2016 (3) TMI 701 - AT - Customs

Demand of Customs duty - Platinum imported but found shortage - Explanation provided but not found acceptable by revenue in terms of condition No.3 of Notification No.137/2000-Cus dated 19/10/2000 - Held that - the records did not match the actual stocks. On one hand excess loss has been sought to be explained on account of using Gold jewelry machines for making platinum jewelry, while on the other it is claimed that the shortage may have been in the dust whish was to be processed before end of financial year. The benefit of Notification is available only subject to following condition imposed in the EXIM policy. It is common ground between the parties that the EXIM policy permits process loss of only 9% in case of platinum jewellery. Therefore, terms of policy even violated in so far as they have consumed platinum much in excess of the prescribed process loss prescribed under the policy. To that extent appellant have not fulfilled the conditions of the notification and have failed to account for the platinum and therefore, liable to payment of duty on the unaccounted platinum. Imposition of penalty - Invokation of Section 114A of the Customs Act, 1962 - Held that - Section 114A can be invoked where the duty has not been levied by reason of collusion or any wilful mis-statement or suppression of facts but here there is a bland allegation, there is no evidence of any wilful mis-statement or suppression. The notice alleges that despite the knowledge that there were shortages the respondents did not inform the revenue. But the respondents have argued that the shortages were to be calculated at the end of financial year and would have been reported. It is nobody s case that the respondents were required to report it on daily or weekly basis. Therefore, in the absence of any evidence of any wilful mis-statement or suppression no penalty is imposable. Confiscation of goods - In lieu of redemption fine - Held that - as per Hon ble Supreme Court decision in a case, if the goods are released in custody of a person under a bond then the same can be confiscated even if the same are not physically available. But here, there was no bond for the use of goods in a particular manner. Therefore, the goods can not be confiscated followed by the decision of Tribunal in the case of SS Watch Industries Vs. CC (I) New Delhi 2008 (11) TMI 420 - CESTAT, NEW DELHI . - Decided partly against the revenue

Summary

Issues Involved:
1. Explanation and accountability for the shortage of platinum.
2. Applicability of penalties under Section 114A of the Customs Act, 1962.
3. Imposition of redemption fine under Section 125 of the Customs Act, 1962.
4. Compliance with Notification No.137/2000-Cus and EXIM Policy.

Issue-wise Detailed Analysis:

1. Explanation and Accountability for the Shortage of Platinum:
The respondents, manufacturers of gem and jewellery located in SEEPZ-SEZ, Mumbai, faced scrutiny after a stocktaking by revenue authorities on 18th & 19th March 2002 revealed a shortage of 5,987.17 grams of platinum. While the respondents satisfactorily explained the variations in gold and diamonds, they attributed the platinum shortage to manufacturing loss and possible thefts. This explanation was not accepted under condition No.3 of Notification No.137/2000-Cus dated 19/10/2000, which mandates proper accounting of stock. The respondents claimed a manufacturing loss of 9% during export, and any excess loss should have been reported to the Customs department.

2. Applicability of Penalties under Section 114A of the Customs Act, 1962:
The revenue issued a show-cause notice to recover a duty of Rs. 9,70,039/- on the missing platinum and alleged that it was liable for confiscation under Section 110(o) of the Customs Act, 1962. The respondents were held liable to a penalty under Section 114A for not reporting the excess manufacturing loss, which was a clear violation of condition No.3 of Notification No.137/2000-Cus. However, the penalties sought against the two Directors were not confirmed due to lack of evidence showing personal benefit from the non-reporting. The Commissioner imposed a penalty of 25% of the duty payable under Section 114A, as the respondents did not pay the duty within 30 days as stipulated.

3. Imposition of Redemption Fine under Section 125 of the Customs Act, 1962:
Revenue argued that the Commissioner should have imposed a penalty equal to the duty involved and a redemption fine in lieu of confiscation under Section 125, even if the goods were not physically available. The Commissioner did not order confiscation or impose a redemption fine, as the goods were released on a bond. The Tribunal referred to the Supreme Court's decision in Weston Components, which allows for redemption fine even if goods are not physically available, provided they were released on a bond.

4. Compliance with Notification No.137/2000-Cus and EXIM Policy:
The respondents argued that the shortage was due to process loss and that they had maintained proper records, which would have been reconciled at the end of the financial year. They claimed that the customs authorities conducted the stocktaking prematurely. The Tribunal found no evidence of clandestine removal of platinum and noted that the respondents had hinted at possible thefts without further investigation. The Tribunal emphasized that the EXIM policy permits only a 9% process loss for platinum jewellery, which the respondents exceeded, thus violating the conditions of the notification and failing to account for the platinum.

Judgment:
The Tribunal concluded that there was no evidence of wilful mis-statement or suppression by the respondents, which is necessary to invoke Section 114A. The appeal by the revenue was dismissed, and the cross-objection by the respondents was allowed. The Tribunal held that the decision of the Supreme Court in Weston Components regarding redemption fine was not applicable in this case, as the goods were not released under a bond with specific conditions for their use. The Tribunal upheld the Commissioner's decision not to impose a redemption fine or confiscate the goods, as they were not physically available and no specific bond conditions were violated.

Conclusion:
The appeal by the revenue was dismissed, and the cross-objection by the respondents was allowed. The Tribunal found that the respondents had not wilfully mis-stated or suppressed facts and that the premature stocktaking by customs authorities contributed to the discrepancies. The Tribunal upheld the penalty imposed by the Commissioner but did not impose additional penalties or redemption fines.