1994 (9) TMI 219 - AT - Central Excise

Summary

Issues Involved:

1. Non-export of yarn cleared under the declaration for export purposes.
2. Invocation of the extended period under Section 11A.
3. Imposition of penalty under Rule 173Q.
4. Department's procedural errors and their impact on penal liability.

Detailed Analysis:

1. Non-export of Yarn Cleared Under Declaration for Export Purposes:

The appeal concerns the Order-in-Original passed by the Collector of Central Excise & Customs, Baroda, which confirmed a demand of Rs. 1,39,44,646.00 and imposed a penalty of Rs. 24 lacs on the appellants for failing to produce secondary evidence establishing that the yarn cleared was used in the production of export goods and duly exported. The Tribunal had previously remanded the case, directing the appellants to produce acceptable evidence showing accountal of yarn removed without payment of duty, in the production of export goods and export of such goods. The appellants failed to comply, leading to the confirmation of the demand and imposition of penalty.

2. Invocation of the Extended Period Under Section 11A:

The appellants conceded to the payment of duty confirmed by the Collector, subject to deductions for exports already effected under one of the DEEC licenses. They argued that the extended period under Section 11A should not be invoked, citing their long-standing compliance and the department's procedural errors. However, the Tribunal found that the appellants did not inform the department of the non-export of yarn, which constituted wilful misstatement or suppression of material facts, justifying the invocation of the extended period.

3. Imposition of Penalty Under Rule 173Q:

The appellants contested the penalty, arguing that the Collector imposed it without considering their arguments and that they acted in accordance with the department's directions. They pointed out that the department's misunderstanding of the DEEC scheme led to procedural errors, and they complied with the requirements despite being told they were out of Central Excise Control. The Tribunal agreed that the department's procedural errors contributed to the situation and noted that the appellants had approached the department for permission under Rule 191B, which was wrongly denied. The Tribunal found that the department's misunderstanding of the DEEC scheme and subsequent procedural errors led to the situation, and thus, the penalty was not justified.

4. Department's Procedural Errors and Their Impact on Penal Liability:

The Tribunal acknowledged that the department's local officers misunderstood the DEEC scheme, leading to procedural errors. The appellants had requested permission under Rule 191B, which was wrongly denied, and the local officers incorrectly held that the imported fibre would be manufactured under Customs Bond. The Tribunal found that the procedural safeguards under Rule 191B were wrongly dispensed with by the department, and the appellants should not be penalized for the department's errors. The Tribunal cited case laws supporting the view that penal provisions should not be invoked when the department is also at fault.

Conclusion:

The Tribunal directed the Collector to allow suitable deductions in the demand after verifying secondary evidence regarding the export obligation fulfilled under the DEEC license No. 2956010. The demand was otherwise confirmed as unchallenged. The penalty imposed was remitted, considering the department's procedural errors and the appellants' compliance with the department's directions. The Tribunal emphasized that the department shared responsibility for the situation and could not resort to penal provisions under these circumstances.