TaxTMI 
TaxTMI 
TaxTMI 
2020 (1) TMI 981
X X X X Extracts X X X X
X X X X Extracts X X X X
.... c. I confiscate the excess found goods valued at Rs. 3,08,18,771.47/- (Rupees Three Crores Eight Lakhs Eighteen Thousand Seven Hundred Seventy One and Forty Seven paise) under Section 111(l), 111(m) & 111(o) of the Customs Act, 1962. However, noticee is given an option to redeem the same on payment of Redemption Fine of Rs. 50,00,000/- (Rupees Fifty Lakhs only) under Section 125 of the Customs Act, 1962 which shall be recovered from them. d. I impose a penalty of Rs. 25,00,000/- (Rupees Twenty Five Lakhs only) under Section 112(a) of the Customs Act, 1962 on the noticee which shall be paid by/ recovered from them. Since penalty is imposed under Section 112 in view of 5th proviso to the Section 114A, no penalty can be levied on them under Section 114A." 2.1 Imports made by the Appellants were self assessed by them under Section 17(1) of the Customs Act, 1962, they being the ACP Clients. They had imported various parts of Aircraft classifiable under heading 8802, and cleared them availing the benefit of exemption under Notification No 21/2002-Cus dated 01.03.2002 (at S No 346D) as amended by Notification No 37/2007-Cus dated 7th March 2007. The exemption availed is subject to c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t for the Appellant and Shri Ramesh Kumar, Assistant Commissioner, Authorized Representative for the revenue. 3.2 Arguing for the appellants, learned consultant submitted that- * The proceedings in the impugned order have been initiated entirely on the basis of M/s Pee Dee Kapur & Co report, pointing to shortages and excess in the inventory of the imported goods. No separate verification of the inventory was undertaken by the department to determine the actual shortages and excesses. The report of M/s Pee Dee Kapur & Co itself has observed that at most of the locations, the verification list of items provided to them was not an updated list and the same was updated post their verification. Also no statement of M/s Pee Dee Kapur & Co was recorded; * Internal Audit was undertaken by the appellants after the receipt of M/s Pee Dee Kapur & Co report to reconcile the excesses and shortages pointed out. After reconciliation undertaken by the internal audit, the excess and shortages will be Rs. 6,02,240/- and Rs. 8,83,709/- respectively. When compared to total inventory of Rs. 1120 crores that they are maintaining these excesses and shortages are miniscule 0.0133%, and should have....
X X X X Extracts X X X X
X X X X Extracts X X X X
....khardt Hospitals and Heart Institute [2006 (200) ELT 15 (Bom)] has held that duty can be demanded without invoking extended period of limitation under Section 28. * The issue is squarely covered by the decision of the Hon'ble Bombay High Court in case Greaves Cotton [2008 (225) ELT 198 (Bom)] wherein it has been held that duty can be demanded in respect of shortages in respect of the goods against which CENVAT credit has been taken. * Since the goods which have been shown in excess are the goods which have been cleared without declaring them on the import Bill of Entries, they are liable for confiscation and the order of Commissioner confiscating the goods and allowing them to be redeemed against redemption fine cannot be faulted with. * The penalty under Section 112(a) of the Customs Act, too is justified for the reason that appellants have failed to properly account for the goods cleared by them availing the benefit of conditional exemption notification. 4.1 We have considered the impugned order with the submissions made in the appeal and during the course of argument. 4.2 During the course of OSPCA undertaken by the Service Tax Mumbai - 1, and on the perusal of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es retrieved from "Oracle" system used by MMD and other related records/ documents, made available to us by AGM MMD for various stores. METHODOLOGY ADOPTED 1. On the basis of computer record for inventory made available to us, we carried out the physical verification for the same in the presence of Departmental Representatives 2. After verification, discrepancies observed during physical verification were submitted to the Departmental Representatives, Manager or In Charge of the respective stores and their acknowledgement & confirmation was obtained. The same has been reported in enclosures of this report. 3. During physical verification, availability of item was relied upon on the basis of Item Code Nos. allotted to the concern items and description by the stores representative. 