2019 (3) TMI 1421 - AT - Central Excise

100% EOU - clandestine removal - terry towels - normal goods or substandard goods - penalty u/s 11AC - SCN alleges that they have cleared the goods without raising invoices clandestinely and presumes that the goods which they have cleared are similar to the goods which they would otherwise have cleared. Held that - It is no longer disputed that the goods were cleared by the appellant without raising invoices and without paying duty and without making necessary entries in the records. In some cases, the recipients of these goods have given letters saying that they received samples free of cost and some cases the recipients have sent letters stating that the goods were seconds. If the goods were sent as samples to their respective customers to enhance their business, it is inconceivable that any businessman would send rejected sub-standard samples to promote their prime goods - the appellant has not substantiated his claim that the goods which they cleared were sub-standard goods. If they were, indeed, sub-standard goods, there was no reason for them to not to raise any invoice accordingly and make appropriate entries in their records. Thus, the appellant has cleared the goods clandestinely but has not been able to substantiate their claim that the goods were rejects or of substandard nature. Penalty u/s 11AC - Held that - There is no ground to reduce the penalty under Section 11AC because they paid some amount of duty during investigation. However, after recomputing the demand taking the value of goods as cum duty value, corresponding changes need to be done in the penalty. The appeal is partly allowed by remanding the matter to the original authority for the sole purpose of recomputing the value of the goods as cum duty value and consequently recomputing penalty if necessary.

Summary

Issues:
1. Clandestine removal of goods without raising invoices.
2. Liability to pay duty on goods as normal or substandard.
3. Imposition of penalty under section 11AC.
4. Deduction of amount already paid for the purpose of penalty imposition.

Analysis:

(a) Clandestine Removal of Goods:
The appellant, an EOU engaged in manufacturing, was alleged to have clandestinely cleared terry towels without proper documentation or duty payment. The investigation revealed discrepancies, and the appellant failed to substantiate that the cleared goods were rejects or substandard. Recipients' letters indicated receipt of free samples or seconds, but the appellant's claim lacked evidence. The Tribunal found the appellant guilty of clandestine clearance.

(b) Liability for Duty Payment:
The duty amount was revised during denovo proceedings, considering the nature of goods and duty exemption eligibility. The appellant's duty payment during investigation was confirmed and adjusted against the revised duty amount. The Tribunal upheld the revision of the duty amount and emphasized the need to recompute the duty value based on cum duty value, rejecting the appellant's argument regarding the value of goods.

(c) Imposition of Penalty under Section 11AC:
The Tribunal affirmed the imposition of penalty under section 11AC, stating that the penalty should not be reduced due to prior duty payments. However, the penalty amount needed adjustment following the recomputed duty value. The Tribunal found no grounds to interfere with the penalty imposition but emphasized the need for corresponding adjustments post revaluation.

(d) Deduction of Amount Already Paid for Penalty Imposition:
The Tribunal directed the original authority to recompute the value of goods as cum duty value and adjust the penalty accordingly. The appellant's argument regarding the penalty amount in relation to the duty already paid during investigation was considered, leading to the remand of the matter for recomputation purposes.

In conclusion, the Tribunal partially allowed the appeal, remanding the case to the original authority for recalculating the duty value and, if necessary, adjusting the penalty accordingly. The judgment aimed to ensure fair assessment and penalty imposition in light of the duty evasion allegations.

(Judges: Mr. M.V. Ravindran, Member (Judicial) and Mr. P.V. Subba Rao, Member (Technical))