JUDGMENT
C.N.B.Nair, Member (T)
1. The appellant M/s. Bhomika International Ltd. is a 100% Export Oriented Unit (EOU) engaged in the manufacture of cotton knitted fabrics. It is obliged under law to export the goods manufactured by it, except for the quantities allowed to be sold, upon payment of duty, in the domestic market. During the period 8.3.2000 to 7.6.2000 the appellant sent a quantity of over 75000 kgs. of fabric for processing to other units in the Domestic Tariff Area. These goods were required to be brought back and exported. The impugned order has held that these goods were never brought back. Instead, the appellant obtained some other fabrics valued about Rs. 41 lakhs with a view to substituting them for the goods cleared for processing. The impugned order has confiscated those goods. In addition, duty demand of Rs. 34.5 Lakhs has been made on the goods cleared and a penalty of Rs. 10 Lakhs has been imposed.
2. There is also a personal penalty of Rs. 1 lakh on Shri Basant Sen Sharma, M.D. of the appellant EOU and lesser amounts of penalty on other officers of the EOU The present appeals by the EOU and Shri Sharma challenge these orders.
3. It is the submission of the learned Consultant appearing for the appellant EOU that even if it is held that the appellant is liable to pay duty on the goods cleared (and not brought back) for processing, it only renders of appellant liable to pay duty on the goods so cleared to the domestic market and there is no justification for the confiscation of the goods which were being brought to the factory. The learned Consultant also has submitted that the duty demand has been erroneously computed. According to him the correct duty amount would be only Rs. 7,37,665. The learned Consultant has also submitted that the penalty imposed is disproportionately high when compared to the duty involved. He also has submitted that the imposition of a penalty of Rs. 1 Lakh on Shri Basant Sen Sharma, Managing Director of the Company was not justified, inasmuch as no personal involvement of his in the offence has been established and the entire incident had taken place during his illness.
4. The learned SDRhas submitted that since this is a case involving deliberate clandestine sale of goods produced in an EOU to the Domestic Tariff Area without payment of duty, heavy penalty is called for. She has also contended that the correct amount of duty is Rs. 9,23,492 and not Rs. 7,37,665 computed by the appellant. The Ld. Consultant has submitted that the appellant does not want to contest the revised duty calculation made by the Revenue.
5. We have perused the records and have considered the submissions made by both sides. Since it is the Revenue’s case that the appellant was trying to substitute new goods for the goods which had been cleared for processing those goods (brought for substitution) which have been seized have to be treated as unconnected to the goods manufactured in the appellant’s unit and sent out for processing. In such a case, confiscation of the new goods would not be justified. Their confiscation is required to be set aside.
6. Case has to be proceeded with on the clear basis that goods cleared for processing have not been brought back. Nor are those goods available with the processors to whom they were sent, to be returned to the appellant. The appellant was clearly obliged to get back those goods and to export them. The appellant is liable for payment of duty on those goods. The duty amount now worked out by the revenue is Rs. 9,23,492. This amount is not being contested. Therefore, the duty amount of Rs. 9,23,492 confirmed.
7. From the facts of the case, it is clear that the appellant has deliberately violated the provisions relating to EOUs, inasmuch as goods cleared for processing were not brought back and exported. Since the goods were not available with the processor also, this has to be taken as a case of deliberate diversion to the domestic market involving evasion of Central Excise Duty. These facts and circumstances call for imposition of penalty. However, the learned Consultant is right in his submission that the penalty of Rs. 10 Lakhs imposed in the impugned order being connected to a finding that the amount of duty evaded was over Rs. 34 lakh, reduction in penalty is called for.
8. No evidence is on record to show that Shri Sharma as Managing Director was personally involved with the evasion of duty. Shri Sharma’s appeal also submits that he was in protracted illness during the period and has no personal responsibility in the matter. Accordingly, the penalty imposed on Shri Sharma is required to be set aside.
9. In view of our above-stated findings, the appeals are ordered as under:
I. Appeal No. E/4Q5/02 NBA of M/s. Bhomika International.
(i) Duty demand is reduced to Rs. 9,23,492.
(ii) Penalty is reduced to Rs. 2.5 lakhs.
(iii) Confiscation of fabrics and other items is set aside.
II. Appeal No. E /406 702 NBA of Shri Basant Sen Sharma
Penalty imposed is set aside and the appeal is allowed.