4. We have carried out 100% verification of items following under rotable stores with TL 02 & 03 and AUP above Rs. 1 Lac. Further we have also verified more than 50% of remaining stores item during the course of our assignment. OBSERVATIONS 1. During the course of our physical verification we observed various discrepancies and same have been reported location wise in the Shortage/ (Exc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....proper and correct. I also find that since the audit report submitted by the outsourcing firm reported such a huge shortage and excesses, the noticee has, as an after-thought, generated a report prepared by the Internal Audit Team. Since the noticee has not submitted any base/corroborating documents to prove that the report prepared by the audit team is proper and correct. It appears that this report is a feeble and ill-founded defence for evading payment of duty on the short / excess found goods. In view of the same, I find that the noticee has cast aspersions on Pee Dee Kapur's Report wherein they should have initiated proper investigation before forwarding the same to their Internal Audit Team which they failed to do so. I find that there were differences between Pee Dee Kapur's Report and the report given by the Internal Audit Team and enough time was available to the noticee to rectify the differences. I find that the noticees were aware of the scheme of OSPCA and they had ample time for discussing the matter with their Internal Auditors. However, no substantial efforts was been made by M/s Air India to improve on the suggestion points given by the Pee Dee Kapur's report. Ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... not used in or in relation to manufacture of the final product. Thus, Cenvat credit worth Rs. 5,34,746/- was claimed without justification or rather without being entitled to do so. Show cause notice dated 15-12-2004 was issued directing the assessee to show cause as to why demand of Rs. 5,34,746/- may not be confirmed, why interest under Section 11AB of the Central Excise Act, 1944 may not be recovered and why penalty under Section 11AC of the Central Excise Act, 1944 may not be imposed. Upon considering the statement of Shri S.P. Ponde, Senior Executive (Commercial) and Authorized Signatory of the noticee for Central Excise matters, as recorded on 9-2-2005 and even after taking into consideration a letter-cum certificate dated 16-5-2004 furnished by Shri Dhananjay V. Joshi, Cost Accountant of the noticee, the Joint Commissioner of Central Excise & Customs, Aurangabad confirmed the demand notice for recovery of wrong Cenvat credit worth Rs. 5,34,746/-, claimed by the assessee. Learned Joint-Commissioner also ordered recovery of interest under Section 11AB and imposed penalty equal to the wrong claim of Cenvat credit. This was done by observing thus : "The Noticee in the ins....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as claimed, but were not accounted in the Audit Report as utilized in the production, the two lower authorities have decided the matter against the assessee, and therefore, those authorities cannot be said to have read Rule 7(4) in an incorrect manner. 6. So far as the order of CESTAT is concerned, it has mainly relied upon the decision of the Tribunal, at Delhi in the matter of Maruti Udyog Ltd. v. Commissioner of C. Ex., Delhi-III, reported in 2004 (173) E.L.T. 382. We must state here itself that the decision of the Tribunal is certainly not binding upon us and it is a question as to whether we should approve the view taken by Delhi Tribunal in Maruti Udyog case and followed by the Tribunal in the impugned judgment. It is observed by the Tribunal at Delhi in paragraph No. 7 in its judgment in the case of Maruti Udyog as under : "The appellants have a huge and complex accounting problem. It is beyond manual tally. The appellants have put in place sophisticated computer based accounting systems to ensure accuracy and efficiency. The evidence on record does not indicate any diversion of inputs in contravention of rules relating to utilisation of inputs. The demand is merely ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for brevity]. We need not refer to the facts of the case which gave rise to the questions for consideration before the Constitutional Bench. K.S. Radhakrishnan, J., who wrote the unanimous opinion for the Constitution Bench, framed the question, viz., whether manufacturer of a specified final product falling under Schedule to the Central Excise Tariff Act, 1985 is eligible to get the benefit of exemption of remission of Excise duty on specified intermediate goods as per the Central Government Notification dated 11-8-1994, if captively consumed for the manufacture of final product on the ground that the records kept by it at the recipient end would indicate its "intended use" and "substantial compliance" with procedure set out in Chapter 10 of the Central Excise Rules, 1944, for consideration? The Constitution Bench answering the said question concluded that a manufacturer qualified to seek exemption was required to comply with the preconditions for claiming exemption and therefore is not exempt or absolved from following the statutory requirements as contained in the Rules. The Constitution Bench then considered and reiterated the settled principles qua the test of construction