The Chennai Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside the demand order due to the violation of principles of natural justice in the case.
The Coram of Ajit Kumar and Sulekha Beevi C.S. noted that the department refused to grant the appellant’s request for the witness to be subjected to a cross-examination and neglected to submit copies of the pertinent Relied Upon Documents (RUDs).
Additionally, the cross examination cannot be denied stating that no purpose will be achieved.
The appellant, M/s.Pravin Tex had obtained 4 Export Promotion Capital Goods (EPCG) licences in 1997-98 for importation of knitting and embroidery machines.
They imported and cleared knitting machines and embroidery machines valued at Rs.1,35,87,242/- vide 4 Bills of Entry at concessional rate of duty under the said EPCG licences by availing Customs Exemption Notification No.110/95 dated 05.06.1995. The duty foregone amounted to Rs.29,99,322/-.
They later produced documents regarding fulfilment of export obligation which included direct exports by the appellant and also exports made through third parties.
It was alleged that since the exports said to have been made through third parties could not be established by the required endorsement on the shipping bills, it appeared to the department that the appellant did not fulfil the export obligation as per these licences.
The respondent side submitted that the condition of duty exemption availed under the Notification No.110/95 dated 05.06.1995 was violated by the appellant and the full duty foregone amounting to Rs.29,99,322/- became payable by the appellant along with interest.
The panel observed that the original authority had ruled that the exports carried out using the contested shipping bills could not be used to fulfil the export obligations under the four EPCG licences, due to the manipulation on the quadruplicate copies, and that the appellant is responsible for paying a duty of Rs. 29,99,322/- plus interest.
The original authority imposed a penalty of Rs.5 lakhs on the appellant importer under Section 112(a) of the Customs Act, 1962.
The counsel of the appellant submitted that the appellants had obtained 4 EPCG licences issued by the Joint Director General of Foreign Trade (DGFT) for importation of knitting and embroidery machines.
Further asserted that it is the case of the department that the EPCG licence numbers and the name of the appellant were not entered in the original and duplicate shipping bills.
Additionally, the appellants made repeated requests to furnish the original and duplicate of all 162 shipping bills to verify and respond to the allegations made, the department did not handover any such documents.
The major issue raised by the appellant is that the demand has been raised without proper evidence and without following the principles of natural justice.
Conversely, the counsel of the respondent claimed that the appellant had fabricated / manipulated the shipping bills to show that some exports were made by third party exporters so as to fulfil the export obligation against their EPCG licences.
The tribunal stated that the department could not confirm the demand on the basis of assumptions and presumptions. The allegations raised in the Show Cause Notice (SCN) have to be established by evidence. The noticee has a right to get the copies of documents.
Moreover, there is a flagrant violation of natural justice principles and the agency has failed to prove the assertions made in the SCN.
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