2014 (11) TMI 569 - AT - Customs

100% EOU - Imposition of penalties on individuals where the main appellant has admitted the diversion of goods - Held that - Adjudicating Authority has bought on record the complicity of the main appellant in defrauding government of its legitimate revenue. In view of the foregoing, we hold that M/s Skyron Overseas Industries the main appellant herein has not made out any case and the appeals are devoid of any merits. The appeals are rejected. Shri Mulchand Bhanvarlal Saran has not been issued any show cause notice and hence no penalty can be imposed - Decided in favor of appellant. Levy of penalty on Shri Sunil G Somani - Adjudicating Authority has imposed penalties on him on the ground that he being authorised signatory of the main appellant. - Role attributed to the Shri Sunil G Somani has been brought out by the Adjudicating Authority in Paragraph 47(b). The said findings specifically point out that the appellant Shri Sunil G Somani was the brain behind the entire duty evasion modus operandi, wherein he played a dual role; as a purchaser as well as seller of advance license/ARO and that he was something more than special power of attorney and also that he has not acted in a prudent manner. In our considered views, these findings of the Adjudicating Authority are correct and does not require any interference - Decided against the appellant.

Summary

Issues Involved:
1. Demand and recovery of customs duties.
2. Demand and recovery of central excise duties.
3. Validity of the show cause notice (SCN) issued.
4. Imposition of penalties on various appellants.
5. Specific penalty on Shri Mulchand Bhanvarlal Saran.

Issue-wise Detailed Analysis:

1. Demand and Recovery of Customs Duties:
The main appellant, a 100% Export Oriented Unit (EOU), was alleged to have violated the conditions of Notification No. 53/97-CUS by diverting duty-free imported raw materials into the domestic market without payment of customs duties. The appellant argued that the demand for customs duties should have been made under Section 28 of the Customs Act, 1962, invoking the conditions of the B-17 Bond executed by them. The appellant contended that the SCN issued was defective as it did not invoke the necessary provisions of Section 28, making the demand unsustainable in law.

2. Demand and Recovery of Central Excise Duties:
Similarly, the demand for central excise duties was based on the alleged violation of Notification No. 1/95-CE. The appellant argued that the demand should have been made under Section 11A of the Central Excise Act, 1944, in conjunction with the conditions of the B-17 Bond. The appellant contended that the SCN was defective for not invoking the necessary provisions of Section 11A, making the demand unsustainable.

3. Validity of the Show Cause Notice (SCN) Issued:
The appellant heavily relied on the judgment in Sterlite Opticals Ltd vs CC&CE Aurangabad, arguing that the SCN dated 3.12.2003 was issued without jurisdiction and was defective in law. The appellant claimed that the absence of essential ingredients of the conditions of the B-17 Bond read with the relevant sections of the Customs and Central Excise Acts rendered the SCN invalid.

4. Imposition of Penalties on Various Appellants:
The adjudicating authority imposed penalties on the main appellant and other appellants for their role in the diversion of duty-free inputs/raw materials into the domestic market. The appellant argued that the penalties were incorrect as the SCN was defective. However, the adjudicating authority found that the main appellant had confessed to the diversion of inputs in the domestic market and had made paper transactions to cover up the illicit clearances, supporting the imposition of penalties.

5. Specific Penalty on Shri Mulchand Bhanvarlal Saran:
The appellant argued that Shri Mulchand Bhanvarlal Saran, the authorized signatory of the main appellant, was not issued any SCN, and hence no penalty could be imposed on him. The tribunal found that the SCN did not mention Shri Mulchand Bhanvarlal Saran by name for the imposition of penalty, making the penalty imposed on him unsustainable in law.

Judgment:

1. Demand and Recovery of Customs Duties:
The tribunal found that the main appellant had not made out any case against the demand for customs duties. The adjudicating authority had correctly invoked the conditions of the B-17 Bond, and the appellant's arguments were devoid of merit. The appeals were rejected.

2. Demand and Recovery of Central Excise Duties:
Similarly, the tribunal found that the main appellant had not made out any case against the demand for central excise duties. The adjudicating authority had correctly invoked the conditions of the B-17 Bond, and the appellant's arguments were devoid of merit. The appeals were rejected.

3. Validity of the Show Cause Notice (SCN) Issued:
The tribunal upheld the validity of the SCN, finding that the adjudicating authority had correctly invoked the conditions of the B-17 Bond. The arguments of the appellant regarding the defectiveness of the SCN were rejected.

4. Imposition of Penalties on Various Appellants:
The tribunal upheld the penalties imposed on the main appellant and other appellants, finding that the adjudicating authority had correctly identified their role in the diversion of duty-free inputs/raw materials into the domestic market. The appeals were rejected.

5. Specific Penalty on Shri Mulchand Bhanvarlal Saran:
The tribunal found that the penalty imposed on Shri Mulchand Bhanvarlal Saran was unsustainable as he was not issued any SCN. The penalty imposed on him was set aside.

Conclusion:
The appeals filed by the main appellant and other appellants were rejected, except for the penalty imposed on Shri Mulchand Bhanvarlal Saran, which was set aside. The tribunal found that the adjudicating authority had correctly invoked the conditions of the B-17 Bond and that the SCN was valid. The penalties imposed on the main appellant and other appellants were upheld.