2022 (6) TMI 432 - AT - Customs

Tribunal overturns order, rules in favor of assessee, citing defective notice and lack of evidence.

RAJHANS IMPEX PVT LTD, JINESH F SHAH, JAKAP METIND PVT LTD and APPLE INTERNATIONAL Versus C.C. -MUNDRA

The Tribunal set aside the impugned order, allowing the appeals of the assessee and dismissing the department's appeal. The demands for Customs duty and ... 100% EOU - the case of the department is that Appellant have obtained 11 Advance Authorization from DGFT for duty free import of raw material under Notification No. 98/2009 -CUS. dated 11.09.2009 - It is alleged that in actual no clearances have taken place for availing benefit of Advance Authorization - HELD THAT:- It is settled that once in the 100% EOU the raw material imported duty free is used in the manufacture of final product and final product is cleared on payment of duty in DTA, for any reason the customs duty on the raw material which was used in the finished goods cannot be demanded therefore, the demand of Customs Duty on this ground also is clearly not sustainable. Clandestine removal - case of the department is on the ground that deemed export clearance were not genuine and were shown only on paper and finished goods were clandestine cleared in the open market - HELD THAT:- During the investigation, the department has sought verification report from the Jurisdictional Authority of EOUs units. It also appears that all the Concerned Officers have certified that EOUs have received the goods. In the said verification reports, officers, no-where pointed out that the EOUs have not received the materials form the Appellant. Further Authorized persons of EOUs units accepted the facts of receipts of materials and transporters and truck owners also accepted the transportation of goods from the factory of Appellant to EOU units - No statement of any buyer recorded to whom clearance was allegedly made, no transportation details provided, no evidence of any receipts of payment from open market buyers produced. Therefore, in the given set of facts and in absence of any adverse evidence, it cannot be said that finished goods were clandestinely cleared in open market. The entire case of the Revenue is based upon the surmises and conjectures. No concrete, positive and tangible evidence appears on record. The evidences brought into the record by the department are incomplete, inconsistent and not a reliable piece of evidence to prove charges of clandestine removal - the charges of clandestine removal of the alleged goods not sustainable in the present matter - the central excise duty liability cannot be fastened upon the appellant. Appeal allowed - decided in favor of appellant. Issues Involved:1. Misuse of Advance Authorisation scheme.2. Demand for Customs duty on imported raw materials.3. Demand for Central Excise Duty on finished goods.4. Allegations of fictitious deemed export clearances.5. Confiscation of goods and imposition of penalties.6. Jurisdiction and validity of the show cause notice.7. Evidence of clandestine removal of goods.Detailed Analysis:Misuse of Advance Authorisation Scheme:The appellant was accused of gross misuse of the Advance Authorisation scheme by showing fictitious deemed export clearances to 100% EOUs and SEZs, thereby obtaining duty-free import benefits for raw materials such as Brass/Copper/Zinc Scrap. The investigation revealed that the clearances to EOUs were not genuine and were only on paper, leading to wrongful availing of refunds and advance authorisations.Demand for Customs Duty on Imported Raw Materials:The impugned order demanded Customs duty amounting to Rs. 1,26,99,092/- on the imported Brass Scrap under Section 28(4) of the Customs Act, 1962, along with interest and penalties. However, the Tribunal found that the appellant had availed the exemption under Notification No. 96/2009-CUS, not under Notification No. 98/2009-CUS as alleged by the department. Since the show cause notice was based on an incorrect notification, it was deemed defective, and the demand was not maintainable.Demand for Central Excise Duty on Finished Goods:The adjudicating authority confirmed the demand of Central Excise Duty amounting to Rs. 90,59,957/- on the finished goods under Section 11A(4) of the Central Excise Act, 1944, along with interest and penalties. The Tribunal, however, observed that the appellant had cleared the goods on payment of duty and received payments through cheques, with all transactions recorded in statutory books. The department failed to provide corroborative evidence of clandestine removal, and thus, the demand was not sustainable.Allegations of Fictitious Deemed Export Clearances:The investigation alleged that the appellant showed fictitious clearances of Brass Rods/Brass Hollow Rods/Copper Alloys Ingots to four 100% EOUs, which were only on records. The Tribunal found that the department's case was based on incorrect assumptions and lacked concrete evidence. The statements of transporters and EOUs confirmed the receipt of materials, and no adverse evidence was provided by the department to prove otherwise.Confiscation of Goods and Imposition of Penalties:The impugned order held that the imported Brass Scrap and finished goods were liable for confiscation under Section 111(o) of the Customs Act, 1962, and Rule 25 of the Central Excise Rules, 2002, respectively. Penalties were imposed under various sections of the Customs Act and Central Excise Act. The Tribunal set aside these penalties, stating that the demand itself was not sustainable, and thus, penalties on the appellants were not justified.Jurisdiction and Validity of the Show Cause Notice:The Tribunal found that the show cause notice was defective as it was based on an incorrect notification (Notification No. 98/2009-CUS instead of Notification No. 96/2009-CUS). The foundation of the department's case was flawed, and thus, the entire proceeding was vitiated. The Tribunal relied on the Supreme Court's judgment in COMMISSIONER OF C. EX. & CUSTOMS Vs. SURESH SYNTHETICS, which held that a defective show cause notice renders the demand unsustainable.Evidence of Clandestine Removal of Goods:The Tribunal observed that the department failed to provide positive evidence of clandestine removal of goods. No statements of buyers, transportation details, or evidence of payments from open market buyers were produced. The Tribunal relied on various judicial pronouncements, including the High Court's judgment in Commissioner of Central Excise v. Brims Products, which emphasized that the revenue must prove clandestine removal beyond doubt.Conclusion:The Tribunal set aside the impugned order, allowing the appeals of the assessee and dismissing the department's appeal. The demands for Customs duty and Central Excise duty, along with interest and penalties, were found to be unsustainable due to the defective show cause notice and lack of concrete evidence. The penalties imposed on other appellants were also set aside, as the main demand itself was not maintainable.