AI Drafter 
TaxTMI 
TaxTMI 
2022 (6) TMI 432
X X X X Extracts X X X X
X X X X Extracts X X X X
....agar and documents were recovered. The scrutiny of the documents revealed that, besides physical exports, Appellant also cleared Brass and Copper Alloys Rods to 100% EOUs and SEZ and availed the benefit of Deemed Exports thereon and subsequently they claimed Advance Authorization from the DGFT, Rajkot for duty free import of raw materials i.e. Brass/Copper Scrap/Zinc Scrap; that they had done physical exports under claim of Rebate and also clearances were made to 100%EOU and SEZs on payment of Central Excise Duty which was later claimed back through refund from the DGFT (in case of EOU units) and their Jurisdictional Central Excise Division (in case of SEZ units); that they have availed the Cenvat Credit of CVD and SAD on imports of Brass scrap after payment of duty and same was later shown as utilized for payment of duty on clearances made for domestic sales as well as exports and deemed exports; that the clearances were mostly done to 100% EOUs without any CT-3 and on payment Central Excise Duty which was later claimed back through refund of Terminal Excise Duty (TED) from the DGFT, Rajkot and in a few cases the clearances were made to 100% EOUs under CT-3 and similarly where cle....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., 2002, in addition to the recovery of custom duty on imported material as also Central Excise Duty on the material cleared with payment of duty under valid duty paying documents to the tune of Rs. 1,26,99,092/- and Rs. 90,59,957/- along with interest and penalty. The said show cause notice was also proposed penalty on the Director as well as respective EOUs. The show cause notice was adjudicated by the Principal Commissioner vide impugned order dated 31.03.3017, wherein he passed order as under: (i) Hold that goods of 261009 Kgs. of Brass Scrap imported is liable for confiscation under the provision of Section 111(o) of the Customs Act, 1962. Since the goods are not available either physically or released after seizure through bonds, refrain from the imposing any redemption fines under the provisions of 125 of the customs Act, 1962. (ii) confirmed the demand of Customs duty amounting to Rs. 1,26,99,092/- leviable on import of total 261009 Kgs. of Brass Scrap imported under the provisions of Section 28(4) of the Customs Act, 1962. (iii) recover interest at the appropriate rate on above amount of Custom Duty under the provisions of Section 28AA of the Cust....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iming exemption under Notification No. 96/2009. After importation of material in terms of para 4.1.5 of the policy, utilized such materials in manufacturing of final products and cleared the same in domestic market with payment of duty. In view of para 4.12 of HBP Exporters are allowed to export material in anticipation of authorization. 2.2 He submits that Appellant transported materials to M/s Jakap Metind Pvt. Ltd. and M/s Apple International in his own vehicle and to M/s Shrijikrupa Exports through either M/s Haresh Transport or M/s Shree Laxmi Transport Co and to M/s Srijan Exports through M/s Jaipur Golden Transport Co. Pvt. Ltd., which is an admitted facts and the department has questioned transportation of materials only to M/s Srijan Exports and M/s Shrijikrupa Exports. The explanation for transportation of goods by the owner of the transport agency was not questioned. On the contrary the statement of authorized person of such transportation agency were conveniently ignored and proves beyond doubt that material has been transported to M/s Srijan Exports and M/s Shrijikrupa Exports. 2.3 He further submits that on 5-9-2013, the officers visited the factory premises and....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 2.6 He submits that the adjudicating authority referred to notification No. 98/2009-CUS dated 11.09.2009 and Para 4.1.5 of FTP for the year 2009- 2014 and has observed that Appellant has not fulfilled the condition prescribed under the said notification i.e. has not produced certificate issued by the Jurisdictional Central Excise Officers certifying the use of materials within 6 months from the date of clearance. However, he has overlooked the facts that Appellant have not availed the exemption under Notification No. 98/2009-CUS dated 11.09.2009 but have availed the exemption under Notification No. 96/2009 -CUS dated 11.09.2009 and have obtained certificate from Chartered Accountant certifying the fact that the material imported is used in manufacturing of final product. In terms of Notification No. 96/2009 clause (v) the importer is required to obtain the certificate either form Jurisdictional Central Excise Officer or from the Chartered Accountant. 2.7 He argued that for the charges of clandestine removal positive evidence required. He placed reliance on the following decisions: • Commissioner of C.Ex. Vs. P.D. Industries Pvt. Ltd. 2016-340-ELT 249 (Tri. Del)....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n is that Central Excise Duty demanded is equal to duty refunded by DGFT. In this connection Revenue's submission is that the duty of Central Excise demanded vide impugned order is on different point from the refund (TED). The Customs duty has been demanded on the goods which were imported by wrongly availing customs exemption notification and the central excise duty has been demanded on clandestine clearance of the finished goods in the open market. 4. We have considered the submissions made by both the sides and perused the Appeal records.As regard the demand of customs duty we find that 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. The said Advance Authorization and subsequent Export Obligation Discharge Certificate have been obtained by Appellant on the basis of clearance shown to have made to four 100% EOUs and claimed the same a Deemed Export Benefits. It has been alleged that in actual no such clearances have taken place and accordingly the exemption of customs duty for the imports made under the said 11 Advance Authorization has been....