TMI Blog2006 (11) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity of 1609.326 M.Ts scrap cleared under various Bills of Entry by SPK. He thus demanded duty of Rs. 1,64,80,526/- on 1156.326 M.Ts of mixed metal scrap. He also demanded Rs. 64,56,373/- being duty on 453 M. Ts of scrap lying in the EOU. He ordered confiscation of 1609.326 M.Ts of scrap out of which 453 MTs had been seized, the remaining being not available for confiscation. The Commissioner ordered SPK to pay Rs. 30 lakhs in lieu of confiscation of 1156.326 M.Ts. of scrap and a fine of Rs. 10 lakhs in lieu of confiscation 453 M.Ts. of mixed metal scrap under seizure. He rejected the declared value of scrap covered by the following six Bills of Entry : Sl. No. Bill of Entry No. Date 1. 435919 26-10-2002 2. 452523, 452522, 452631, 452632, 452633 2-1-2003 He revised the value of the above goods predominantly copper/brass scrap weighing 159.819 MTs at US$ 171232.47 under Rule 8 of Customs Valuation Rules, 1988. He ordered confiscation of the above goods under Section 111(d), (m) and (o) of the Customs Act. As the goods had been allowed to be re-exported provisionally against bank guarantee executed for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urchased a total of 20 Tons of the imported raw material retracted the same during cross-examination. On the basis of the evidence collected, it was decided that the EOU had sold in DTA 1156.327 MTs of segregated metal scrap. The finding was also supported by statements obtained from Shri Vasanthkumar, an employee of M/s. New Super Transport Corporation and Shri Selvam, Supervisor in SPK who had admitted that imported goods had been segregated into copper, aluminium and brass scrap and sent to dealers in Delhi. According to him, Shri Saminathan was at times present during the segregation of scrap and its transport to Delhi. The Commissioner found that the buyers of the goods in DTA in Delhi denied having bought the goods. The Commissioner also recorded that the search of the premises of the buyers in Delhi did not result in recovery of any documents. He concluded that the documents had been destroyed as the transactions were black transactions. The EOU could not produce any documentary evidence for sale of 279.18 M.Ts. of iron and steel scrap in DTA and the adjudicating authority decided that the claim of DTA sale of 274.18 M.Ts. had not been proved. 5.From a perusal of the Stuff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating authority assumed that the actual quantity exported was not exactly 661.327 M.Ts but much less. The Commissioner highlighted the fact that this was only his assumption and the correct position was known only to Shri Saminathan. From the following working, the adjudicating authority arrived at the quantity exported at 304.929 MTs Imported Quantity : 1914.256 MTs. Stock with EOU : 453 MTs. DTA Sales : 1156.326 MTs. Quantity exported : 304.929 MTs. The Commissioner also observed that if the waste destroyed had also been taken into account, the exported quantity would go down to less than '0'. Therefore, the same had been ignored. 8.The next allegation decided was valuation of the goods pending clearance. M/s. National Metallurgical Laboratory and M/s. SGS had examined the goods and indicated metalwise scrap content. On comparison with LME prices, the assessable value worked out to USD 1193.87/MT. This showed that the value had been misdeclared in respect of the consignments pending clearance. Therefore the goods were liable for confiscation. 9.The next point decided was whether the benefit of Notification No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e goods had been cleared based on the report of the Chartered Engineer and enhancements of value where necessary. They segregated waste from various metal scrap, sold iron and steel scrap locally on payment of duty and destroyed the waste in the presence of Bond Officer. They imported 1914.25 M.Ts of mixed metal scrap under 77 Bonds. They segregated and exported 661.23 tons copper and brass scrap and cleared 279.18 MTs. of iron and steel scrap for local sale and destroyed 461.37 MTs of wastage generated. There was a balance of 512 MTs of mixed scrap in stock and as the exports and DTA sales related to 59 bonds. As the stock available was 453 tons there was a shortage of 59 tons. The appellants could not clear the goods covered by six Bills of Entry and goods contained in another 7 containers owing to financial difficulties. M/s. Global Metals, the supplier of the scrap consignments approached the High Court for permitting it to re-export the material. The High Court of Madras directed the department to complete the investigation and to decide their representation. In response to the SCN the appellants had submitted that being a EOU they had no need to underdeclare the value and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d purchasing scrap from the appellants. The Commissioner had attributed denial of receipt of goods by Delhi dealers to their fear of action from sales tax and income tax authorities. This was a needless presumption and observation. Therefore, the finding that there was evidence to suggest that 1136.327 M.Ts. had been diverted for local sales was without substance; that there were no documents to show that 279.18 Tonnes of steel scrap had been sold did not prove that such sales had not taken place. The Chartered Engineer during inspection and officers during the visit of the factory had seen iron and steel scraps. They had cleared iron and steel scrap on payment of proper duty with the approval of the Department. 