2017 (11) TMI 970 - AT - Customs

N/N. 53/97-Cus., dated 3-6-1997 - Waste - Clandestine removal - Held that - it does not appeal to common sense as to how without SION fixed by the EXIM Policy which governed the appellant for the purpose of import and export and also the notification governing the appellant, as aforesaid, having no mention about any SION or percentage of wastage, appellant shall be arbitrarily dealt - Making further examination, it is noticed that the waste generated was not deliberate and the appellant has paid excise duty thereon when cleared. Department has not made any case to show that there was deliberate pilferage of the raw material by the appellant or diverted the same. In absence of any mala fide being brought on to record, appellant cannot be suspected to have made any undue gain at the cost of the State - appeal allowed - decided in favor of appellant.

Issues:
1. Interpretation of Notification No. 53/97-Cus.
2. Compliance with SION norms for wastage in manufacturing process.
3. Allegation of duty evasion on waste material.
4. Applicability of Circular No. 305/111/85-FTD.
5. Prima facie assessment of the case.
6. Allegation of deliberate pilferage or diversion of raw material.
7. Adjudication based on mala fide intentions.

Interpretation of Notification No. 53/97-Cus:
The appellant contended that the raw material imported had undergone manufacturing processes and the resultant goods were exported as per Notification No. 53/97-Cus. The main issue arose due to the percentage of wastage during manufacturing, which exceeded the SION norm of 25%. However, since there was no specific SION prescribed for the appellant, the circular relied upon by the Revenue was deemed inapplicable to impose duty on the waste material. The appellant argued that the waste generated had already attracted excise duty without any suspicion of clandestine removal.

Compliance with SION norms for wastage:
Revenue argued that the SION norm for wastage was fixed at 25% of the input, and any excess wastage should be liable to Customs duty, as per the circular. However, the tribunal noted that the absence of a specific SION for the appellant made it unreasonable to impose duty based on a generic norm. The tribunal emphasized that the waste generated was not deliberate, and the appellant had paid excise duty on it when cleared, indicating compliance with the law.

Allegation of duty evasion on waste material:
The department alleged duty evasion on the excess wastage beyond the prescribed SION norm. Despite this, the tribunal found no evidence of deliberate pilferage or diversion of raw material by the appellant. In the absence of any mala fide intentions or undue gain by the appellant, the tribunal deemed arbitrary adjudication impermissible and allowed the appeal.

Applicability of Circular No. 305/111/85-FTD:
The circular relied upon by the Revenue to restrict wastage to 25% was found inapplicable due to the absence of a specific SION for the appellant. The tribunal highlighted that the appellant had already paid excise duty on the waste material, and there was no indication of any fraudulent activities.

Prima facie assessment of the case:
Upon examination, the tribunal found it illogical to subject the appellant to arbitrary treatment without a prescribed SION for wastage. The lack of specific guidelines for the appellant in the EXIM Policy and relevant notifications raised doubts about the validity of imposing duty on the waste material.

Allegation of deliberate pilferage or diversion of raw material:
The department failed to establish any deliberate wrongdoing on the part of the appellant regarding the excess wastage. The tribunal emphasized that the appellant had fulfilled its obligations by paying excise duty on the waste material, and without any evidence of malpractice, suspicion or undue gain could not be attributed to the appellant.

Adjudication based on mala fide intentions:
Given the absence of any mala fide intentions or fraudulent activities on the part of the appellant, the tribunal ruled in favor of the appellant and allowed the appeal, emphasizing that arbitrary adjudication was not permissible in this case.

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