JUDGMENT :

ABHAY AHUJA, J.

1. Both these Appeals arise out of a common order dated 24 July 2006 passed by the Customs Excise and Service Tax Appellate Tribunal (for short “the CESTAT”) West Zonal Bench at Mumbai.

2. M/s. Galaxy Surfactants Ltd. the Respondent herein, is a company engaged in the manufacture and export of Surfactants, Specialty Chemicals such as Sodium Lauryl Sulphate (SLS) and Sodium Lauryl Ether Sulphate (SLES), which chemicals are used as raw materials for the manufacture of toothpaste, shampoo etc. The Respondent statedly has one manufacturing unit at Taloja and five manufacturing units at Tarapur. The Respondent has a unit at V-23, MIDC at Taloja where the Respondent manufactures SLS and SLES. One of the major and important raw material required for manufacture of SLS and SLES is Lauryl alcohol. The Respondent, it is submitted, has been sourcing Lauryl alcohol either through indigenous purchase on payment of appropriate excise duty or it is imported under advance licence without payment of duty or it is imported on payment of customs duty. In the present case, the Respondent had obtained five advance licences with actual user condition.

3. Under General Exemption No. 81 pursuant to Notification No. 30/97-CUS dated 1 April 1997 as amended by Notifications upto No. 63/2004-CUS dated 14 May 2004 (the “said notification”) materials imported into India against an advance licence with actual user condition in terms of paragraph 7.4 of the Export and Import Policy 1997-2002 (for short the “EXIM Policy”) would be exempt from the whole of the duty of customs leviable thereon.

4. During the period from 16 October, 1998 to 5 November, 1998, 83,128 kgs of imported Lauryl alcohol was received in the Respondent’s M-3 Unit Tarapur instead of its V-23 Taloja Unit. Pursuant to intelligence received by the Department that Lauryl alcohol imported by the Respondent under the Advance Licence Scheme by availing exemption under the said Notification No. 30/97-CUS dated 1 April 1997 had been directed or transferred in contravention of the conditions of the said exemption Notification, the Appellant issued a show cause notice dated 20 September 2004 seeking explanation from the Respondent to show-cause as to why the duty exempted material of 83,128 kgs of Lauryl alcohol imported under the licence should not be confiscated under Section 111 of the Customs Act. And since the goods were not available for confiscation, as to why the Respondent should not be held liable to pay fine in lieu of confiscation along with the customs duty on the material and why further penalty under Section 112 of the Customs Act should not be imposed upon the Respondent and on Shri Sadanand Shetty, the Senior executive of the firm. The Respondent filed reply dated 14.12.2005 and written submissions dated 27.12.2005 wherein the Respondent challenged the demand on diverse grounds.

5. The Commissioner of Customs (Export Promotion) proceeded with the adjudication and after hearing the Respondent, passed an Order in Original dated 30 January 2006 confirming the demand and confiscated the goods viz. 83,128 kgs of imported Lauryl alcohol which was imported under the duty free licence. As mentioned earlier, since the said goods were not available for confiscation and no bond, bank guarantees were available, the Commissioner kept this point, while imposing penalty and further held that the duty foregone, amounting to Rs. 24,25,856/- was recoverable with applicable interest from the date of first import clearance till payment of the above duty under Section 28 of the Customs Act read with Section 125(ii) and directed the Respondent to pay the same and further imposed penalty of Rs. 2,50,000/- on Shri Sadanand Shetty.

6. Being aggrieved by the said Order-in-Original dated 30 January 2006, Respondent preferred an Appeal to the CESTAT, Mumbai being Appeal No. C/S/519. By an order dated 24 July 2006, the CESTAT allowed the Appeal of the Respondent and set aside the order in Ori