2007 (8) TMI 613 - AT - Central Excise

CESTAT Ahmedabad: Personal Penalties Set Aside for Duty-Free Yarn; Section 112(b) Not Applicable

KAUSHIKBHAI P. MODI Versus COMMISSIONER OF CENTRAL EXCISE, SURAT-I

KAUSHIKBHAI P. MODI Versus COMMISSIONER OF CENTRAL EXCISE, SURAT-I - 2008 (232) E.L.T. 815 (Tri. - Ahmd.) Issues:- Imposition of personal penalty on the appellants by the Commissioner of Central Excise- Allegation against M/s. Blue Sky Synthetics Ltd. and M/s. S.A. & Company for receiving duty-free imported polyester yarn- Applicability of Section 112(b) of the Customs Act in penalizing the appellants- Reliance on the statement of the Proprietor of the importer and the appellant by the Revenue- Lack of documentary evidence showing financial dealings with M/s. Blue Sky Synthetics Ltd. or M/s. S.A. & Co.Detailed Analysis:The judgment by the Appellate Tribunal CESTAT, Ahmedabad pertains to two appeals challenging the imposition of personal penalties of Rs. 25,000/- and Rs. 1 lakh on the appellants by the Commissioner of Central Excise. These penalties were imposed while confirming the duty demand against M/s. Blue Sky Synthetics Ltd. The appeals were taken up together for disposal based on written submissions filed by the appellants as M/s. Blue Sky Synthetics Ltd.'s appeal was dismissed for non-compliance with a stay order issued by the Tribunal.The main issue revolved around the allegation that M/s. Blue Sky Synthetics Ltd. and M/s. S.A. & Company, both 100% Export-Oriented Units (EOU), received duty-free imported polyester yarn for manufacturing texturised yarn. Penalties were imposed on the present appellants under Section 112(b) of the Customs Act as recipients of the yarn. The appellants contended that the goods received were indigenously made texturised yarn, not imported polyester yarn, and thus, Section 112(b) was not applicable to them. They argued that since the yarn was manufactured in India, it was not confiscable under Section 111 of the Customs Act, and they should not be penalized under Section 112(b).Furthermore, the appellants disputed the Revenue's case, which relied on the statements of the Proprietor of the importer and the appellant. They highlighted that the proprietor's statement clarified that they had no dealings with the appellants and their names were provided under pressure from officers. The appellants also pointed out that they received a copy of the statement only on a later date and that it was retracted promptly. They emphasized the lack of documentary evidence supporting the Revenue's claim that they were recipients of the texturised yarn, labeling it as unsubstantiated.Upon evaluating the submissions, the Tribunal found that the penalty was imposed on the appellants as recipients of the indigenously manufactured yarn. However, there was no evidence to suggest that the appellants were aware of the non-duty paid nature of the yarn or the supplier's obligation to export it instead of selling domestically. The Tribunal questioned the evidentiary value of the statements, especially since they were retracted and in a language the appellants claimed not to understand. Additionally, the Tribunal agreed with the appellants that Section 112(b) of the Customs Act was not applicable in this case, as the allegations pertained to goods manufactured in India attracting excise duty, not customs duty.Ultimately, the Tribunal set aside the impugned order and allowed both appeals with consequential relief, ruling in favor of the appellants. The judgment was pronounced in court on 22-8-2007.