Legal principle

A case of diversion of duty-exempt goods cannot be made out without evidence of the actual movement of the goods alleged to have been diverted, and standard input output norms (SION) are per-material ceilings or estimates, not mathematically precise formulae from which misuse of an exemption can be presumed.

Court decision

The Tribunal allowed the appeal of M/s Responsive Industries Ltd and dismissed the appeals of the Commissioner of CGST & Central Excise, Palghar, holding that no part of the 'duty foregone' was recoverable: there was no evidence, even remotely proximate, that the PVC resin had reached any user/trader, and no ground to infer that it was used in excess of the adopted norms.

Facts

M/s Responsive Industries Ltd, an export oriented unit (EOU), procured 'polyvinyl chloride (PVC) resin' both from abroad and indigenously without payment of duty in terms of notification no. 52/2003-Cus dated 31st March 2003 (with the parallel excise notification no. 22/2003-CE). The department alleged diversion of this duty-exempt resin, and the Commissioner of Central Excise & CGST, Palghar, by Order-in-Original No. PLG-GST-COM-01/2020-21 dated 10th June 2020, proceeded to recover 'duty foregone', giving rise to cross-appeals by the company, the Commissioner, employees and transporters. The Revenue's charge rested on the procurement of 'plasticizer' not being in proportion to the procurement of PVC resin, implying that a lesser quantity of PVC resin was actually used in production.

Key provisions

• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded
• Section 65, Customs Act, 1962 — Manufacture and other operations in relation to goods in a warehouse
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 111(o), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 112, Customs Act, 1962 — Penalty for improper importation of goods
• Section 28A, Customs Act, 1962 —  Power not to recover duties not levied or short-levied as a result of general practice
• Rule 2, Customs Valuation (Determination of value of Imported goods) Rules, 2007 — Definitions
• Section 25, Customs Act, 1962 — Power to grant exemption from duty
• Section 127J, Customs Act, 1962 — Order of settlement to be conclusive
• Section 58, Customs Act, 1962 — Licensing of private warehouses
• Section 127B, Customs Act, 1962 — Application for settlement of cases
• Section 12, Customs Act, 1962 — Dutiable goods