2017 (7) TMI 669 - AT - Customs

100% EOU - N/N. 1/95-C.E. dated 4.1.95 - respondents are alleged to have procured huge quantity of raw materials namely polyester fabrics yarn from some of the 100% EOUs under CT-3 certificate but instead of utilising the same in the manufacture of goods and exporting the same they exported cheaper varieties of polyester fabrics yarn from local market and the raw materials procured duty free were diverted into the Domestic Market - whether charge of confiscation and penalty sustainable when the goods are not available for confiscation? - Held that - principle of law laid down by the Hon ble Gujarat High Court in the case of Commissioner of Central Excise Customs and Service Tax Versus M/s Sanjari Twisters 2017 (4) TMI 219 - CESTAT AHMEDABAD taken into consideration where it was held that as the goods were not available for confiscation as the goods were already diverted/permitted to be warehoused without payment of duty on furnishing the bond and the undertaking and thereafter the respondent-Unit clandestinely and illicitly diverted the goods to the open market the goods which otherwise were liable to be confiscated in lieu of confiscation redemption fine was imposable - the matter needs to be remanded to the Adjudicating Authority to ascertain the quantum of fine - impugned order to the extent of not directing confiscation and imposition of fine is set aside - appeal allowed by way of remand.

Summary

Issues:
- Violation of Notification No.1/95-C.E. dated 4.1.95, Exim Policy 2002-2007 by a 100% EOU.
- Confiscation of goods and penalty under the Customs Act, 1962.
- Imposition of fine in lieu of confiscation.
- Application of Section 125 of the Customs Act, 1962.

Analysis:

The appeal was filed by the Revenue against the Order-in-Appeal passed by the Commissioner (Appeals), Central Excise & Customs, Surat II. The case involved a 100% EOU accused of contravening various provisions by exporting cheaper varieties of polyester fabrics yarn from the local market instead of utilizing duty-free raw materials in manufacturing goods for export. The Revenue sought confiscation of goods and penalties under the Customs Act, 1962. The Commissioner imposed penalties but refrained from imposing a fine as the exported goods were not available for confiscation. The Revenue contended that confiscation should have been directed based on legal principles established by the Hon'ble Gujarat High Court and a Division Bench of the Tribunal in similar cases.

The main legal question at hand was whether goods exported in violation of specific notifications could be liable for confiscation and fine. The Tribunal referred to the case law and observed that the respondent, a 100% EOU, had illicitly diverted goods into the open market, breaching the conditions of the bond executed for warehousing duty-free goods. As per Section 125 of the Customs Act, 1962, confiscation could be authorized for such goods. However, since the goods were not available for confiscation during adjudication, a redemption fine in lieu of confiscation was deemed appropriate. The Tribunal cited relevant precedents to support this interpretation and held that the matter should be remanded to determine the quantum of fine to be imposed.

In conclusion, the Tribunal allowed the Revenue's appeal by remanding the case to ascertain the fine amount applicable under the circumstances. The impugned order was set aside, and the matter was referred back to the Adjudicating Authority for the determination of the fine to be imposed, following the legal principles established in previous judgments.