2016 (12) TMI 766 - AT - Customs

100% EOU - confiscation of goods - import of yarn - Held that - the entire case of duty demand and confiscation of the goods was made out on the basis of statements of various persons. Therefore in our view looking to the nature of the case the cross examination as was requested by the appellant ought to have been granted to the appellant in the interest of justice. Moreover, we observed that the submission made by the appellant that the imported goods though seized but after provisional release claimed to have been used by the appellant in their EOU unit for the manufacture of final product and the said final product was exported. The claim of the appellant is that since the final product has been exported, the export obligation required for EOU has been fulfilled therefore no duty demand can be confirmed. However the Commissioner has not given any findings on this issue. For this reason also the principles of natural justice was violated. In these circumstances, we are of the considered view that matter needs to be re-considered by the Adjudicating authority - appeal allowed by way of remand.

Summary

Issues:
- Confiscation of imported goods under EOU scheme
- Demand for customs duty and penalties
- Confiscation of trucks
- Imposition of penalties on individuals
- Violation of principles of natural justice regarding cross-examination
- Alleged fulfillment of export obligation by using imported goods in EOU unit

Confiscation of Imported Goods under EOU Scheme:
The case involved the importation of yarn under the EOU scheme, which was attempted to be diverted without being in-bonded. The goods were seized under the Customs Act, 1962, and a show cause notice was issued proposing confiscation of the goods. The Commissioner ordered the confiscation of the goods but allowed for redemption on payment of a fine of ?15,00,000 under Section 125 of the Act. The appellant argued that the goods were used in their EOU unit for manufacturing final products that were exported, fulfilling the export obligation. However, the Commissioner did not provide any findings on this crucial issue, leading to a violation of natural justice.

Demand for Customs Duty and Penalties:
The Commissioner ordered the recovery of customs duty amounting to ?30,92,998 along with interest and the adjustment of a previous payment made by one of the parties. Penalties were also imposed on various individuals for acts that rendered the goods liable for confiscation under the Customs Act. The appellant contested the duty demand and confiscation, stating that all trucks were sent to their group company, which was also a 100% EOU, and thus no duty should be demanded.

Confiscation of Trucks and Imposition of Penalties on Individuals:
The Commissioner ordered the confiscation of the trucks under Section 115 of the Customs Act, with an option for the owners to pay a fine in lieu of confiscation. Additionally, penalties were imposed on specific individuals involved in the case for their roles in the events leading to the confiscation of goods.

Violation of Principles of Natural Justice Regarding Cross-Examination:
The appellant raised concerns about the violation of principles of natural justice due to the denial of the request for cross-examination of various persons whose statements were relied upon by the Commissioner. The Appellate Tribunal agreed that cross-examination should have been allowed in the interest of justice.

Alleged Fulfillment of Export Obligation by Using Imported Goods in EOU Unit:
The appellant argued that the imported goods were used in their EOU unit for manufacturing final products that were subsequently exported, fulfilling the export obligation required for EOU units. However, the Commissioner did not provide any findings on this crucial aspect, leading to a violation of natural justice. The Appellate Tribunal set aside the impugned order and remanded the matter to the original adjudicating authority for fresh consideration, emphasizing the need for a de novo adjudication within three months.

In conclusion, the judgment highlighted issues related to the confiscation of imported goods under the EOU scheme, demands for customs duty and penalties, confiscation of trucks, imposition of penalties on individuals, violation of principles of natural justice, and the alleged fulfillment of export obligations by using imported goods in an EOU unit. The Appellate Tribunal emphasized the importance of allowing cross-examination, provided detailed analysis on the arguments presented by the appellant, and ordered a fresh adjudication to address the unresolved issues.