Bharat Tissues Pvt. Ltd. Vs C.C. (CESTAT Bangalore)
No Custom Penalty levied, if goods were permitted to be cleared by the officers after signing Bond
The issue under consideration is whether the penalty under Customs Act will be applicable in case where bond is submitted for any violation of EOU related rules?
CESTAT states 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. They find that the Bond submitted in terms of the Notification binds the appellants to pay back the duty and interest in the event of any violation. CESTAT find that the said Notification does not provide for imposition of any penalty and therefore, they set aside the penalty imposed. CESTAT also find that the appellant’s submission vis-à-vis confiscation is also acceptable in terms of the Notification. The Notification is a self-contained Notification and action can be taken by Revenue under the terms of the Notification. The Notification also does not provide for confiscation and fine in lieu of confiscation. Moreover, as discussed above, Learned Commissioner finds that the appellants have imported the rejected goods even though the Serial No. 14 & 15 of Annexure-I to the Notification do not permit such imports. In such case, as submitted by the appellant, the fact that the respective Bills of Entry have been assessed by the proper officers at the time of import is also to be considered. In view of the same, 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.
FULL TEXT OF THE CESTAT JUDGEMENT
Briefly stated the facts of the case are that the Appellants, M/s. Bharath Tissues (P) Ltd, are a 100% EOU engaged in the manufacture and export of silk fabrics; the appellant imports silk yarn and grey silk fabrics without payment of duty availing relevant Notifications 53/2007 & 52/2003;
after due process/manufacture of silk fabrics, export the same; there are no sales of the finished goods in DTA; some of the exported silk fabrics are reimported, availing the benefit of exemption contained in above cited notifications; the re-imported fabrics are processed for removal of the defects and re-exported, depending on orders. During the statutory audit of the Appellant, company auditors had recorded details of shortage of imported materials and non-movable items; DRI has undertaken investigation and found shortage of 29,145.65 Meters of silk; after investigation, DRI issued Show Cause Notice dated 27.08.2008; the allegations were mostly based on audit reports except the allegation of shortage of 36409 Mtr/1609 pcs of silk fabrics reimported. The demands raised in the Show Cause Notice were confirmed by Commissioner of Customs, Bangalore, Commissioner of Customs, Bangalore, vide impugned Order 02/2010 dated 24.03.2010; Learned Commissioner confirmed the duty demand of Rs. 1,19,08,353 along with interest and penalty while confiscating the goods imported duty free. Hence the appeal, C/1139/2020; the appellants deposited an amount of Rs 75, 60,000 during investigation.
2. Learned Counsel for the appellants, Shri N. Rajagopalan submits that the impugned order has been passed assuming that the shortages have been accepted by the Managing Director and Manager Imports-Exports; a perusal of their statements would clearly establish that the appellant has given due explanation; in their letters dated 18.03.2006 to SBI and letter dated 13.06.2006 to Canara Bank, the appellant has categorically stated that the shortages were not real shortage but included clerical errors. He explains different shortages with reference to the allegations as follows.
(i). Alleged shortage of 134 kg of Dupion yarn is based on 40% weighment; work-in-progress yarn in weaving section was not considered; actual shortage, if all stock is taken, is well within 0.1%;
(ii). Alleged shortage of 2153 Mtr of imported fabrics, though based on 100% input stock verification, the stock of fabrics under work in process category was not considered.
(iii). Alleged shortage of 21903 Mtr of raw fabrics is based on 74% check only and was worked out by applying average fabric weight to meterage; 101 varieties of fabrics could not have been measured within 2 days; excess noticed in some cases was not considered; in his statement dated 23.11.2007, the Manager Imports-Exports has explained that there was no shortage;
(iv). It was alleged after officer’s visit in 2007 that as against the book stock 36401mtrs/1609 pieces of scarves, only 7263.60 Mtr were physically found.
3. Learned Counsel submits that the findings of the Commissioner are not correct for the following reasons:
