Customs Duty, Redemption Fine and Penal Action can be Confirmed on Establishment that Customs Duty Paid on Raw Material Sent to Job Workers not Received by 100% EOU of Appellant: CESTAT

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that the customs duty, redemption fine and penal action can be confirmed on the establishment that customs duty paid on raw material sent to job workers not received by 100% Export Oriented Units (EOU) of the appellant.

The appellant, Sun Pharmaceuticals Industries Ltd, is registered as a 100% Export Oriented Unit with the Development Commissioner. The unit procures imported raw materials as well as indigenous raw materials under a 100% EOU Scheme without payment of Customs, Central Excise duty for the manufacture of finished goods and for exporting the same as per the export-import policy.

It has been submitted by the appellant that they wanted to get ‘Theobromine’ manufactured on a job-work basis from other manufacturers as they did not possess the required facility in their manufacturing unit. Accordingly, the appellant made a request to the Deputy Commissioner of the concerned Range for permission to allow the manufacturing of ‘Theobromine’ from M/s. Heartwell Life Science.

The advocate appearing on behalf of the appellant contended that the Commissioner (Appeals) has failed to provide a speaking order as he did not accept any of the submissions made by the appellants at the time of adjudication of the matter. It was further emphasized that they have no intention to divert the duty-free raw materials to any other premises with an intention to evade payment of duty. It has forcefully been argued by the appellants that raw materials were put to the intended use and there has been no misuse or diversion of the same in the domestic market.

A Two-Member Bench of the Tribunal comprising Ramesh Nair, Judicial Member and CL Mahar, Technical Member observed that “In this case, we find that the appellant has violated the faith imposed in them in as much as they did not even bother to check whether the job worker declared by them for the manufacture of an intermediate product exists at the time declared manufacturing unit or not. It also shows the carelessness on the part of the manufacturer in failing to ensure that the duty-free import or acquired are being sent to the right place which has been declared by them for the manufacture of the intermediate products.”

“We are of the view that duty, redemption fine and penal action can be confirmed only if it is established that duty paid on raw material which was sent to the job workers have not been received by the 100% EOU of the appellant” the Bench concluded.

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