ORDER
Jyoti Balasundaram, Member (J)
1. The above appeals arise out of the order of the Commissioner of Central Excise & Customs, Surat who has confirmed a duty demand of Rs. 1,71,78,536/- in terms of Section 72 with interest on a total quantity of 1,62,763 yards of duty free fabrics imported by M/s. Dhanlaxmi Garments Pvt. Ltd. (100% EOU who purchased Warp Knitted Fabrics on High Seas sales basis) illicitly removed and sold in the local market instead of being used in the manufacture of export garments, confiscated 5350 pieces of Lady gowns and 650 kgs. of waste under Section 113(d) of the Customs Act, on the ground that gowns were not manufactured out of imported raw materials but out of indigenously procured raw materials, with option to redeem the same on payment of fine of Rs. 2,50,000/-, imposed penalty of amount equal to duty under Section 112(a) and Section 114 of the Customs Act and has also imposed a penalty of Rs. 10 lakhs on Shri Sanjay B. Goyal, Director of the first appellant company under Section 112(b) and Section 114 of the Customs Act. The total quantity of 1,62,763 yards of imported materials removed in to the domestic market consists of :-
(i) 28,400 yards removed illicitly instead of being used in the manufacture of 5350 pieces of lady gowns which were manufactured out of indigenously procured fabrics in substitution of the above quantity of imported fabrics;
(ii) 53,503 yards + 80,860 yards ( total of 1,34,363 yards) removed illicitly instead of being used in manufacture of garments such as shirts and T-Shirts exported by the appellants company through M/s. Systematic Corporation which garments were manufactured out of indigenously procured raw materials in substitution of imported fabrics.
The finding that 28400 yards of imported fabrics removed illicitly is based upon the statement of Shri Sanjay Goyal that imported fabrics received under Bills of Entry were not used in the manufacture of lady gowns that the fabrics used in the manufacture of those gowns were manufactured out of indigenous fabrics received by them without any documents from DTA and without being entered in any statutory records. The finding that 1,34,363 of imported fabrics were removed illicitly is based upon the difference in weight of imported fabrics (32.03 kgs per 100 yards and the weight of garments shown in the export Shipping Bill 80 kgs per 100 yards.) When asked to explain this difference, Shri Goyal stated that they had cleared the goods manufactured from the fabrics imported by them to M/s. Systematics Corporation and the weight difference could be explained by M/s. Systematics Corporation, while Shri Shyam Bihani proprietor of M/s. Systematic Corporation clearly stated that ready made garments were received from M/s. Dhanlaxmi Garments Pvt. ltd. under AR 4 Nos. 1 to 4 and they prepared the Shipping Bills on the basis of invoices, packing lists and cartons received from M/s. Dhanlaxmi Garments.
2. We have heard Shri Willingdon Christian, ld. counsel for the appellants and Shri K.K.Srivastava, ld.DR for the Revenue. The preliminary objection raised by the appellants is that the show cause notice is bad in law as it has been issued by the Director of DRI who is not the proper officer for issue of show cause notice to 100% EOU and that it is the Central Excise officer who has jurisdiction over the 100% EOU who will be the proper officer for issue of notice. He placed reliance upon the Larger Bench decision in the case of Ferro Alloys Corpn. Ltd. [1995(77)E.L.T.310] in support of the above contention.
3. We do not find any merit in the above plea in the light of the Circular No.4/99-Cus dated 15/2/1999 of the Government of India which stipulates that the officers of the Directorate of Revenue Intelligence are to undertake investigations of cases detected by them and issue show cause notice on completion of investigations. The circular is Annexed ‘A’. The decision of the Larger Bench cited supra was considering the period prior to the issue of Circular No.4/99-Cus dated 15.2.1999 and is, therefore, not applicable after the issue of the circular. The same is the position in the case of Commissioner of Customs, Mumbai v. Ramesh Nebhnani [2001(138)E.L.T.232]. We, therefore, over-rule the preliminary objection of the appellants.
4. The next submission of the appellants is that the show cause notice invokes the ingredients of the extended period of limitation such as intention to evade payment of duty and, therefore, could be issued only by the Commissioner of Customs or Addl. Director of DRI and not the Asstt. Director of DRI. This submission is also devoid of any merit as it is not disputed that the demand has been raised within the normal period of limitation.
5. Yet another contention of the appellants is that the confirmation of the demand under Section 72 is not sustainable, as for the purpose of demand of duty short Levied, the demand could be raised only under Section 28. This plea also requires to be rejected in the face of the clear language of Section 72 which reads as under:-
” Section 72. Goods improperly removed from warehouse, etc.-
(1) In any of the following cases, that is to say, –
(a) where any warehoused goods are removed from a warehouse in contravention of Section 71;
(b) where any warehoused goods have not been removed from a warehouse at the expiration of the period during which such goods are permitted under Section 61 to remain in a warehouse;
(c) where any warehoused goods have been taken under Section 64 as samples without payment of duty;
(d) where any goods in respect of which a bond has been executed under Section 59 and which have not been cleared for home consumption or exportation are not duly accounted for to the satisfaction of the proper officer,
the proper officer may demand, and the owner of such goods shall forthwith pay, the full amount of duty chargeable on account of such goods together with all penalties, rent, interest and other charges payable in respect of such goods.”
6. On the merits of the matter, the appellants did not raise any defence against the demand. We find that the demand has been confirmed on the basis of sufficient evidence that raw materials imported duty free were diverted into local market for sale, without being used in the manufacture of export garments and hence the appellants were not entitled to the benefit of duty free import. We, therefore, uphold the demand. Confiscation is also upheld as the liability to confiscation of the lady gowns has also been clearly brought by the materials on record.
7. In view of the above, penalties are also justified. However, having regard to the totality of the facts and circumstances of the case, we reduce the penalty on the first appellant company to Rs. 50 lakhs (Rupees fifty lakhs) and on its Director to Rs. 5 lakhs (Rupees Five lakhs).
8. The appeals are thus partly allowed.
(Dictated in Court)