PRADEEP INDUSTRIES Vs. CC

JUDGEMENT

(1.) THE appellants had imported SS coils/sheets under three advance licences viz. No.0410011108 dt. 19.12.2000, No. 0410011753 dt. 19.1.2001 and No. 0410017869 dt. 11.9.2001 and cleared the goods free of duty under Customs Notification No. 51/2000 dt. 27.4.2000 (as amended) under the DEEC scheme. Later on, from the results of investigations, it appeared to the department that the appellants had violated certain conditions of the above Notification attracting liablity to pay duty on the imported raw materials. The department took the stand that a part of the exports made by the importer towards discharge of export obligation under the advance licences was of SS utensils manufactured from locally procured materials and also that a part of the quantity of raw materials imported by them had been diverted to local traders. This was, inter alia, based on physical verification wherein a quantity of 649.554 MTs of raw materials had been found short. It also appeared to the department that 382.267 MTs of SS utensils had been manufactured from locally procured raw materials and exported by the appellants towards discharge of export obligation under the DEEC scheme. Statements of partners of the appellant -firm were recorded. Statements were also recorded from their job workers. On the basis of these materials, show -cause notice dated 26.2.2003 was issued by the DRI asking the appellants to show cause why (a) the benefits under DEEC Scheme claimed by them for the exports of 382.267 MTs of utensils manufactured by them utilizing locally procured materials should not be denied and why such exports should not be treated as made under free bills; (b) duty amount of Rs. 2,59,82,160 (as detailed in Annexure to SCN) on the quantity of 649.554 MTs of inputs found short and not accounted for by them should not be demanded in terms of the conditions of Customs Notification 51/2000 dated 27.4.2000 a,, amended; (c) interest in terms of the conditions of the said Notification should not be recovered from them; (d) the bond/bank guarantee executed by them should not be enforced; (e) the above said 649.554 MTs of raw materials found short and not accounted for by them should not be held liable to confiscation under the provisions of Section 111(o) of the Customs Act, 1962 ; and (f) penalty under Section 112(a) of the Customs Act, 1962 should not be imposed on them. In adjudication of the above notice, the Commissioner passed the following order:

(2.) IT appears from the impugned order that there was an earlier investigation by SUB into the very same imports under two of the three advance licences, viz. No. 0410011753 and No. 0410011108. In the course of that investigation, a shortage of 44 MTs of utensils was found vis -a -vis the total quantity of export goods declared under four Shipping Bills. Such shortage was found on a physical verification conducted in the month of September 2001. Statements of Shri Ramesh Chand (partner of the firm) were recorded. On the basis of these materials, the department inferred that the appellants misdeclared the quantity and value of export goods covered by the four Shipping Bills and had thereby rendered the goods liable to confiscation under Section 113(d) of the Customs Act and rendered themselves liable to penalty under Section 114 of the Act. The party waived SCN and requested the Commissioner to take a lenient view and drop the proposed action. They also agreed to pay such fine and penalty as the Commissioner deemed fit. The Commissioner, after considering the submissions of the party, passed Order -in -Original No. 108/2002 dated 12.6.2002 holding the goods entered for export under the four Shipping Bills, to be liable to confiscation under Section 113(d) and imposing a redemption fine of Rs. 10 lakhs in lieu of confiscation. A penalty of Rs.10 lakhs was also imposed on the appellants under Section 114. In the impugned order, learned Commissioner considered his predecessor's order dated 12.6.2002 but rejected the party's plea that the question whether any part of the imported raw materials had been diverted had already been settled in their favour in the earlier order. Ld. Commissioner, in the impugned order, took the view that it was open to him to take a decision on the said question on the basis of fresh evidence gathered by the department. He also relied on the party's admission that they had procured certain quantity of raw material from the local market to meet the export orders.

(3.) BEFORE us, learned Counsel heavily relied on Order -in -Griginal No. 108/2002 passed by the Commissioner, wherein it had been found that no diversion of imported inputs had been proved by the department against the importer. In the face of this case of the appellants, we queried learned SDR as to whether there was any evidence, gathered in subsequent investigations, of any part of the imported raw materials having been diverted by the party, but she could not cite any. Ld. SDR also did not contest the counsel's submission that the above finding recorded by the Commissioner in OIO No. 108/2002 was not challenged by the department. She, however, pointed out that the said Order -in -Original was set aside by this Bench in Final Order No. 214/2003 dated 4.3.2003 in appeal No.C/329/2002 filed by the party. This fact is not in dispute. But, as rightly submitted by ld. counsel, what was invalidated by the Tribunal was a set of findings against the party. Findings recorded by the Commissioner (in order dt. 12.6.2002) in favour of the party were not affected by the Tribunal's order. Hence the finding that there was no evidence of diversion of inputs by the appellants survived. Admittedly, the Department has not challenged it. In the circumstances, we hold that the finding, recorded in the impugned order, of imported inputs having been diverted by the appellants is not sustainable insofar as the imports made under the aforesaid two advance licences (Nos. 0410011108 and 0410011753) are concerned. In respect of the remaining imports covered under advance licence No. 0410017869, the Revenue has not adduced any evidence of diversion of the raw materials. No quantity of raw materials imported by the appellants was recovered from any trader or other person in the local market. Any payment representing sale proceeds of such raw materials was shown to have been received by the appellants from any trader or other person. What was admitted by the appellants was that they had procured certain quantities of raw materials from the local market to meet the shortage of the imported materials in their bid to discharge export obligation under the DEEC scheme. We find that, though the DEEC scheme obligated the appellants to utilize the imported raw materials entirely for the manufacture of goods for export, it did not prohibit utilization of locally procured raw materials for the said purpose in addition to the imported raw materials. The department has no case that the export obligation was not discharged by the appellants. In fact, in respect of one licence (No. 0410011108), the adjudicating authority itself has conceded that the appellants fulfilled their export obligation. In respect of the other two licences, learned Commissioner appears to have recorded a contra finding on the ground that the appellants did not maintain proper account showing actual user of imported raw materials. This finding has been challenged by the appellants by submitting that the Customs authorities themselves had logged the DEEC Books and hence 'it was not open to them to allege that utensils manufactured from the imported raw materials had not been exported by them. Ld.counsel has pointed out that these DEEC Books were seized by the investigating officers and were never returned. This plea of learned Counsel has not been successfully rebutted. On the whole, neither the demand of duty nor the order of confiscation/penalty can be sustained on the grounds of diversion of imported raw materials and non -fulfilment of export obligation.