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2012 (3) TMI 460
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....d other different turned components. The said unit is a 100% EOU exporting their products to INDEC and Tavadec, S.A. in Switzerland. M/s. Tavadec Industries (P) Limited, Maroli, Mangalore is their one more unit of which Shri B. Ramachandra is a partner; Shri Jacques Monnin of Switzerland and his wife are the other partners. This unit manufactures turned components and electronic components meant for domestic market with major customers like Baker Mereer (India), Poona, Protection (India) Bangalore, Integral Systems, Bangalore and Safari, Bangalore, M/s. Chirag Enterprises, situated in the premises of Canara Foundry Industrial Compound, Maroli is their another unit and his wife is the proprietix of this unit, which manufactures turned components for electronic connectors and electronic switches on job work basis for M/s. Integral Systems and M/s. Protectron India, Bangalore. 3. On 23-2-1998, the officers of DRI, Mangalore had during the course of search on the premise of M/s. Chiramith Precision (India) Limited (hereinafter referred to as 'Chiramith') a 100% EOU manufacturer of watch screws and turned components, recovered several incriminating documents showing the misuse o....
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....tement recorded on 24-2-1998, Shri B. Ramachandra has admitted that M/s. Hawa Industries, Kankanady, Mangalore was functioning from 1-4-1987 to 1-4-1997 and manufacturing products for Indian market. He was proprietor of the firm. The unit was closed and the existing stock of raw materials and machineries was transferred to M/s. Tavadec and M/s. Chirag. M/s. Chirag was formed in the year 1992 with an intention of diverting the products manufactured in Chiramith for the Indian Market. Chirag Enterprises in fact existed only on paper and all the products which said to have been sold through M/s. Chirag Enterprises were actually got manufactured using M/s. Chiramith's machineries, the raw materials for Chirag Enterprises were procured domestically but the scrap generated out of it was added to the scrap of M/s. Chiramith. M/s. Tavadec started with an intention to divert the products manufactured by M/s. Chiramith to Indian market and also to divert the raw materials imported by Chiramith for manufacturing in M/s. Tavadec and that spares for Tavadec were supplied after taking from the bonded warehouse of M/s. Chiramith; the spares and tools issued from Customs bond is used in all the 3 ....
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....e the purchase order for screws, they started supplying turned components to M/s. Giltec S.A. Switzerland in violation of condition No. 1 in the licence, in order to boost their export and were on the look out for other customer; value addition percentage fixed for them was 47% as per L.O.I. and it was 41.56% as per board banding scheme; that during 1993-94 due to strong recession in Switzerland there was no market for watch screws. Due to increase in rate of raw materials even though they have imported machinery, they could not achieve the value addition; for this lapse A.D.G.F.T. imposed penalty of Rs. 5 lakhs and debarred the firm from importing any goods for which they obtained a stay from the Appellate Committee; depending upon the requirement and machine running condition rotationally they have used the machineries imported by M/s. Chiramith for the production of goods meant for Indian market and for the job work of M/s. Chirag. 8. Shri S.R. Damle, in his statement on 23-2-1998 stated that he is working as Manager (Administration) since last 5 years for all the 3 companies viz., Chiramith, Chirag Enterprises and Tavadec. He is in charge of proper maintenance of record....
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....ts Pvt. Ltd., Bangalore was recorded on 2-6-1998, wherein he has stated that they were engaged in activities like electroplating on ABS plastic metal components on job work basis, manufacturing of imitation jewellery and press work on hand operated vessel, that they require rivets, screws, to assemble the parts, they procure, the base raw materials viz., brass wires, MS wires, SS wires and sent to M/s. Chirag Enterprises, Mangalore for conversion into rivets, screws and also purchased the rivets, screws both from Hawa Industries and M/s. Tavadec for the job work, charges are paid to M/s. Chirag, they are transacting since 1993 with Chirag, Hawa and Tavadec, they understood that said rivets and screws were manufactured out of the imported machineries. He also stated that he also represents M/s. Safari Designs, Bangalore as Commercial Manager and stated that M/s. Safari Designs is in the line of manufacture of watch straps supplying to M/s. Titan Industry and also does machine work for Titan Industries on job work basis, they procure main basic raw material like brass wire, MS wire and SS wire and send to Chirag, Mangalore for conversion into rivets and screws, on job work basis for ....