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the appellants' sales to Syndet in Uttar Pradesh. This finding of the Appellate Tribunal is based on first proviso to Section 4(1)(a) of the Act. While the show-cause notice and the order of the Collector proceeded on the basis of the invocation of third proviso to Section 4(1)(a) of the Act, the Appellate Tribunal for the first time in the impugned order has sustained the proceedings on the basis of first proviso to Section 4(1)(a) of the Act. It was argued that the first proviso to Section 4(1)(a) of the Act was never invoked by the Department either in the show-cause notice or in the impugned order and it was for the first time that the Appellate Tribunal in the impugned order has sought to sustain the impugned order by invoking the first proviso to Section 4(1)(a) of the Act. It is thus seen that the Tribunal has gone totally beyond the show-cause notice and the order of the Collector, which is impermissible. The Appellate Tribunal cannot sustain the case of the Revenue against the appellants on a ground not raised by the Revenue either in the show-cause notice or in the order. 17. In this context, we may usefully refer to the judgment of this Court in the case of Reck....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "35. It also reveals from the letter dated 27-10-2013 (page No. 167 of the petition) that the Central Excise Department has not sanctioned any refund/rebate of the duty paid on the supplies to the EOUs. It also appears that the refund of TED is sanctioned by the DGFT and if DGFT has acted under the different provisions and the refund is sanctioned under those provisions, the proper authority is DGFT who can initiate proceedings against the petitioners for violation of exemption notification and the Advance Authorization Licence. Now, it is an admitted fact that the Advance Authorization Licence of the petitioners is still valid and no action is taken by the DGFT for breach of condition thereof. As such, initiation of proceedings by the customs is nothing but an exercise of power in excess of jurisdiction. When the Custom Department has exercised power in excess of jurisdiction, than, this Court can exercise its extraordinary writ jurisdiction under Article 226 of the Constitution of India. Therefore, considering peculiar facts of this case, the impugned order-in-original is required to be set aside. 36. In view of the above, the present petitions deserve to be allo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ther quantities which is sold. Penalty under Section 112 of the Act was proposed on it and on R.R Agarwal, its director for its contravention. Penalty under Section 112 was also proposed on Gajanand Fabrics, Kamdhenu Textiles and Shalimar Fabrics, for having purchased such goods. 2. The contention of the common counsel for the appellants is that no duty under the Customs Act, 1962 could be demanded on these goods which the appellant manufactures in its factory in India and sells in the domestic Tariff area and therefore no penalty can be imposed on the appellant, or anyone else for this contravention. We are not able to understand the rationale for demanding duty on the goods under consideration under Section 28 of the Customs Act, 1962. The Show cause notice does not propose to demand custom duty on the Fabrics the appellant imported on any ground such as that they were not utilised in the manufacture of exported goods. Such a demand could be justified where goods are manufactured by a 100% export oriented unit in a factory in a free trade zone using imported raw materials or components are cleared to a buyer in the domestic tariff area they are not imported.The 100% expo....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4. The department being aggrieved with the said portion of the impugned order by which no duty stand was confirmed in respect of raw materials, has filed the present appeal. The appeal has been filed on the ground that non-duty paid raw materials were admittedly used in finished products which were cleared to DTA in contravention of provisions of law. Such raw materials, which were imported by availing the benefit of notification No. 53/97-Cus. dt. 3-6-97, should have discharged the duty. 5. After hearing the ld SDR, we find that the main issue involved relates to the determination of FOB value of export to arrive at the quantum of eligible domestic clearances and whether the same should include only physical export or it should include deemed export as well. If deemed exports are held to be not included, then the quantum of clearances permitted in DTA will be accordingly reduced. This issue has been decided by the Tribunal in favour of the assessee on a number of precedent decisions, holding that the value of deemed export should be included while determining the FOB value of export, based on which DTA clearances are permitted. However, in this case, the assessee i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in statutory books & accounts of the Appellant. We, further find that in support of their contention department nowhere produced any corroborative evidence to show that the Appellant have cleared alleged finished goods in open market. 