of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....established in law that the taxing statutes have to be construed strictly and unless the literal meaning leads to anomaly or absurdity, the golden rule of literal interpretation should be adhered to. Literal meaning of Section 125(2) is that, whenever the goods liable to be confiscated under the Customs Act are allowed to be redeemed by giving an option to pay fine in lieu of confiscation imposed under Section 125(1), the owner of such goods or the person referred to in Section 125(1) shall, in addition to the fine be liable to any duty and charges payable in respect of such goods. In other words, under Section 125(2), the duty payable on the confiscated goods has to be paid on imposition of fine in lieu of confiscation and it is immaterial whether such option is exercised or not. 42. It is contended that if the above literal interpretation of Section 125(2) is accepted, then the absurd situation would be that in every case, the moment an order of confiscation is made with an option to pay fine in lieu of confiscation, the owner would have to pay duty even if the option to redeem the goods is not exercised. The submission is that, where the option to redeem the goods is not exer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fore seeking clearance of the goods. In such a case if the clearance of the goods is not sought for, the question of paying duty does not arise at all. 45. However, in cases where the dutiable goods are cleared for home consumption without payment of duty and are confiscated subsequently under Section 111(o) with an option to redeem the same on payment of fine in lieu of confiscation imposed under Section 125(1), then, the duty on such goods as per Section 125(2) becomes payable, on imposition of fine in lieu of confiscation. The reason is that, in such cases, the clearance of the goods was subject to fulfilment of the conditions and if those conditions are not fulfilled, the benefit of the Notification would not be available and consequently, duty in respect of such goods becomes payable if allowed to be redeemed by imposition of fine in lieu of confiscation. In such cases, the liability to pay duty is not dependent upon the owner or the person referred to in Section 125(1) exercising the option of redeeming the goods. In such cases, duty becomes payable on imposition of fine in lieu of confiscation and the same has to be paid on passing an order under Section 125(1). In such c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mposed where the goods were neither available for confiscation nor cleared under bond/undertaking. The Hon'ble High Court followed the ratio of the Apex Court's judgment in Weston Components case and held that, as the goods in question had been allowed to be cleared without execution of any bond/undertaking by the importer, no redemption fine could be imposed under Section 125 of the Customs Act in lieu of confiscation. Reproduced below is the relevant part of the High Court's judgment. "12. It may also be noticed here that in the case of M/s. Weston Components Ltd. v. Commissioner of Customs, New Delhi (supra), the goods were released to the assessee on an application made by it and on the execution of a bond by the assessee and in those circumstances, the Hon'ble Apex Court held that the mere fact that the goods were released on the bond being executed would not take away the power of custom authority to levy redemption fine. A reading of the judgment/order of the Hon'ble Apex Court in M/s. Weston Components Ltd. v. Commissioner of Customs, New Delhi (supra), would show that the Apex Court has taken the view that redemption fine can be imposed even in the absence of the goods ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....36 (S.C.) as under: "We see no reason to interfere with the impugned order. The appeal is dismissed." (emphasis supplied) In the result, the view taken by the Tribunal in Chinku Exports case stands affirmed by the Apex Court and consequently the similar view taken by the P & H High Court in Raja Impex case is a binding precedent while the contra decision of the Madras High Court in Venus Enterprises case ceases to be good law on the point. It may be noted contextually that the dismissal, by the apex Court, of the SLP filed by M/s. Venus Enterprises did not have the effect of enhancing the precedent value of the High Court's decision in that case." 4.7 Thus while upholding the demand of duty made in respect of the excesses as these goods were cleared without filing proper import declaration as require under the Customs Act, 1962 we set aside the order of confiscation of goods and redemption fine imposed. 4.8 By the impugned order, interest under Section 28AB on the amount short paid has also been demanded. Appellants have contested the demand of interest too. The interest as provided by the statue is for the delay in the payment of duty from the due date. Since the demand ....