant imported Cannulae and Needles duty-free for manufacturing Disposable syringes under a specific exemption. However, discrepancies were found in the quantity of imports, usage in production, and waste generated, leading to the imposition of duty.

2. The Appellant failed to maintain proper records and provide necessary information, causing delays and inconsistencies in the investigation process. Multiple requests for details were ignored, raising suspicions of non-compliance.

3. The issue of excess waste and scrap beyond the permissible limit of 5% was a significant concern. The Adjudicating Authority found discrepancies in the claimed wastage, leading to the imposition of duty on the excess generated waste.

4. The judgment interpreted relevant notifications and policies to determine the liability of the Appellant for Customs duty on excess waste/scrap. The Adjudicating Authority relied on specific clauses to disallow the claimed wastage and specify the disposal procedures for scrap.

5. Consequently, Customs duty, interest, and penalty were imposed on the Appellant for the excess waste generated, highlighting the importance of compliance with duty exemption conditions and maintaining accurate records.

6. The Appellant's plea regarding debonding and non-fulfillment of export obligations was not accepted, emphasizing the need for timely compliance with regulatory requirements.

7. The Adjudicating Authority rejected the Appellant's argument based on the Board's Circular, emphasizing the duty liability for excess waste/scrap generation beyond permissible limits.

8. The issue of limitation for duty demand was raised by the Appellant, but the Revenue argued that the duty demand was not time-barred due to the nature of the violation.

9. The examination of the destruction certificate and loss incurred during manufacturing highlighted the need for a detailed analysis of wastage for each financial year to determine the permissibility under relevant regulations.

This comprehensive analysis of the judgment showcases the intricacies of the case, emphasizing the importance of compliance, record-keeping, and adherence to duty exemption conditions in import-related matters.