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....rs of DRI should not be confiscated under Section 111(j) of the Customs Act, 1962. (vii) Penalty should not be imposed on M/s. Chiramith, Mangalore as per the provisions of Sections 112 and 114 of the Customs Act, 1962. (viii) The in-bond manufacturing license and private bonded warehouse licence should not be cancelled under Section 58(2) of the Customs Act, 1962. (ix) Further Shri B. Ramachandra, Managing Director and Shri S.R. Damle, Manager, M/s. Chiramith being the mastermind behind the misuse of imported duty free machineries, clandestine removal of raw materials, spares and final products to domestic market as well as illegal export of finished products valued at Rs. 8,64,850/- which are liable for confiscation were called upon to show cause to the Commissioner of Customs, New Customs House, Panambur, Mangalore as to why penalty should not be imposed on them under Section 112(b)(I) and Sec. 114 of the Customs Act, 1962. 15. Reply was filed to the show cause notice denying the allegations made therein and they are represented by their Advocates. In the reply, it is categorically stated that all the machines are not used for do....
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....tic market insofar as 5 machineries are concerned is specifically admitted. Similarly, diversion of raw materials imported to M/s. Tavadec is also admitted. By undertaking job work imported machineries were used contrary to the statutory provisions and notifications issued. Therefore, the Commissioner proceeded to hold that once the contraventions are established, the assessees are not entitled to the benefit of duty exemption. Therefore he levied duty, he levied penalty, he levied interest and he also confiscated 29 machineries and permitted the assessee to redeem the machineries by paying the market value of the said machineries. Aggrieved by the said order, the assessee preferred an appeal to the CESTAT. 18. After hearing both the parties, the CESTAT records a finding that the findings on record does establish that all the 29 machineries, which were imported were used for manufacturing products for domestic market. The evidence only proves usage of 5 machineries. When the authorities did not take steps to cancel the licence granted for that violation, they had no right to seize the machineries and collect the redemption charges. It also recorded a finding that the circul....
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....ommitted an error in not accepting the voluntary statement of Shri B. Ramachandra and others? (x) Whether charges regarding the diversion of raw materials/finished goods could have been negatived by holding that the raw materials could be removed for job work? (xi) Whether penalty imposed on M/s. Chiramith Precision India and Shri B. Ramachandra under Sections 112 and 114 could have been set aside in entirety? (xii) Whether the Tribunal has erred in not considering the documentary evidence on record, which clearly establishes diversion of raw materials/finished goods?" 20. The learned counsel for the Revenue assailing the impugned order contended that the entire approach of the Tribunal is erroneous. After recording a finding that 5 of the 29 machineries imported are used for production of the goods in the local market, still he holds that violation is not established because all the 29 machineries are not used. The Circular, on which the Tribunal relies on, provides for idle machineries being used by an EOU for production of goods of yet another assessee for being directly exported. The Circular does not ....
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.... show cause notice, it is admitted 5 out of 29 machineries were used by a sister concern for producing products for domestic market. In those circumstances, nothing more was required to prove the contravention by the Revenue. Though this fact is accepted by the Tribunal, it seems to think that unless all the 29 machineries are used for production of goods, which are diverted to domestic market, the contravention is not established. Because the statements of other witnesses run counter and in the absence of any other corroborative evidence, the Commissioner was not justified in recording the said finding. 24. It is not the law that in order to constitute violation of the terms of the licence as well as the provisions of the Act, each and every machinery imported under the licence, duty exemption was granted is to be used for producing products for being diverted to the domestic market. Therefore, the finding recorded by the Tribunal on the fact of it is illegal, perverse and is liable to be set aside. Accordingly, it is set aside. 25. Similarly, not only the statement of Shri B. Ramachandra, but also the other witnesses on record clearly establishes that diversion of....