1992 (1) TMI 223 - AT - Central Excise

Tribunal overturns duty demand and reduces penalty for custard powder exporters.

AMERICAN DRY FRUITS STORES Versus COLLECTOR OF CENTRAL EXCISE

The Appellate Tribunal CEGAT, Bombay overturned the duty demand of Rs. 92,002.30 and reduced the penalty from Rs. 50,000 to Rs. 2,000 imposed on the ... Demand Issues:1. Duty demand and penalty imposed on the appellants for manufacturing and clearing custard powder for export without payment of duty.2. Justification of duty demand and penalty in the absence of diversion of custard powder for home consumption.Detailed Analysis:The appeal before the Appellate Tribunal CEGAT, Bombay was directed against an order demanding duty of Rs. 92,002.30 and imposing a penalty of Rs. 50,000 on the appellants for manufacturing custard powder under an L-4 license and clearing it for export without paying duty. The appellants sought a certificate to claim drawback for the exported custard powder, leading the Department to discover the manufacturing activity not covered by the license. The appeal challenged this order dated July 4, 1991, issued by the Addl. Collector of Central Excise, Bombay. The key contention raised by the appellants was that since the custard powder was exported and not diverted for home consumption, no duty should be payable despite procedural lapses. They argued that the demand was solely based on export invoices and shipping bills, indicating the goods were indeed exported. The appellants also highlighted that they had a general bond for exporting other products, although the custard powder was not included in the license or removed under the required procedure.On the other hand, the Department contended that the custard powder was manufactured without a license and cleared without duty payment, supporting the original order. After considering both arguments, the Tribunal noted that the goods in question were manufactured without a license but were cleared and exported. The Addl. Collector acknowledged this fact in the order, stating that no evidence suggested the custard powder was cleared for home consumption. The Tribunal emphasized that the failure to follow the AR 4 procedure for export amounted to a technical violation, not undermining the substantive benefit of duty-free export under bond. Consequently, the Tribunal set aside the duty demand, reasoning that the collateral evidence of shipping bills and invoices confirmed the export. Regarding the penalty, the Tribunal reduced it from Rs. 50,000 to Rs. 2,000, as there was no intent to evade duty, and the penalty was primarily for the appellants' failure to fulfill statutory obligations.In conclusion, the Tribunal disposed of the appeal by overturning the duty demand and reducing the penalty, emphasizing that the substantive benefit of duty-free export for goods cleared for export should not be negated by procedural lapses. The Tribunal's decision focused on the factual position of the goods being exported and not diverted for home consumption, leading to the modification of the penalty amount and the dismissal of the duty demand.