By TIOL News Service

MUMBAI, MAY 10, 2017: THE appellant, 100% EOU, during the period 13th September 2006 to 4th October 2006 stuffed four containers containing the goods i.e. Electric wiring accessories and parts for export to USA.The stuffing operation was supervised by the officers from the Central Excise department.

On receipt of the goods in USA, the customer noticed shortage of goods and informed the appellant accordingly, who in turn filed a FIR and claimed insurance.

Incidentally, the proof of export was filed by the appellant with the departmental authorities.

SCN was issued demanding duty on the allegedly stolen goods, which were not physically exported, and proposal was made for imposition of interest and penalties.

The adjudicating authority confirmed the demand and interest on the basis of B-17 Bonds undertaking given by appellant and also imposed equivalent penalty.

As their appeal was rejected by the first appellate authority, the appellant is before the CESTAT.

The stay order was reported by us as 2009-TIOL-1266-CESTAT-MUM.

The appeal was heard recently.

It is submitted that -

+ It is not denied by the CE authorities that the containers were stuffed in their presence and that the proof of export was furnished.

+ On receiving a complaint from the overseas buyer, the appellant filed FIR and claimed insurance. However, the same did not mean that the goods were diverted into the local market and were not exported.

+ Reliance is placed on the decision in Sree Narasimha Textiles Ltd. - 2008-TIOL-2126-CESTAT-MAD for the proposition that once the goods on examination were cleared for export by Customs authorities who had admitted the proof of export, department cannot raise claim for duty on the ground that the goods have not been exported. Further, in Honest Bio-Vet Pvt. Ltd. - 2014-TIOL-2286-CESTAT-AHM-LB it is held that the demand of duty on the goods cleared for export can be done only if proof of export is not submitted within six months as per the condition of Notification No. 43/2001-CE (NT) dated 26.06.2001.

The AR emphasized that the appellant had filed a FIR with the local Police Station indicating the names of the driver and the transport company who had been involved in the theft which had occurred near Navi Mumbai when the goods were in transit. Inasmuch as the same indicated that the driver of the vehicle and the transport company were engaged in theft of the finished goods, hence the goods were not exported and the demand of duty with interest and penalty is correct. The case laws of The Sandur Manganese & Iron Ore Ltd. - 2006-TIOL-757-CESTAT-MAD, Surya Pharmaceutical Ltd. - 2010-TIOL-907-CESTAT-Delhi and Sarla Polyester Ltd. - 2008-TIOL-985-CESTAT-AHM are relied in support.

The Bench observed -

"5. On consideration of the submissions made by both sides, I find that there is no dispute as to the factual position of the matter, inasmuch as four containers which were cleared during the period 13.09.2006 to 04.10.2006 were stuffed in the presence of Central Excise officials at the factory by appellant and the said Central Excise officials had sealed the containers and recorded the same in documents like ARE1; the containers were transported to port and the customs authorities after examining the seals allowed the containers to be loaded and granted LET export order; on inspection of the containers received in USA by appellant's customers it was noticed that there was a shortage which was informed to appellant, who subsequently lodged a F.I.R and claimed insurance from the Insurance Company. It is the case of Revenue that such shortage in the containers received by an American client would tantamount to non-export of goods hence duty liability arise as per B-17 Bond excluded by appellant in respect of the goods cleared for export.

5.1 In my considered view the claim of learned D.R. that the duty liability arises on the appellant is totally incorrect. On factual matrix I notice that the Revenue authorities have never disputed the fact that appellant had produced the proof of export to the authorities who had accepted the same. It is also not disputed that the ARE-1 forms were attested by customs authorities for the export of the goods. Just because appellant has lodged F.I.R for the short receipt of the goods by their clients in USA, would not mean that the goods were diverted to DTA and duty can be demanded…."

Drawing support from the decisions in Sree Narasimha Textiles Ltd. - 2008-TIOL-2126-CESTAT-MAD and Honest Bio-Vet Pvt. Ltd. - 2014-TIOL-2286-CESTAT-AHM-LB while distinguishing the case laws cited by the AR, the CESTAT set aside the impugned order and allowed the appeal with consequential relief.

(See 2017-TIOL-1563-CESTAT-MUM)