ORDER
Lajja Ram
1. For hearing their appeals, M/s. Stuti Electronics Ltd. are required to pre-deposit the customs duty of Rs.62,08,704/- and a penalty of Rs.62,08,704/- total Rs.1,24,17,408/- and Shri Anil Saxena, Managing Director ils required to pre-deposit a penalty of Rs.10,00,000/-. The matter relates to the alleged shortages in the stock of capital goods, spares, etc, which had been imported duty free under exemption Notification No.53/97 Cus dated 3.6.97(as amended,), for manufacture and export of colour computer monitors, falling under sub-heading No.8473.20 of the Central Excise Tariff.
2. Both the stay applications were heard on 9.4.2001 when Shri L.P. Dhir, Advocate appearing for the applicants submitted that the adjudicating authority had not allowed the cross examination of the central excise officers,who had conducted the checks in the factory premises. The applications had made a prayer for such cross examination in their provisional reply to the show cause notice.The employees on whose statements reliance had been placed by the adjudicating authority had been frightened by the Central Excise Officers and were confused.The physical verification was not complete.Shri Anil Saxena, Managing Director was unwell and no time was given for getting the full inventory of the goods made. M/s. Stuti Electronics Ltd. had deposited Rs.1.5. lakhs and the full amount as promised by Shri Anil Saxena could not be deposited due to financial hardship.The unit was facing financial problems and the matter was before the Board for Industrial and Financial Re-construction(BIFR). The ld. Advocate referred to the Delhi High Court’s decision in the case of Ripen Kumar Vs. Department of Customs-88 (2000) Delhi Law Times 541 (BB), wherein it was held by the Delhi High Court that in a case of prosecution, the evidence means the examination in chief and the cross examination and that an in-complete statement of prosecution witness in the absence of cross examination would not be created as evidence nor the same could be relied upon.He also referred to the Tribunal’s decision in the case of Hindustan Wires Ltd. Vs. Commissioner of Central Excise, Delhi – 2001 (129) ELT 159 (Tribunal) and the Tribunals’s decision in the case of Shree Krishan Rolling Mill (Jaipur) Ltd. Vs. Commissioner of Central Excise, Jaipur – 2001 (129) ELT 160 (Tribunal) in support of his contention that when a company was sick, was under BIFR facing acute financial difficulty, un-conditional stay was justified.
In reply,Shri Mewa Singh, SDR submitted that shortages in the stocks of duty free imports had not been denied.The inventory of the goods actually available was drawn in the presence of the responsible officers of the company and the Managing Director of the Company had not challenged the correctness of the Verification reports when his statement was recorded under Section 14 of the Central Excises Act, 1944.Retraction of a statement after a long gap of time have no validity and such a belated retraction was obviously an after thought. The plea of the appellants that the goods found short were kept in one room which was not checked is an after thought The Id. SDR pleaded that the conduct of the appellants was such as not to deserve any leniency and that in the interest of revenue full amount of duty and penalty should be got deposited.
3. We have carefully considered the matter .The appellants were a 100% Export Oriented Undertaking (EOU) engaged in the manufacture of coloured computer monitors, classifiable under sub-heading No.8473.20 of the Central Excise Tariff, for export and availed of the benefit of duty free imports of capital goods, raw materials, spares, etc. under Notification No.53/97 Cus dated 3.6.97 (as amended). M/s. Stuti Electronics Ltd. availed of the benefit of the said exemption Notification No.53/97 Cus and imported duty free capital goods, raw materials, spares, etc. The benefit under the aforesaid exemption notification was not un-conditional and was subject to the various conditions as mentioned in that Notification. The duty free imported goods were to be used in the manufacture of goods for exports by the 100% Export Oriented Unit. On 17.5.99 and 15-8.5.99, when Central Excise Officers visited the factory premises of the appellants, it was found that a number of capital goods, spares, etc. which had been import duty free were not available in the factory premises. Shri Anil Saxena, Managing Director in his statement dated 20.05.99 and 21.5.99 admitted the shortages and undertook to deposit the duty at the earliest.The shortages had been admitted by the employees of the assessee’s company.In the show cause notice dated 13.4.2000, the role of Shri Anil Saxena, Managing Director in the alleged clandestine removal of the duty free imported capital goods, spares, etc. without authority had been mentioned in para-14 of the said show cause notice.
4. The physical verification report listing the items found missing had been accepted as correct by the authorised signatory and other officers of the company.Shri Anil Saxena, Managing Director in his statement dated 20.5.99 recorded under section 108 of the Customs Act, 1962 and section 14 of the Central Excises Act, 1944 had admitted the shortages (refer page 75 of the paper book). He did not contest the physical verification (refer page 77 of the paper book). The quantity mentioned in the physical verification report was also not contested (refer page 79 of the paper book). He stated as under:-
“I own the responsibility of the shortage in the stock of capital goods and shortage in the stock of capital goods and spares, duty free under bill of entry (Rotation No.) 809 dated 18.3.98 and Invoice No.ST-980305/A dated 27.2.98, detected during physical verification on 17.05.99 and 18.5.99 and am reedy to pay the duty due to the Government.”
On 21.5.99, it was further stated as under:-
“I, further state that I undertake to deposit duty liability within the shortest period of time in instalments. However, IL will deposit amount Rs.5-7 lakhs upto June 15,1999 positively.” However, only a sum of Rs.1.50 lakhs was deposited, Rs.50 thousand on 25.5.99, and Rs.1 lakh on 3.8.99.