12.It was submitted that when goods which were to be exported were cleared in DTA without prior approval, duty had to be demanded without invoking proviso to Section 3 of the Central Excise Act, 1944. Thus duty payable on such scrap would not be Customs duty but the duty applicable in terms of Section 3 of the Central Excise Act, 1944. Therefore, the impugned order was erroneous. In this regard the appellants relied on the case law Sam Spintex Ltd. and Others v. CCE, 2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e thrown out giving preference to unauthenticated private records as well as third party statements. The adjudicating authority had not relied on concrete evidence to contradict the statutory records of the EOU. Therefore the findings of liability to confiscation of 1156.367 M.Ts. and 453 MTs of scrap and imposition of Rs.30 lakhs fine and Rs.10 lakhs fine respectively were incorrect. As regards 453 M.Ts, the orders were premature and illegal. The penalty of Rs. 10 lakhs and Rs. 1,64,80,526/- jointly and separately under Sections 114A and 112(a) on SPK and Shri Saminathan were unwarranted and arbitrary. 13.In the appeal filed by M/s. Global Metals, it was submitted that there was no need for them to underinvoice the goods as those after segregation were to be exported back to them. It was submitted that M/s. SPK and appellants were not related though Shri Renganathaan, brother of Shri Saminathan was employed in their company. They were aggrieved by the fine amount of Rs.9 lakhs and Rs. 10 lakhs imposed in respect of 8 and 7 containers respectively which had been allowed to be re-exported. They were also aggrieved by the penalty of Rs.l lakh. 14.In their grounds of appeal, it wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) = 2004 (113) ECR 610 (Del) (ii) Stonemann Marble v. CC, Kandla, 2004 (166) E.L.T. 84 (Tri. - Mum.) = 2004 (62) RLT 93 (Ces. - Mum.) (iii) Alexo Chemicals v. CCE, Mumbai-III reported in 2004 (166) E.L.T. 124 (Tri. - Mum.) (iv) Sarpin Pharmacal v. CCE, Ahmedabad, 2004 (167) E.L.T. 472 (Tri. - Del.) It was argued that if penalty was imposed on a partnership firm penalty could not be imposed against an individual partner. Therefore, the imposition of penalty jointly and severally was not called for. It was prayed that the penalties imposed on him may be set aside. 16.Shri K.C. Sahaney assailed the impugned order on the ground that the same was contrary to Customs law and suffered from non-application of mind. The adjudicating authority ignored the submissions made about inadequacy of phone calls to establish any sale between the appellant and M/s. IPK Impex. The appellants stopped the scrap business in 1998 and there was no question of his buying scrap from M/s. IPK Impex. The adjudicating authority concluded that scrap consignments were delivered to the appellants. However, the appellant was not confronted with any documentary evidence incriminating him during inve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r change in bank balance. During the cross-examination on 17-11-03 he had confirmed that the statement had been given under compulsion. It was settled law that any statement without corroboration could not be a basis for imposing penalty. The impugned order in para 77.6 held that there was no evidence available for purchase of material by the appellant from M/s. SPK Impex. The appellants had not abetted any offence nor had any intention to evade payment of duty and therefore penalty could not be imposed which was done on the basis of the statement of co-accused. 19.Shri Vijayan submitted that the allegations were made on the basis of presumption and assumption without any documentary evidence. A statement had been recorded from the appellant on 8-1-2003 to the effect that he had purchased copper scrap (3 to 3.5 M.Ts) by the appellant from M/s. SPK Impex. The penalty under Section 112(a) was liable to be vacated especially since the penalty was imposed basing on the statement of the co-accused. 20.Representing SPK Impex, Shri Saminathan and Global Metals, the ld. Advocate Shri Murugappan submitted that the Commissioner had reduced the quantity exported as per the SCN and the shi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts as reliable basis for a finding that the 1136.327 MTs of segregated scrap had been sold to different dealers in Delhi by SPK Impex. Moreover, search of the premises of the alleged buyers of scrap did not yield anything incriminating. S/Shri Chandra Mohan, K.C. Sahaney and Mahesh Kumar separately denied having purchased any scrap from SPK Impex. Existence of evidence of telephone conversation between the phones with the Delhi dealers and the EOU is believed to support sales between the EOU and the Delhi dealers. This hardly advances the Department's case without knowing who spoke to whom and the contents of the conversation. 24.As regards purchase of 20 Tons of segregated scrap by the local dealers S/Shri T.M. Vijayan and Venkatachalam, both the dealers denied purchasing the scrap material during cross-examination before the adjudicating authority. Both of them also stated that their initial statements had been obtained by compulsion. As the initial statements had implicated a third party, the EOU, it may not be safe to derive any conclusion for the reason that their retractions were belated. As regards purchase of scrap by the Delhi dealers, the adjudicating authority has pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Custom House destruction of rubbish and sale of iron and steel scrap. 