2013 (8) TMI 717 - AT - Central Excise

100% EOU - Diversion of goods - Non- Utilization of Inputs - Violation of Various Notifications - Duty Liability - Revenue was of the view that the main appellant had not consumed/used the input imported by them as an EOU and had diverted the same and thereby has violated the condition of various notifications - Whether the Appellant was liable to discharge the duty liability foregone by the Department either in the form of Customs duty and Central Excise duty - Held that - It had to be noted that the Revenue has conducted detailed investigations and the Director of the appellant, had clearly admitted that the vehicle numbers shown on the body of the invoices under which the clearances were shown just to fill the appropriate column and, in fact, no goods were physically sent - as many as 14 invoices were found to be having wrong vehicle numbers - what was required to be considered was the case against the appellant and each case had to stand on its own merit or fail. Commissioner of Customs (Sea) Custom House, Chennai Versus CESTAT, South Zonal Bench, & M/s Gaur Impex 2009 (4) TMI 83 - MADRAS HIGH COURT - All the appellants had to do was to get a certificate from the Development Commissioner that the appellants had fulfilled the export obligation and if they had fulfilled the export obligation, the Development Commissioner would ha issued such a certificate - It was surprising that the appellants were choosing not to get a certificate from the Development Commissioner which was, indeed, required also for their own purpose and instead they required that the Commissioner should make a reference to Development Commissioner and go on, waiting for a reply. Waiver of pre-deposit - The appellant had not been able to make out a prima facie case in their favor - Taking note of the fact that the period of dispute was 2001 to 2003 and nine years had already elapsed and the duty involved was more than Rs.2.5 Crores with equal amount of penalty - the appellant was required to make an additional small amount of pre-deposit - 35Lakhs were ordered to submitted upon such submission rest of the duty to be waived till the disposal of appeal.

Issues Involved:
1. Non-utilization and diversion of imported inputs by M/s Laurel Apparels Pvt. Ltd.
2. Adjudicating authority's adherence to Tribunal's directions.
3. Reliance on statements without cross-examination.
4. Validity of the second Show Cause Notice.
5. Financial hardship and pre-deposit requirements.

Issue-wise Detailed Analysis:

1. Non-utilization and Diversion of Imported Inputs:
The core issue revolves around the allegation that M/s Laurel Apparels Pvt. Ltd., an Export Oriented Unit (EOU), did not use the imported duty-free raw materials for manufacturing as mandated but instead diverted them. This led to the confirmation of Customs and Central Excise duty demands along with penalties. The appellant argued that they had complied with the necessary documentation and permissions, including CT-3, D-3 declarations, and DTA permissions, which were not adequately considered by the adjudicating authority.

2. Adjudicating Authority's Adherence to Tribunal's Directions:
The appellant contended that the adjudicating authority ignored the Tribunal's clear directions from the Final Order No.A/349-358/WZB/AHD/2010, dt.22.04.2010, which required referring the matter to the Development Commissioner before adjudicating. The Tribunal, however, noted that the Commissioner was within his rights to decide whether the issue was covered by earlier Tribunal decisions and concluded that the Commissioner had provided detailed reasoning for not following the judicial pronouncements based on CBEC circulars and the decision of the Hon'ble High Court of Chennai.

3. Reliance on Statements Without Cross-examination:
The appellant argued that the case against them was primarily built on statements without allowing cross-examination, which should not be admissible as evidence. The Tribunal acknowledged that the statements were crucial but also noted that the appellant had not retracted these statements in a legally recognized manner. Furthermore, the Tribunal emphasized the detailed investigations conducted by the Revenue, including multiple statements from the Director of the appellant company admitting to the diversion.

4. Validity of the Second Show Cause Notice:
The appellant raised an issue regarding the second Show Cause Notice dated 24.10.2007, arguing it was beyond the statutory period of five years and should only cover a limited period. The Tribunal did not provide a specific finding on this aspect, focusing instead on the broader context of the case and the evidence presented.

5. Financial Hardship and Pre-deposit Requirements:
The appellant cited severe financial hardship, with net losses and accumulated losses, arguing that the pre-deposit requirement should be waived or reduced. The Tribunal considered the financial situation but noted that the appellant had already deposited Rs.45 lakhs in the first round of litigation. Given the significant duty and penalty amounts involved, the Tribunal directed an additional pre-deposit of Rs.35 lakhs within eight weeks, allowing the application for waiver of the balance amounts subject to compliance.

Conclusion:
The Tribunal's judgment emphasized the importance of adhering to procedural directions, the validity of relying on detailed investigations and statements, and the necessity of a balanced approach in pre-deposit requirements considering the financial condition of the appellant. The appellant's failure to provide a certificate from the Development Commissioner and the detailed reasoning provided by the Commissioner were critical factors in the Tribunal's decision.

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