CHARMINAR EXPORTS Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THE appellants had imported a total quantity of 812.88 MTs of SS Coils/Sheets under two advance licences (DEEC licences) viz. No. 410028056 dated 04.0.7.2002 and No. 410031501 dated 24.09.2002 and cleared the same duty -free in terms of Notification No. 30/97 -Cus. dated 01.04.1997. In the DEEC scheme, they were liable to discharge their export obligation in relation to the entire quantity of the raw materials imported by them, within the time limit prescribed by the licensing authority (DGFT). The above Notification stipulated that the raw material imported duty -free under the DEEC licences were not to be disposed of or utilized in any manner except for utilizing in discharge of export obligation or for replenishment of such materials. Where the raw materials imported were used to replenish similar materials, the Notification stipulated that such replenished materials were not to be sold or transferred to any other person. After the subject goods were cleared duty -free as above, the department launched investigation into the manner of use of the goods and it was found that a total quantity of 134.093 MTs of SS Coils/Sheets had been diverted to the premises of M/s. VKN Industries, Chennai -52, M/s Baburam Premchand, Chennai -81 and M/s. Modern Steel Industries, Chennai -57. This quantity of the goods was seized from the said premises. The said three parties, in their respective statements, submitted that their premises were being used by the appellants only for storing the goods. After completing the investigations, the department issued show -cause notice for recovering duty on the aforesaid quantity of SS Coils/Sheets (134.093 MTs) from the appellants on the ground that the said quantity of the imported raw materials had been diverted by them instead of utilizing the same in the manufacture of export goods. The notice also proposed to confiscate the goods under Section 111 of the Customs Act and to impose penalty on the party under Section 112 of the Act. These proposals were contested. The Commissioner of Customs, in adjudication of the dispute, demanded duty of Rs. 54,97,813/ -from the appellants on the above quantity (134.093 MTs) of raw materials, confiscated the goods under Section 111(o) of the Act with option for redemption, and impose a penalty of Rs. 55 lakhs on the party under Section 112(a) of the Act. Hence the present appeal.

(2.) IT is submitted by learned Consultant for the appellants that they had discharged export obligation in respect of the entire quantity of raw materials imported under the two licences as evidenced by the 'redemption certificates' issued by the Assistant Director -General of Foreign Trade (ADGFT, for short), Chennai. These certificates have been produced by learned Consultant. He also claims support from the following decisions of the Tribunal: (i) Bharath Steel Corporation v. Commissioner of Customs, Chennai (ii) Ashok Enterpriese v. Commissioner of Customs, Chennai (iii) Tamil Trading Corporation v. Commissioner of Central Excise, Tuticorin According to learned Consultant, the impugned order is not sustainable in view of fulfilment of export obligation certified by the ADGFT in relation to both the licences. Learned SDR submits that the goods in question were seized from the three premises outside the appellants' factory on the 4th and 5th December, 2002, and that these goods were released to the appellants as per orders of the Hon'ble High Court on 29.07.2003 only. It is submitted that, by that time, the exports had been completed by the party as per the certificates issued by the ADGFT. On these facts, learned SDR submits, it is evident that the subject goods (134.093 MTs of SS Coils/Sheets) were not utilized in the manufacture of utensils exported in discharge of export obligation under the licences. In other words, the department's allegation of diversion of imported raw materials stood proved. As the party has consistently maintained that the above quantity of raw materials was used for discharge of export obligation, they cannot resist a finding that, on account of diversion of the said goods, one of the conditions of the Notification stood violated and the benefit of the Notification was not available to the offending goods. We have found substance in this argument. The last export noted in the ADGFT's certificate relating to the advance licence dated 04.07.2002 was made on 25.10.2002, prior to seizure of the goods in question. All the exports noted by ADGFT in the two certificates were made long before release of the seized goods to the appellants pursuant to the High Court's order. Thus, it is crystal clear that 134 MTs of SS Coils/Sheets, which were claimed to have been utilized in the manufacture of export product were not so utilized but diverted out of the factory. The relevant condition under the Notification reads as under: exempt materials shall not be disposed of or utilized in any manner except for utilization in discharge of export obligation or for replenishment of such materials and the materials so replenished shall not be sold or transferred to any other person. The appellants have never had a case that the subject goods were used for replenishment. On the other hand, it has ever been their case that the goods were used in the manufacture of the export product. This claim of the party has been successfully disproved by the Revenue who have established that the above condition was violated by the importer thereby disentitling themselves to the benefit of the Notification. Hence the demand of duty on 134.093 MTs of SS Coils/Sheets can only be sustained. Another consequence of the above violation is that the goods became liable for confiscation under Section 111(o) of the Customs Act. Learned Commissioner has determined a total redemption fine of over Rs. 19 lakhs, which appears to be reasonable. However, a penalty of Rs. 55 lakhs on the party is seemingly harsh. In the facts and circumstances of the case, we are of the view that a penalty of Rs. 10 lakhs (Rupees Ten lakhs only) will match the offence found against the party. The impugned order will stand modified accordingly.

(3.) THE appeal is disposed of in the above terms.