Tribunal Upholds Revenue Directorate's Notice on Export Unit, Confirms Duty Demand

The Tribunal upheld the show cause notice issued by the Directorate of Revenue Intelligence to the 100% Export-Oriented Unit, dismissing jurisdictional objections. It validated the notice invoking the extended period of limitation, rejecting the challenge raised by the appellants. The demand under Section 72 for duty short-levied was sustained based on evidence of diversion of imported raw materials. The Tribunal affirmed the demand, confiscation of goods, and penalties, reducing the penalties imposed on the appellant-company and its Director. The appeals were partly allowed, with upheld liabilities but reduced penalty amounts.

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Issues:
1. Jurisdiction of the Directorate of Revenue Intelligence in issuing show cause notice to 100% EOU.
2. Validity of show cause notice invoking extended period of limitation.
3. Sustainability of demand under Section 72 for duty short-levied.

Analysis:

1. Jurisdiction Issue:
The appellants contended that the show cause notice issued by the Director of DRI to the 100% EOU was improper. They argued that the Central Excise officer should be the proper officer for issuing such notices. However, the Tribunal dismissed this plea citing Circular No. 4/99-Cus., which authorized officers of the Directorate of Revenue Intelligence to investigate cases and issue show cause notices. The Tribunal held that the appellants' objection was not valid post the issuance of the circular, overruling their preliminary objection.

2. Extended Limitation Period Issue:
The appellants raised a submission challenging the show cause notice's invocation of the extended period of limitation. They argued that only the Commissioner of Customs or Addl. Director of DRI could issue such notices for cases involving intention to evade duty payment. The Tribunal rejected this submission as the demand was raised within the normal limitation period. The Tribunal found this argument devoid of merit and upheld the validity of the notice issued by the Asstt. Director of DRI.

3. Demand Sustainability under Section 72:
The appellants contended that the demand under Section 72 was not sustainable, as duty short-levied demands should be raised under Section 28. However, the Tribunal disagreed, citing the clear language of Section 72 which allows for demanding the full amount of duty in cases of goods improperly removed from a warehouse. The Tribunal upheld the demand as there was sufficient evidence that duty-free imported raw materials were diverted to the local market instead of being used in manufacturing export garments.

On the merits, the Tribunal found that the demand was justified based on evidence of diversion of imported raw materials. The confiscation of lady-gowns was also upheld. Penalties were deemed justified, but considering the circumstances, the penalty on the first appellant-company was reduced to Rs. 50 lakhs and on its Director to Rs. 5 lakhs. Consequently, the appeals were partly allowed, affirming the demand, confiscation, and penalties with reduced amounts for the appellants.

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