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. There are several judicial pronouncements of the Hon'ble Apex Court, High Courts and Tribunal wherein it has been consistently held that in the case of clandestine manufacture and removal of goods, Revenue has to prove it beyond doubt. We rely on the Hon'ble High Court judgment in the case of Commissioner of Central Excise v. Brims Products - 2011 (271) E.L.T. 184 (Pat.) wherein it was held that:- "8. Facts emanating from the records, disclose that the Central Excise authority itself has held with regard to two consignments out of four, that the investigation is incomplete and has been carried out only at th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s premises of M/s. Sunrise Enterprises. In the statements of Managing Director and the Excise persons of M/s. Sakeen Alloys Pvt. Limited and Shri Mukeshbhai V. Patel of M/s. Sunrise Enterprises it has been admitted that they have clandestinely manufactured and cleared CTD/round bars but they have retracted their statements immediately after recording the statements. It is the case of the appellants that request for cross-examination of the persons whose statements were recorded has not been made available to them by the adjudicating authority. In view of the various judgments relied upon, it was also argued that no investigation has been extended to the suppliers of raw materials or purchasers of finished goods to establish whether such clandestine removal of excisable goods have actually been undertaken by the appellants or not. It was emphasized that cross-examination of the persons whose statements have relied upon is obligatory to be provided especially when the statements are retracted by the appellants. 6. It is observed from Para 3.1 of the show cause notice dated 1-5-2009 issued to the appellants that stock yard of M/s. Sunrise Enterprise, Mehsana was searched by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... clandestine removal of excisable goods, following are the indicators of clandestine removal activities by a manufacturer :- (i) Excess stock of raw materials found in the factory premises. (ii) Shortage of raw materials in the records of manufacturer. (iii) Excess/shortage of manufactured goods found in the factory premises. (iv) Excess consumption of electricity/power used in the manufacture of finished goods. (v) Any transit seizure of clandestinely removed goods made by the investigating authority. (vi) Any cash amounts seized from the factory premises or dealer's premises or residential premises searched during investigation. (vii) Confessionary statements of the persons concerned with the clandestine manufacture/removal of excisable goods. 9. It is observed from the case records that in the present proceedings, there are few confessional statements of the persons which were later retracted by the persons concerned. The confessional statements subsequently retracted can be argued to be an afterthought under a proper legal advice but to observe the principles of natural justice, it becomes necessary to prov....
X X X X Extracts X X X X
X X X X Extracts X X X X
....from the premises of Chitra Traders and Transporters and the various statements recorded from the Proprietor of Chitra Traders, transporters and labourers working in the factory of the Appellants and also the driver or cleaner of the Truck which was in the process of loading on 22-6-2001 when the Central Excise Officers visited their factory premises. The Appellants, on the other hand, have contended that most of the persons whose statements have been relied upon have not been produced for cross-examination and the documents seized from third parties' premises have not been corroborated by adducing evidence of any of the customers though the enquiries were conducted at different places as deposed by Shri Anurag Sharma, Inspector, in his cross-examination on 4-3-2002. Out of 19 consignments said to have been cleared by the Appellant No. 1 without payment of duty on the basis of five transporter, we observe that in respect of two consignments, it has been mentioned by the Revenue that the same may not pertain to the Appellants. Further, only one transporter Shri Sanjay Garg of M/s. Balaji Transporter Co. was produced for cross-examination which accounts for only two consignments out ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cision in Oudh Sugar Mills Ltd. v. Union of India, 1978 (2) E.LT. (J172) wherein "the Apex Court has observed that no show cause notice or an order can be based on assumptions and presumptions. The findings based on such assumptions and presumptions without any tangible evidence will be vitiated by an error of law". The Tribunal also took note of the decision in Kamal Biri Factory and Shri Khushnuden Rehman Khan v. CCE, Meerut - 2003 (161) E.L.T. 1197 (T) = 1997 (23) RLT 609 (CEGAT) wherein view has been taken that the allegations of clandestine removal of the goods will not stand established when based on the entries made by the assessee's employee in a diary or on the basis of third party's record in the absence of any corroborative evidence. It has also been the consistent view of the Tribunal that the statements of the witnesses, without allowing the assessee to test the correctness of the same by cross-examining those witnesses; cannot be made the basis for holding the allegation against the assessee. (Takshila Spinners v. CCE, supra). Similar views have been expressed by the Tribunal in the case of Haryana Petrochemicals Ltd., supra wherein the Tribunal has held that reliance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ds from the premises of the Appellant-company. The mere fact that the Appellant-company had business relation with Chitra Traders, does not mean that they will be liable to each and every entry made by Chitra Traders in their books of account. It is also noted that none of the transporters and none of the labourers whose statements have been relied upon by Revenue have mentioned that the goods in question were delivered to Chitra Traders from the premises of the Appellants. The material brought on record may at the most create a doubt only. But doubt cannot take the place of evidence. The Revenue has, thus, not proved its case against the Appellants in respect of 149 consignments. We, therefore, set aside the demand of duty and penalty imposed on Appellant-company and consequently the demand of interest." 11. From the above settled law, it is clear that in a clandestine removal case, the facts of clandestine removal of excisable goods cannot be established only on the basis of certain statements which are retracted later but there has to be positive evidences like purchase of excess raw materials, shortage/excess of raw materials/finished goods found in the stock/factory p....