Whether failure to produce original copy of warehousing certificate result in duty demand?

PJ/CASE LAW/2014-15/2292

Case:- COMMISSIONER OF CENTRAL EXCISE, TAJKOT VERSUS GALAXY EXPORTS

Citation:-2014(301) E.L.T. 672 (Tri.-Ahmd.)

Brief facts:-This appeal is directed against the Order-in-Appeal No. 154/2006/III(RAJ)/COMMR-(A)/RP/RAJ, dated 21-3-2006 and is filed by the Revenue.

Briefly stated the facts of the case are that appellant had cleared 94515 pieces of scarf made from polyester dyed/printed fabrics (S.H. No. 6214.30) valued to Rs. 33,08,025/- vide ARE-3 No. 10, dated 6-6-2003, No. 17, dated 27-6-2003 and No. 18, dated 4-7-2003 against CT-3 No. 10, dated 4-6-2003 to M/s. Vrinda Tex-prints N./H. No. 6, via Dhhulagori-PS. Sankrali, Dist. Howrah, West Bengal. As no warehousing certificate was received, it was inferred that the goods in question, cleared by the appellant have not been warehoused at the premises of the consignee.

Therefore, a Show Cause Notice No. V.RJT-11 /AR. Jetpur/ADC/029/2004, alleging that the appellant have clandestinely declared the said goods to the domestic market with an intent to evade payment of duty leviable thereon, the appellant was also asked to show cause as to why Central Excise duty amounting to Rs. 19,69,259/- should not be demanded and recovered from them under Section 11A read with proviso to Section 3(1) of the Central Excise Act, 1944 and Rule 20 of the Central Excise Rules, 2002, and also consequential interest and imposition of penalty.

The Adjudicating Authority has confirmed the demand of Rs. 19,69,259/- along with interest under Section 11AB on the ground that the recipient-consignee has not informed their Superintendent in-charge regarding receipt of the goods nor they have produced the original copy of warehousing certificate. Therefore, it held that the consignee, M/s. Vrinda Textprint, Dist. Howrah had not received any goods from the appellant-consignor and it has also held that the appellant have diverted all the goods covered under subject three AR-3s to other places with sole intention to evade payment of duty leviable thereon. The Adjudicating Authority also held that if the goods dispatched for warehousing or re-warehousing is not re-warehoused, the responsibility for payment of duty shall be upon the consignor. The Adjudicating Authority has also imposed equal penalty of Rs. 19,69,259/- under Section 11AC of the Central Excise Act, 1944 on the appellant.

Aggrieved by such an order, the Assessee preferred an appeal before the First Appellate Authority and submitted evidence in support of their claim regarding re-warehousing of their final products in export oriented unit. The First Appellate Authority considering the evidences on record as submitted by the Assessee, came to the conclusion that the Appellant has proved that the goods cleared from his factory premises, in fact, was received by the consignee. Coming to such a conclusion he set-aside the order in original and allowed the appeal filed by the Assessee. The Revenue is aggrieved by such an order in this appeal.

Appellant contentions:-Ld. Departmental representative would reiterate the grounds of appeal in the appeal memorandum which are reproduced here below:

"The Appellate Authority failed to consider that the superintendent in charge of the assessee has never received re-warehousing Certificates from the Customs Authority in charge of consignee unit.

The Appellate Authority failed to consider that there was allegation in the Show Cause Notice that in absence of receipt of re-warehousing Certificates, the assessee has diverted the goods in local market. The same was also confirmed by the Adjudicating Authority in para No. 8 of the OIO.

The Appellate Authority wrongly relied upon the documents produced by the assessee with purported signature of the departmental authority. The said documents produced by the assessee were never corroborated by the relevant copies which are required to be received by the superintendent in charge of the assessee unit.

It was argued by the assessee that the department should have called for the documents and records from the Superintendent, Kolkata. The same was mentioned by the Appellate Authority at para No. 4 of the OIA. It was also mentioned by the Appellate Authority at Para No. 6 of the OIA that the superintendent in charge of the unit has apparently written two letters to the jurisdictional Range Superintendent who has issued CT-3 Certificate for clearance of the said goods.

Therefore it was on the records that department was trying to get behind reasons of non-receipt of re-warehousing Certificates from the concerned Authority. The Appellate Authority should have waited for the outcome of the inquiry before setting aside confirmed demand.

A bigger inquiry is being conducted in respect of the assessee which revealed that the Vehicle No. HR-37 B 9721, purportedly used by the assessee for sending the subject goods, was utilized by some other parties during the material period. Therefore it was established beyond doubt that the assessee has diverted the subject goods to local market and consignee has never received the subject goods. SCN issued was pending for Adjudication.

Therefore, it appears that the Appellate Authority wrongly relied upon the documents produced by the assessee and arrived at wrong conclusion that re-warehousing has been established beyond doubt."

Respondent Contentions:-None appears on behalf of the Respondent. Since the matter is of 2006, the appeal filed by Revenue was taken up in absence of any representation from the Assessee.

Reasoning of Judgment:-On perusal of the record, we find that the issue involved in this case is regarding demand of the duty on the Assessee on the ground that they were not able to produce evidence/proof of warehousing of finished goods cleared by them to their consignee at Kolkata. Ld. First Appellate Authority in the impugned order has recorded following findings :

"Further the appellant produced the original copies of the ARE-3As (duplicate Yellow copy) meant for the assessee during the hearing and it is noticed from the ARE-3A that the jurisdictional officer in charge of the warehouse Kolkata has duly signed the AR-3A and certified for having received the said goods and for having accounted for in the Bonded Register. Further the goods were cleared under valid CT-3 Certificate issued by the competent authority and the clearance of goods from EOU to another EOU, the Project Authority's certificate was also produced before the Adjudicating Authority and the same was also produced before Appellate Authority. In view of the above facts, the appellant's contention that goods cleared from the factory has been proved and the same have been duly received by the officer in charge of the buyer's unit and proof of re-warehousing has been established beyond doubt whereas the Adjudicating Authority has not given findings to the contrary for the diversion of the goods."

On going through the above findings, it can be noticed that the First Appellate Authority has come to a factual conclusion, as regards receipt of the goods by Export Oriented Units in Kolkata. The Revenue has not adduced any evidence contradicting the above findings. The tribunal perused the record and find that A.R.3-A's in question are annexed to the appeal memorandum. In the said A.R.3- A's it was found that the Customs House Preventive Officer, in-charge of the Export Oriented Unit at Kolkata has signed the A.R.3-A's in token of having received the same from the consignees at Kolkata. On such a clinching evidence on receipt of goods at EOU and accepted by in-charge of the EOU, it was found that the Revenue's appeal is devoid of merits as the grounds of appeal (as reproduced in paragraph-6) does not contradict the fact of signature of P.O. and nor it is claimed as forged. In facts and circumstances of this case, it was found that Revenue has not made out any case against the order of the First Appellate Authority.

It was concluded that the order of the First Appellate Authority is correct, legal and does not suffer from any infirmity.

Decision:-Appeal rejected.

Comment:- The analogy drawn from the case is that merely because the original copy of warehousing certificate was not produced, it would not lead to conclusion that there was clandestine removal of goods. If the fact of receipt of goods by the consignee is sufficiently established by the consignor with appropriate evidences, no duty demand can be fastened upon the consignor for not producing the warehousing certificate. This clearly implies that the procedural lapses are to be condoned if the substantial conditions have been satisfied.

Prepared by: Hushen Ganodwala

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PJ/CASE LAW/2014-15/2292

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