By TIOL News Service

MUMBAI, JAN 22, 2014: BRIEF facts of the case are that the appellants are 100% EOU and are engaged in the manufacture of polyester twisted yarn and polyester woven fabrics. The appellants were working under Notification 1/95-CE dated 1.4.1995 and procuring the raw materials without payment of duty on the condition that the same will be used in the manufacture of goods exported.

During investigation, it was found that the appellants had procured raw material without payment of duty and cleared the same to DTA without payment of duty. As the appellants had not complied with the conditions of the Notification under which the appellants were procuring the raw material without payment of duty, the demands were made and confirmed by the adjudicating authority, along with interest and penalties.

Before the CESTAT, the only submission is that the demands are hit by limitation;that as per the terms of the B-17 bond, the demands are to be made as per the provisions of Section 11A of the CEA, 1944 and since the SCNs were issued after five years from the period in dispute they are time barred.

It is submitted by the Revenue that pursuant to the detailed investigations conducted at the end of the transporters it was found that although the records prepared by the appellants showed the use of the raw material procured as being used for intended purpose the fact of the matter was that the appellants cleared the said raw materials to the DTA in violation to the conditions of the Notification. That this evidence was ultimately put to Shri Dharampal Lal chand Chug who is the proprietor of the appellant company and he appeared before the investigating authority on 16.12.2006 and admitted the clearance of the raw material to the DTA without payment of duty. Even the landlord of the premises disclosed in his statement that there was no machinery or equipment to manufacture the intended goods. Thereafter the show cause notices were issued. It was further submitted that the five-year period for issuing show cause notice in the case of suppression, fraud etc. will start from the date of knowledge. Reliance is placed on the decisions in CCE, Mumbai vs. Kalvert Foods India Pvt. Ltd. - (2011-TIOL-76-SC-CX) and the decision in the case of CCE, Visakhapatnam vs. Mehta & Co. - (2011-TIOL-17-SC-CX). Similarly, in the case of the other appellant, it was submitted that the proprietor had not co-operated with the investigating authorities and he was summoned in the years 2003 and 2005 on various dates and the summons were received back with the remarks that the factory is found closed and no responsible person is available; that ultimately his statement was recorded on 15.12.2006; thereafter investigation was further conducted from the proprietor Shri Kamal Lalchand Chugh and in the year 2009 by statement dated 16.12.2009 he admitted that one Shri Gopal Vyas paid him Rs.4 lakhs in cash to start the activities and he was working under his instructions. Inasmuch as in the case of the said appellant also, the SCN was issued within five years from the date of knowledge of the appellants admitting the activity of clandestine clearance of the goods.

The Bench adverted to the apex court decisions cited by the Revenue and observed -

+ Neither in reply to SCNs nor before the adjudicating authority, the appellants denied the fact that the raw material which is procured without payment of duty under the provisions of the Notification is cleared clandestinely without payment of duty to DTA.The only contention is that the demands are time barred.

+ In the present case, the statutory records maintained by the appellants show the use of the raw material procured without payment of duty for intended use. However, the detailed investigation was conducted from various transporters as well as buyers, which shows that in fact the raw material which was procured without payment of duty was cleared clandestinely to DTA.

++ The documents prepared by the appellants were found to be fake and ultimately in the year 2006, the evidence collected was put to the proprietors and they admitted the clandestine clearance of the goods without payment of duty and thereafter the show cause notices were issued within five years hence the ratio of the above decisions relied upon by the Revenue are fully applicable on the facts of the present case.

+ As the appellants are not disputing the demands on merits before the adjudicating authority nor in the present appeals, therefore we find no merit in the contention of the appellants that the demands are time barred.

The appeals were dismissed.

(See 2014-TIOL-109-CESTAT-MUM)