IMPORTANT POINT
The court established that an importer remains liable for customs duties even if goods are seized from third parties, especially in cases of clandestine removal and failure to maintain proper records.

JUDGMENT :

Bhargav D. Karia, J.

1. Heard learned advocate Mr.Sudhanshu Bissa with learned advocate Mr.Paresh M.Dave for the appellant and learned advocate Mr.C.B.Gupta for the respondent no.1.

2. This Tax Appeal is filed under Section 130 of the Customs Act, 1962 arising out of the order dated 18.10.2006 passed by the Custom Excise and Service Tax Tribunal Ahmedabad (for short “CESTAT”) in Appeal no.C/377 of 2002. This Court by order 07.09.2007 Admitted the Appeal on the following questions:

“Whether the order of the Appellate Tribunal demanding Customs duties from the appellant on yarns seized from Jay Krishna Sizers and Carewell Rayons Pvt. Ltd. and imposing penalty on the appellant is correct and legal in the facts of this case?”

3. The brief facts giving rise to this appeal are that appellant is a 100% expert oriented undertaking (for short ‘EOU’) was engaged in business of manufacturing twisted yarns and polyester filament yarns (hereinafter referred to as “PFY”).

3.1. The appellant was allowed to import PFY free of duty being 100% EOU for utilizing such inputs in or in relation to the manufacture of permitted goods meant for exports.

3.2. The appellant was also permitted to deliver imported inputs to other EOUs for enabling them to manufacture goods meant for exports from the imported inputs.

3.3. The Officers of the Directorate General of Anti Evasion conducted enquiry at the premises of the appellant on 30.11.1999 and verified the stocks of materials and finished goods lying in the factory as well as statutory records maintained by the appellant.

3.4. During the course of enquiry the officers also visited premises of parties namely M/S. Jay Krishna Sizers and M/S. Carewell Rayons Pvt. Ltd. and seized 1800 kgs and 4842 kgs of PFY at the respective premises of the above said concerns on the ground that no evidence showing payment of duties on imported PFY was produced by the two parties.

3.5. During the course of the investigation, statements of various persons including Director of appellant Company and representatives of both the parties were recorded under the provisions of Customs Act, 1962 (hereinafter referred to as Act, 1962).

3.6. A show-cause notice dated 25.05.2000 was issued upon the appellant Company as to why custom duty of Rs.1,36,030/- on the goods seized at the premises of M/S. Jay Krishna Sizers and custom duties of Rs.3,64,559/- of the goods seized on the premises of M/S. Carewell Rayons Pvt. Ltd. the should not be recovered from the appellant company as it was alleged that the appellant company clandestinely removed the PFY by selling the goods to the said two concerns.

3.7. A show-cause notice was also issued with regard to the confiscation of the seized goods.

3.8. During the course of the investigation the goods seized from the both the concerns were permitted to be provisionally released on condition of providing bond and bank guarantee of 25% of the amount of the bond.

3.9. The Commissioner of Customs after considering the defence and the replies filed by the appellant and other co- noticees passed an order-in-original dated 08.03.2002 by confiscating the goods under Section 111(J) of the Act, 1962 seized from both the concerns and as the goods were permitted to be provisionally released the bank guarantee furnished was ordered to be appropriated. The duty of Rs.1,36,030/- and Rs.3,64,559/- was also held to be payable by the appellant in addition to the penalty of Rs.1,00,000/-.

3.10. The Commissioner Central Excise and Customs also imposed penalty upon the co- noticees. The appellant being aggrieved along with the Director preferred an appeal before the CESTAT. The CESTAT after considering the facts of the case as well as findings arrived at by the Adjudicating Authority upheld the same by observing as under:

“We have heard both sides. The perusal of the records shows that the 100% EOU imported PFY without payment of duty. They were, therefore, required to maintain proper accounts for receipt, issue and consump