Demand of Excise Duty on Clandestine Clearance of Dyed Grey Fabrics without Verifying Re-warehousing Certificate: CESTAT directs Re-adjudication [Read Order]

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) directed re-adjudication for the confirmation of the demand of central excise duty imposed on the clandestine clearance of dyed grey fabrics without verifying re-warehousing certificate. 

Om Sai Textiles, the appellant assessee was a 100% Export Oriented Unit (EOU) and engaged in the manufacture of Polyester grey fabrics falling under Chapter 54 of Schedule to the Central Excise Tariff Act,1985. 

The assessee appealed against the order passed by the Commissioner of Central Excise and Customs Service Tax for confirming the demand of central excise duty of Rs. 2,55,38,210/- on clandestinely cleared dyed grey fabrics illicitly removed and confiscation of goods valued at Rs. 2,89,72,080/- was also proposed under Rule 25 of the Central Excise Rules, 2002 and under Section 111(j) and 111(o) of the Customs Act, 1962. 

Hardik Modh, the counsel for the assessee contended that the finding of the lower authorities was not correct and the circular issued by the Central Board of Excise & Custom wherein provides that if the re-warehousing certificate was not received, the liability of duty can be fastened upon the Consignor and the action of the department not following the circular issued by the board was considered a violation of the principle of judicial discipline. 

Further submitted that since it was not in dispute about the genuineness of re-warehousing certificate and payment, the excise duty demand was not sustainable against the assessee and the assessee produced the re-warehousing certificate duly endorsed by the Superintendent of Central Excise and the department did not verify the certificate and raised the demand. 

Kalpesh P. Shah, the counsel for the department relied on the decisions made by the lower authorities and contended that the demand of central excise duty raised by the department on the assessee was as per the law and liable to be sustained. 

The Bench observed that the department has made the allegation of non-re-warehousing of the goods at the consignee’s end and it had to prove the same by substantial evidence it cannot be made on assumption and it had to be shown as if the goods were not warehoused then where were the same diverted and in the present case there was no evidence of diversion of goods. 

The two-member bench comprising Ramesh Nair (Judicial) and C.L Mahar (Technical) quashed the demand of excise duty and remanded the matter to the Adjudicating Authority to decide the matter afresh after allowing personal hearing to the assessee. 

To Read the full text of the Order CLICK HERE

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