27.From the statutory scheme of inbond manufacture using imported materials and the working of the EOU, it is seen that an officer of the department is always present when the EOU undertakes its various operations, receives goods and cleared the goods. He certifies the receipts of raw materials and disposal of the resultant products. Therefore, it is not conceivable that the EOU could clear the above 1156.327 MTs of segregated scrap hoodwinking the Preventive Officer (or the Superintendent of Customs House who supervises the working of the Preventive Officer). The Commissioner himself has reproduced the submission of SPK that the charge of importation of 2259.327 MTs of mixed metal scrap was not sustainable in view of the fact that, (i) the Bond Officer had verified the registers and records maintained by the 100% EOU. (ii) all imports, exports as well as destruction of wastes were verified and inspected under the supervision of the Bond Officer representing the department and quantities imported have been inspected and certified in the records by the Bond Officer. (iii) After segregation, expor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antity. This has been done in the normal course of the working of the EOU and in a regular manner. The Bond Officer had categorical stated that he had witnessed the materials exported and other material generated/cleared and destroyed in his supervision. During the inspection conducted by the SIIB officers, they had seen iron and steel scrap and several types of rubbish generated. Therefore, the adjudicating authority cannot conclude that iron and steel scrap had not been disposed or that rubbish and waste not destroyed. 31.If the Bond Officer had acted against the interests of the Department, and failed in his duties and committed misconduct, disciplinary action should have been initiated against him. The Commissioner has only made the observation that the conduct of the Bond Officer against the Department's interests was a tragedy. If the allegations against the EOU are true and had been facilitated by the Bond Officer, stern action should have been initiated against the Bond Officer, which has not happened. Therefore it is all the more reason not to disregard his evidence. As per record, the Bond Officer had carried out his statutory functions scrupulously. 32.As regards the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded on the basis of transport documents that 1156.327 MTs of non-ferrous scrap was sold in the DTA, the balance 624.657 MTs (less of above 531.67 MTs from 1156.327 MTs) was taken as diversion of imported scrap as such for the purpose of adjudication. Therefore, it is not possible to accept the Commissioner's finding that the EOU had sold 1156.327 MTs. 35.A significant observation made in the impugned order is that the department was liberal in clearing export consignments and therefore it was possible that the quantity exported was not 661.327 MTs but a much lesser quantity. The adjudicating authority accepted the quantity sold in DTA to be 1156.327 MTs, stock available in the EOU as 453 MTs, whereby the export quantity had to be 304.929 MTs considering the actual quantity imported as 1194.256 MTs, and ignoring the 461.310 MTs of waste as never to have existed. The adjudicating authority observed that there had been cases of mis-declaration of exported quantities in the Customs House and that it was only his assumption in the absence of any other alternative, to believe that the actual quantity exported was not 661.327 MT as per Shipping Bills. He observed as follows: "In view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption availed on 1156.327 MTs sold in DTA and 453 MTs lying in the EOU. Duty on these quantities worked out to Rs. 2,29,36,899/-. 37.The adjudicating authority examined the role of Shri Saminathan of SPK in rendering the segregated metal scrap and the imported scrap lying in stock liable for confiscation. On finding that Shri Saminathan was involved in the supervision of stuffing of segregated metal scrap cleared in DTA and otherwise masterminded the entire activity of the EOU, the Commissioner found SPK Impex and Shri Saminathan liable to penalty under Sections 114A and 112(a) of the Customs Act. The Commissioner also found Shri Thenkumaran, Shri Selvam and Shri Paulraj employees of SPK liable to penalty under Section 112(a) of the Customs Act as they had done or omitted to do certain acts which rendered imported goods liable to confiscation under Section 111. He also found Sh. Mahesh Kumar, Shri Chandramohan and Shri K.C. Sahney, had knowingly involved in transactions relating to sale of scrap without bills to avoid taxes. These three persons had abetted the illegal activities of Shri Saminathan and rendered themselves liable to penalty. Shri P.R. Venkatraj, Chartered Engine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the details of verification conducted by the SIIB officers available on record, it is seen that the imported items available in the warehouse do conform to this description. As regards the fulfilment of export obligation and earning of net foreign exchange, the Customs authorities are required to initiate action only after a decision has been taken in this regard by the Development Commissioner, Ministry of Foreign Trade. As per the Board's Circular No. 21/95-Cus., dated 10-3-1995, action for non-fulfilment of export obligation etc. can be initiated by the customs only after the Development Commissioner has taken a decision in this regard. In the circumstances, it is premature to order confiscation of imported raw materials lying with the EOU at this stage. Therefore, we find that confiscation of the 453 M.Ts as well as demand of duty on 1156.327 plus 453 M.Ts (1609.327 M.Ts) as not sustainable. In view of our above findings, the penalties imposed on SPK Impex, Global Metals, S/Shri K. Saminathan, K.C. Sahney, P.R. Venkatraj, Venkatachalam, T.M. Vijayan, Chandramohan, Mahesh Kumar are liable to be set aside and we order accordingly. The appeals are accordingly allowed. (Order p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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