J.H. Joglekar, Member (T)
1. This application seeks stay of recovery and waiver of pre-deposit of the penalty of Rs. 10 lakh imposed on the applicants in the impugned order.
2. The applicants were engaged in manufacturing and exporting of metallised polyester films. The raw materials, namely, polyester film was being imported by them under DEEC. On 11-6-1992, their office and factory premises were searched. Officers found that there was a total shortage of duty-free raw materials to the extent of 21,892.74 kgs. and a show cause notice was issued. Before the adjudicating authorities, the plea taken was that the assessees had fulfilled export obligation for all imports made under DEEC. It was claimed that the goods imported under one advance licence could be utilised for production of goods to be exported against another advance licence. In support of the first claim, copies of the shipping bills were also produced before the adjudicating authority. The Deputy Collector in the impugned order has held that the transfer of imported goods was against provisions of Notification No. 116/88. He also held that the importers could not satisfactorily explained the shortage of raw materials. He held that the shortage was on account of raw materials not used in terms of notification and imposed penalty of Rs. 10 lakh on the importers.
3. Shri J.S. Agarwal, ld. Advocate arguing for the applicants reiterated all the arguments made before the Deputy Collector. He stated that the transfer of raw material between the advance licences for fulfilment of the export obligation, was not in contravention of the provisions of Notification 116/88. He, further, claimed that the importers were also manufacturing goods for domestic sales and that the provisions permitted use of duty-free raw materials for domestic sales also. He stressed that the importers had shown the accountal of raw materials imported and resultant manufactured goods exported. As such the claim could not be made that the importers had contravened any provisions of the impugned notification. We also heard Sh. H.K. Jain, ld. SDR, who supports the lower order.
4. We have carefully considered the submissions made before us. Although, the chart showing that the export obligation was fulfilled in all cases, were placed before us and although it is claimed that the relevant shipping bills were placed before the Dy. Collector, barring the charts, nothing was shown to us establishing the export of finished products and their accountal with the imported raw materials. In the show cause notice, the claim was made that even if the claim of the assessees was accepted that exempted raw material could be transferred from one licence to another, the shortage of exempted raw material to the extent of 4651.91 kg. was still not explained. The shortage has been indicated in the show cause notice. In spite of the claim made in the statement of Shri Kwatra, Director of the Importers that the goods were in the factory, the fact that the shortage existed has not been rebutted by the importers. While the issue as to the interpretation of the impugned notification would have to be examined, during the course of hearing of the proper appeal, at this stage only on the count of unexplained shortage of raw material, we direct the applicants to deposit a sum of Rs. 2 lakh only. On such deposit being made, the recovery of the remainder of the penalty shall be stayed. The applicants are given a period of 10 weeks to report compliance. Case to be posted for mention on 18-12-1997.