2017 (7) TMI 337 - AT - Central Excise

Goods transfer during Tsunami deemed necessary, penalties revoked for EOU and DTA units

Jeevan Diesels & Electricals Ltd. -EOU Puducherry, Jeevan Diesels & Electricals Ltd. - DTA Puducherry Versus Commissioner of Central Excise, Puducherry

The Tribunal found that the goods removed from the EOU to the DTA unit were not diverted for sale or misuse but were shifted due to a Tsunami-induced ... 100% EOU - clandestine removal of raw materials from JDL-EOU to JDL-DTA, without any approval from concerned authorities - Held that: - from the SCN itself, it clearly emerges that the goods so found removed from JDL-EOU were very much located and detained in JDL-DTA unit. In the circumstances, taking note of the fact that both the units are adjacent to each other under a common management, the averment that removal of goods had only been necessitated due to destruction caused in one unit due to Tsunami, should not be summarily rejected. The only infraction that comes up is that appellants have removed the goods without any prior permission or for that matter, any post-facto permission. But given the facts that the goods removed to the adjacent unit have been found available, even such infraction would only have to be considered as a procedural lapse which should not be given the colour of clandestine removal with intent of evading duty. When the impugned goods not found at the EOU unit have, however, been subsequently found in their adjacent DTA unit, there cannot be any demand of customs duty on such goods. Penalty u/s 11AC - Held that: - Imposition of equal penalty u/s 11AC ibid on JDL-EOU and confiscation of the detained goods valued at ₹ 3,01,98,135/- will also, in consequence, not sustain. Penalty u/r 25 - Held that: - Penalty of ₹ 15 lakhs imposed u/r 25 of CER on JDL-EOU is therefore, unnecessary and excessive - what that has happened is a procedural violation for which, in our considered opinion, imposition of such huge penalty is an overkill. We therefore hold that interest of justice for such a procedural lapse would be best served by limiting the penalty to ₹ 25,000/-. Penalty u/r 26 - Held that: - there is no justification for imposition of penalty of ₹ 1 lakh on JDL-DTA u/r 26 ibid since the adjacent unit was only used to store the goods temporarily. It is also pertinent to note that JDL-DTA has not been issued a SCN. This penalty against JDL-DTA is therefore set aside. Appeal allowed - decided partly in favor of appellant. Issues: Alleged clandestine removal of materials from EOU to DTA unit without permission, demand of duty liability, penalty imposition on EOU and DTA units.Clandestine Removal of Materials:The case involved M/s. Jeevan Diesel and Electricals Ltd., an EOU, and their adjacent DTA unit, where raw materials and finished goods from the EOU were found. The department alleged that the manufacturing activity of both units occurred only in the DTA unit. A show cause notice was issued to the EOU for clandestinely removing materials to the DTA unit without approval, causing a revenue loss. The Commissioner's order confirmed some demands and penalties, leading to the appeal.Delay Condonation:The appellant sought condonation of a 900-day delay in filing an appeal for the DTA unit. The delay was attributed to a misconception that a common appeal would suffice for both units. The Tribunal accepted the reasons as genuine and condoned the delay, allowing both appeals for disposal.Defence and Arguments:The Managing Director of the appellant explained that materials were shifted from the EOU to the DTA unit after damage caused by a Tsunami to safeguard them. The appellant argued that all removed materials were found and accounted for in the DTA unit, denying any revenue loss. The department contended that the EOU lacked capital goods for manufacturing and removal without permission justified the duty liability.Judgment and Disposition:The Tribunal noted that the goods removed were found in the DTA unit, indicating no diversion for sale or misuse. The removal was considered a procedural lapse due to a Tsunami-induced necessity, not for evading duty. Consequently, the demand and penalties were set aside, limiting the penalty on the EOU to Rs. 25,000. The penalty on the DTA unit was also revoked, as no SCN was issued. The appeals were allowed, except for the reduction in the penalty on the EOU.This detailed analysis covers the issues of clandestine removal, delay condonation, defense arguments, and the Tribunal's judgment, providing a comprehensive overview of the legal judgment.