2014 (5) TMI 53 - HC - Customs

Court remands case for detailed examination, stresses evidence verification, no costs awarded

COMMISSIONER OF CENTRAL EXCISE & CUSTOMS Versus AFZAL FAZAL DALAL

COMMISSIONER OF CENTRAL EXCISE & CUSTOMS Versus AFZAL FAZAL DALAL - 2014 (301) E.L.T. 188 (Guj.) Issues Involved:1. Whether the CESTAT was justified in holding that the Revenue failed to establish from documentary evidence that the grey fabrics were imported and customs duty was liable.2. Whether the CESTAT was justified in holding that the unit was not liable to pay customs duty but rather Central Excise duty.3. Whether the CESTAT was justified in holding that the goods were procured from 100% EOU or local traders, and not imported, which was considered a perverse finding.4. Whether the Director of the unit was liable for penalty under Section 112(b) of the Customs Act for illicitly clearing grey fabrics without payment of customs duty.Detailed Analysis:1. Establishment of Imported Grey Fabrics:The primary issue was whether the CESTAT was justified in holding that the Revenue failed to establish from documentary evidence that the grey fabrics were imported and customs duty was liable. The Department contended that the shortage of fabrics detected during preventive checks and the statement of the Director, which was not retracted, confirmed the illicit removal of imported grey fabrics. The CESTAT, however, noted that no documentary evidence was provided in the show cause notice to support that the grey fabrics were imported. The Tribunal found that the lower authorities did not verify the claim that the goods were not imported, which could have been easily done from the records maintained by the appellant. The Tribunal concluded that the findings of the lower authorities were not based on evidence.2. Liability to Pay Customs Duty vs. Central Excise Duty:The second issue was whether the unit was liable to pay customs duty or Central Excise duty. The Tribunal agreed with the respondent's contention that in the absence of proof that the goods were imported, customs duty could not be demanded. The Tribunal held that what was leviable was Central Excise duty in respect of goods obtained from 100% EOU and other local sources, not customs duty. The Tribunal's decision was based on the lack of evidence proving the importation of the raw materials.3. Procurement from 100% EOU or Local Traders:The third issue involved the Tribunal's finding that the goods were procured from 100% EOU or local traders, which the Department considered a perverse finding. The Tribunal observed that there was no proper documentation to prove that the grey fabrics were imported. It noted that the goods could have been procured from local traders or 100% EOU, and the lower authorities did not examine this contention. The Tribunal emphasized that for demanding customs duty, it was necessary to prove that the goods were imported, which was not done.4. Penalty on the Director:The fourth issue was whether the Director was liable for a penalty under Section 112(b) of the Customs Act for illicitly clearing grey fabrics without payment of customs duty. The Department argued that the Director's statement, which confirmed the illicit removal of fabrics, was not retracted and should be considered conclusive evidence. The lower authorities had imposed a penalty based on this statement and the lack of separate maintenance of records for imported and indigenous raw materials. However, the Tribunal found that the findings were not based on sufficient evidence and suggested that the matter required further examination.Conclusion and Remand:The High Court concluded that the Tribunal should have remanded the matter back to the original authority for a detailed examination instead of setting aside the orders of both adjudicating authorities. The High Court remanded the matter back to the authority who passed the Order-in-Original for fresh consideration, instructing the authority to independently examine the entire material produced by both the Department and the respondent. The appeals were disposed of with no order as to costs.