Customs, Excise and Gold Tribunal - Ahmedabad
R.G. Agarwal vs Commissioner Of C. Ex. And Cus. on 18 October, 2006
ORDER
Jyoti Balasundaram, Vice-President
1. The above appeals arise out of the order of the Commissioner of Central Excise & Customs, Surat, by which he has-
(a) confiscated imported Polyester Filament Yarn weighing 11,324.950 kgs under Rule 226 of Central Excise Rules, 1944 with an option to redeem the same on payment of fine of Rs. 35,000/-,
(b) confirmed customs duty demand of Rs. 1,36,030/- against M/s. Kansal Texo Tube Pvt. Ltd. (100% EOU) on 1800 kgs of imported polyester filament yarn seized at the premises of M/s. Jay Krishna Sizers and ordered to be confiscated and Rs. 3,64,559/- on 4824 kgs. of imported polyester filament yarn seized at the premises of M/s. Care well Rayons Pvt. Ltd. and ordered to be confiscated (total duty demand is Rs. 500589/-),
(c) imposed penalty of Rs. One lakh under Section 112(a) of the Customs Act upon the 100% EOU, and
(d) imposed penalty of Rs. 50,000/- on its Director under the provisions of Section 112(b) of the Customs Act and Rule 209A of the Central Excise Rules, 1944.
2. The brief facts of the case are that on 30-11-99, officers of Directorate General of Anti Evasion searched the premises of 100% EOU which is engaged in twisting of POY and PFY and ascertained the physical stock of raw materials and finished goods. The premises of M/s. Jay Krishna Sizers was also searched and 1800 kgs of imported PFY was found. 4824 kgs of imported PFY was found during the search of premises of M/s. Carewell Rayons and the goods were placed under seizure as no proof of duty payment was produced. Investigations revealed that the 100% EOU had entered into an agreement dated 23-7-98 with the Development Commissioner, KFTZ, Kandla to manufacture twisted PFY and POY for export and in view of this permission they became eligible to import raw material and other inputs without payment of duty in terms of Notification No. 59/98-Cus dated 3-8-98 as amended and even without payment of Central Excise duty in terms of Notification No. 1/95-C.E. dated 1-4-95. They have given an undertaking to pay both Customs and Central Excise duty together with interest in the event of non-fulfilment of conditions of the agreement. In the category of exempted material, they declared various types of yarns such as polyester filament yarn etc. The 100% EOU obtained indigenous raw materials under CT. 3 procedure from other 100% EOU and also imported PFY without payment of duty and they were under obligation to maintain proper accounts for receipt, issue and consumption of the raw materials in their factory. No statutory records were found in their premises for receipt or consumption of raw materials. Statements of the Director of the 100% EOU and of the partner and authorized signatory of M/s. Jay Krishna Sizers and M/s. Carewell Rayons Pvt. Ltd. respectively were recorded. Investigations revealed that the 100% EOU were involved in the clandestine removal of imported PFY received by them duty free under Notification No. 59/98 for manufacture of export goods, that they diverted the imported raw materials in connivance with the brokers and their buyers (M/s. Jay Krishna Sizers and M/s. Carewell Rayons Pvt. Ltd.) and obtained sale proceeds in cash. Such diversion amounts to contravention of the provisions of Notification 53/97 as amended and duty not paid at the time of import became recoverable from them under the provisions of Section 28 read with Section 72 of the Customs Act 1962 and Notification No. 59/98 Cus. Show cause notice was thus issued to 100% EOU for recovery of duty on goods lying at the premises of their buyers, proposing confiscation of goods seized from their premises and proposing penal action against them and their Director as well as their buyers. The Adjudicating authority upheld the charges levelled against the 100% EOU and confiscated the goods seized at different premises with option to redeem, confirmed duty demands as set out above, and also imposed penalties as indicated herein above. Hence these appeals.
3. We have heard both sides. The perusal of the records shows that the 100% EOU imported PFY without payment of duty. They were, therefore, required to maintain proper accounts for receipt, issue and consumption of the same in their factory. Evidence on record shows that they clandestinely removed the goods received by them duty free under Notification No. 59/98 for manufacture of export goods by diverting the same in connivance with the brokers and their buyers and obtained sale proceeds in cash. Such diversion clearly amounts to violation of the provisions of the Notification. Therefore, duty not paid at the time of imports becomes recoverable from them. The appellants have not been able to rebut the charge and finding of diversion which is clearly based upon statement of the Director of the 100% EOU. The only argument raised before us that the 100% EOU was not the importer and therefore, could not be held liable to duty, and that duty demand, if at all, could be raised only against M/s. Jay Krishna Sizers and M/s. Carewell Rayons Pvt. Ltd. who purchased imported raw materials and to whom provisional release of the goods was allowed, cannot be accepted for the reason that the Director of the 100% EOU had admitted that the EOU had imported PFY duty free and no document has been produced to show that the goods were imported by someone else, and the option to redeem the goods seized from the premises of M/s. Jay Krishna Sizers and M/s. Carewell Rayons Pvt. Ltd. has been given to 100% EOU.
4. In the light of the above, we uphold the confiscation and duty demands. Penalty on the 100% EOU is also upheld. Penalty on the Director of the 100% EOU is set aside as unsustainable for the reason that it is a consolidated/composite penalty imposed under Section 112(b) of the Customs Act and Rule 209A of the Central Excise Rules which is not legally permissible.
5. In the result the appeal No. E/373/02 is allowed and appeal No. E/377/02 is dismissed.