2020 (7) TMI 146 - AT - Customs

100% EOU - shortage of imported materials and non-movable items - Import of silk yarn and grey silk fabrics without payment of duty availing relevant Notifications 53/2007 52/2003 - HELD THAT - The officers of DRI have found in addition to the shortages detected by the auditors, shortages in respect of goods claimed to have been re-imported by the appellants in consequence to the rejection of the same by the foreign buyer. The appellants have argued that as the warehousing period is not over, the demand is premature. Whereas, we find that Learned Commissioner has confirmed the demand in terms of the Notification No. 53/97 dated 03.06.1997 and 52/03 dated 31.03.2003 as the goods were neither utilized within the prescribed period nor any extension was sought. It is found that among other conditions, Notification No. 52/2003 requires the appellants to maintain proper account of the receipt, storage and utilization of the goods. The investigation conducted by the Revenue shows that the so-called re-imported goods were not found in the factory premises and no proper accounts of the same has also been done. The appellants have taken the plea that import, export, re-processing and re-export is a continuous exercise and that the re-imported goods were in the work in progress. This argument is not acceptable. It is not the case of the appellants they have maintained records showing the receipt, utilization and disposal of re-imported goods. Under the circumstances, it is found that the appellants have violated the conditions of the Notification and in terms of the Bond they have submitted at the time of import, they are liable to pay duty along with applicable interest. Penalty u/s 114A of the Customs Act, 1962 - HELD THAT - There is merit in the argument of the appellants to the extent that the Revenue is free to demand and collect duty along with interest, in terms of the Bonds submitted by the appellants at the time of import in terms of Notification No. 52/03. The Bond submitted in terms of the Notification binds the appellants to pay back the duty and interest in the event of any violation. The said Notification does not provide for imposition of any interest and therefore, we set aside the penalty imposed. Also, the appellant s submission vis- -vis confiscation is also acceptable in terms of the Notification - penalty under Section 114A and other penal provisions cannot be invoked when the goods were permitted to be cleared by the officers. However, the Revenue will be free to recover duty along with interest in terms of the Notification - Commissioner has not imposed any fine in lieu of confiscation. Appeal allowed in part.

Issues Involved:
1. Alleged Shortages of Imported Materials
2. Non-Accountal of Re-Imported Fabrics
3. Applicability of Notifications 53/97-Cus and 52/03-Cus
4. Demand of Duty under Section 28 vs. Section 72 of the Customs Act
5. Imposition of Penalty under Section 114A
6. Confiscation of Goods

Detailed Analysis:

1. Alleged Shortages of Imported Materials:
The appellants contested the alleged shortages of various imported materials, arguing that the shortages were due to clerical errors and not actual shortages. They claimed that the auditors did not conduct a 100% stock verification and ignored work-in-progress items. The appellants also emphasized that the shortages were within permissible limits and that they had informed their bankers about these issues before the DRI's visit. The Tribunal found that the DRI officers did not conduct a physical stock verification and relied solely on the statutory audit reports, which were not sufficient to prove the shortages. Therefore, the Tribunal held that the demand of duty for the alleged shortages of Dupion yarn, silk fabric, and other items (Serial Nos. 1 to 5 & 7) was not sustainable.

2. Non-Accountal of Re-Imported Fabrics:
The appellants argued that the re-imported goods were mixed with regular stock and that one-to-one correlation was not possible. They also claimed that some of the re-imported goods were re-exported, as evidenced by four shipping bills. However, the Tribunal found that the appellants failed to maintain proper records and could not show physical stock or proof of re-export. The Tribunal upheld the duty demand of ?72,79,538 for the shortage of 36,409 meters/1609 pieces of re-imported silk fabric (Serial No. 6).

3. Applicability of Notifications 53/97-Cus and 52/03-Cus:
The Tribunal examined whether the re-imported goods fell under the specified serial numbers of the notifications. The Commissioner had found that the re-imported goods, partially rejected by foreign buyers, did not qualify for the exemption under the notifications. The Tribunal agreed with this finding, noting that the appellants did not utilize the goods within the prescribed period nor sought an extension for warehousing.

4. Demand of Duty under Section 28 vs. Section 72 of the Customs Act:
The appellants argued that the demand under Section 28 was not appropriate since the goods were warehoused, and the bond period was not over. The Tribunal found that the demand was correctly confirmed under the notifications, as the appellants failed to maintain proper accounts and did not seek an extension for the warehousing period. The demand of duty for the re-imported goods was sustained.

5. Imposition of Penalty under Section 114A:
The appellants contended that the penalty under Section 114A was not applicable since the demand under Section 28 was not sustainable. The Tribunal found merit in this argument, noting that the bond submitted by the appellants at the time of import bound them to pay duty and interest in case of any violation. The Tribunal set aside the penalty under Section 114A, as the notifications did not provide for such penalties.

6. Confiscation of Goods:
The Tribunal found that the notifications did not provide for confiscation and fine in lieu of confiscation. The Commissioner had not imposed any fine in lieu of confiscation, and the Tribunal agreed that the goods were permitted to be cleared by the officers at the time of import. Therefore, the confiscation of goods was not upheld.

Conclusion:
The Tribunal partly allowed the appeal, restricting the duty demand to ?72,79,538 for the re-imported goods (Serial No. 6). The balance duty demand and penalty under Section 114A were set aside. The order was pronounced in the open court on 01/07/2020.

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