ORCHID CHEMICALS AND Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THE appellants are a 100% Export -Oriented Unit manufacturing bulk drugs. They had imported certain office equipments since 1994 -95, without payment of duty, in terms of Notification No. 13/81 -Cus. dated 9 -2 -1981 (as amended) and Notification No. 53/97 -Cus. dated 3 -6 -1997 and these equipments were rewarehoused and Rewarehousing Certificates obtained from the Bond Officer in -charge of the EOU. Later on, upon scrutiny of records, it was noticed by the department that some of the office equipments (fax, UPS with accessories, computers etc.) had been removed out of the EOU premises to the Corporate Office of the appellant -company without requisite permission or payment of duty. When queried, the Finance Controller of the EOU explained that the equipments had been removed to their Corporate Office only for operational convenience. It was stated that the designing of the equipments was done by the project department at the Corporate Office. It was also stated that the equipments had been used at the Corporate Office in connection with the EOU's business only. The Finance Controller also offered to bring the equipments back to the factory. Not satisfied with the above explanation of the appellants, the department issued a show -cause notice seeking to recover duty of Rs. 29,57,335/ - from the appellants in respect of the above equipments, to confiscate the goods and to impose penalties. These proposals were contested by the party. In adjudication of the dispute, the Commissioner of Customs dropped the demand of duty but held the goods to be liable for confiscation and the appellants to be liable for penalty. The present appeal is against the Commissioner's decision.

(2.) AFTER hearing both sides, we find that the case of the appellants is that, once the demand of duty was dropped, it was not open to the Commissioner to confiscate the goods or to impose penalty on the importer. Learned SDR has contested this case of the appellants on the strength of the findings recorded in the impugned order.

(3.) LEARNED Counsel has claimed support to the above case of the appellants from the Tribunal's Larger Bench decision in Godrej Soaps v. Commissioner of Central Excise, Mumbai , wherein it was held that, where the demand of duty on the assessee was dropped on any account, penal provisions i.e., provisions for confiscation of the goods and for imposing penalty on the assessee, could not be invoked against him. After a perusal of the Larger Bench decision, we find that the issue in the instant case is squarely covered by it in favour of the appellants. It is also noticed that, in the case of Collector of Central Excise v. H.M.M. Ltd. , the Hon'ble Supreme Court held that the question of imposing penalty would arise only if the department was able to sustain its demand of duty.