The show cause notice was issued on 13.4.2000 and the provisional reply was filed by the appellants on 10.07.2000. The statements, which had been earlier recorded under the relevant provisions of the law had not been retracted, and they were retracted much later. The belated retraction/affidavit would not take away the evidentially value of the statement recorded before the competent authorities under the relevant provisions of the law.In reply, a reference had been made to “one particular room wherein parts of imported machinery and deassembled chamber and spares were stored.”(refer page 124 of the paper book). No details were given as what this room contained and why the good s were kept there,if any goods ware there at all.The statements of the witnesses contained factual details and there is nothing on record to indicate that these statements containing factual details could be dictated by any cental excise officer. In the reply, there were general rebuttals. Detailed itemwise position had not been explained. Only vague observations such as that there were no significant shortages, etc., had been made.
5. The appellants were a 100% Export Oriented Unit, and in the interest of export promotion, exemption from duty had been provided for imports of necessary capital goods, raw materials, spares, etc.The alleged removal of duty free imported goods without any authority of law is a serous matter and full facts had to be examined at the time of final hearing.
6. When the conditions of exemption are violated then the customs authorities had jurisdiction to enforce the law. The Hon’ble Supreme Court had so held in the case of Shashank Sea Foods Pvt. Ltd. Vs. Union of India – 1996 (88) ELT 626 (SC). In the matter before the Apex Court, the issue for consideration was whether the Customs authorities had right o authority to go into questions relating to the utilisation of the raw materials that had been imported by the appellants in that case under advance licences granted to them under the Duty Exemption Scheme.
The relevant exemption notification had been issued in exercise of the powers conferred by Section 25(1) of the Customs Act, 1962 and one of the conditions thereof was that the goods exempted therein could not be sold, loaned, transferred of in any other manner other than those specified in the exemption notification.The Apex Court did not agree with the contention raised on behalf of the importers that it was only the licensing authority which could investigate the alleged cases of domestic sale of exempt material and that the jurisdiction of the customs authorities to do so was ousted.The relevant paras in the Supreme Court judgment are paras 8, 9, 10 and 11.As regards the continuing obligations to fulfil the conditions of the exemption notification,the Hon’ble Supreme Court in the case of Mediwell Hospital & Health Care Pvt. Ltd. Vs. Union of India -1997 (89) ELT 425 (SC) had held that such notification granting exemption from the payment of customs duty must be construed to cast continuing obligation on the part of all those, who avail of the benefit of exemption from the payment of customs duty. In case such an obligation is not fulfilled, then the limitation will be counted from the date of the infringement.
7. As presently we are concerned with the disposal of the stay application, any further observations on the merits of the case may not be necessary. Suffice it to say that priemafacie the Revenue has a good case on merits as well as on limitation.
8. The demand is in respect of the goods imported duty free but not found in stock. Obviously, it could not be reflected in the Annual Report of the Company.From the documents on record, it is seen that the Company had fixed assets of over Rs.5 crores. Sales in the year ending 31.3.2000 were over Rs.1 crore. Depreciation has been taken of about Rs.95 lakhs. Net current asets were of above Rs. 62 lakhs. Among indirect expenses a sum of over Rs.1 crore was towards financial charges.
Reference has been made to the report dated 12.7.2000 of Shri Prashanta Verma, Local Commissioner appointed by the Debts Recovery Tribunal, Delhi in the case of Industrial development Bank of India Vs.Stuti Electronics Ltd.This Commissioner’s report in no way established the financial position of the appellants.The Board of Industrial and Financial Re-construction (BIFR) in their communication dated 11.2.2001 had asked for certain information and there is nothing on record to show that the unit has been declared a seek unit by the BIFR.
9. In the provisional reply to the show cause notice at page 130 of the paper book, the correctness of the valuation adoption has been challenged. At page 130 of the paper book, reference has also been made of two machines, which has been sent outside for repairs, and which had been subsequently returned to the factory later on.These contentions will need detailed examination at the time of the final hearing of the case.
10. On careful consideration of the matter and after taking all the pleas of the appellants into account, we consider that there is no ground for waiving the requirement of pre-deposit of duty and penalty amount in full and that it would be just and appropriate if the appellants, M/s. Stuti Electronics Ltd. are required to deposit a sum of Rs. 30 lakhs and Shri Anil Saxena, Managing Director is required to deposit a sum of Rs.2.5 lakhs.The appellants, M/s. stuti Electronics Ltd. have already deposited a sum of Rs.1.5 lakhs.After deducting the above sum of Rs.1.2 lakhs, we direct M/s.Stuti Electronics Ltd. to deposit a sum of Rs.28.5 lakhs (Rupees Twenty Eight Lakhs and Fifty Thousand Only) and Shri Anil Saxena, Managing Director to deposit a sum of Rs.205 lakhs (Rupees Two Lakhs and Fifty Thousand Only) within a period of 8 weeks from the date of receipt of this order. On depositing the above sum of Rs.28.5 lakhs(Rupees Twenty Eight Lakhs and Fifty Thousand only) by M/s. Stuti Electronics Ltd. and Rs.2.5 Lakhs (Rupees Two Lakhs and Fifty Thousand Only)by Shri Anil Saxena, Managing Director within the period as stipulated above, the pre-deposit of the balance amount of duty and penalty with the amount of interest thereon will be waived and recovery stayed till the disposal of the appeals. If the above sums are not deposited within the period stipulated above, then this stay order shall stand automatically withdrawn and the appeals will be liable for dismissal for non-compliance with the provisions of Section 129 E of the Customs Act, 1962 without any further reference to the appellants.
To come-up for reporting the compliance and further orders on 2.7.2001.