2017 (12) TMI 898 - AT - Central Excise

Penalty u/r 26 - clandestine removal - Held that - Since adequate evidence regarding the job work activity and payment of duty on the final product were produced by the appellant No. 1, the same cannot be discarded and adjudged demands cannot be confirmed against it - Since there is no clandestine removal of goods from the factory of the appellant No. 1, personal penalty imposed on the appellant No. 2 u/r 26 of the CER, 2002 cannot be sustained. Penalty on appellant No. 3 - Section 28 (2B) of the Customs Act, 1962 - Held that - Since the appellant No. 1, who was the job worker for the appellant No. 3 has confirmed that it had received the goods and used for slitting purpose, it cannot be said that non-fulfilment of the conditions of N/N. 52/2003-CUS., dated 31/03/2003 is attributable to fraud, collusion, separation of facts, with intent to evade payments of duty - since the appellant No. 3 had deposited the duty foregone on account of import of the goods and also deposited the appropriate interest, the benefit of Section 28 (2B) ibid should be available, for non-imposition of penalty. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Duty demand confirmation against appellants
- Imposition of penalties on appellants

Analysis:

Issue 1: Duty demand confirmation against appellants
The case involved appellants engaged in manufacturing CRGO Electrical Steel. Appellant No. 3, a 100% EOU, imported CRGO Steel under a customs duty exemption for manufacturing purposes. However, a portion of the imported steel was not returned to the factory, leading to duty demand investigations. The department found that Appellant No. 3 diverted the steel to Appellant No. 1 for job work, who subsequently diverted it to the domestic market. The department confirmed duty demands against both appellants, with penalties imposed. The Ld. Advocate for the appellants argued that the duty liabilities and penalties should not be confirmed, citing sales of processed goods with duty payments and pre-deposit of customs duty by Appellant No. 3. The Tribunal found that Appellant No. 1 had evidence of job work activities and duty payments, which were not considered by the lower authorities. Consequently, the duty liabilities and penalties against Appellant No. 1 were set aside due to lack of clandestine removal.

Issue 2: Imposition of penalties on appellants
Regarding the penalties, the Tribunal noted that Appellant No. 3 did not contest the duty demand but challenged the penalty imposition. As Appellant No. 1 confirmed receiving and processing the goods, the failure to fulfill customs duty exemption conditions was not due to fraudulent intent. Considering that Appellant No. 3 had already paid the foregone duty and interest, the Tribunal applied Section 28(2B) of the Customs Act, 1962 to waive the penalty. Consequently, the penalties imposed on Appellant No. 3 were set aside, and the appeal was allowed in their favor.

In conclusion, the Tribunal set aside duty liabilities and penalties against Appellant No. 1 due to lack of evidence consideration and absence of clandestine removal. Additionally, penalties on Appellant No. 3 were waived under Section 28(2B) of the Customs Act, 1962, as the duty foregone was paid along with interest. The appeals were disposed of accordingly.