2006 (9) TMI 368 - AT - Customs

Summary

Issues Involved:
1. Alleged misdeclaration and misuse of DEEC scheme by ESI.
2. Liability of duty and interest on imported goods.
3. Confiscation of 46 bales of mulberry raw silk yarn.
4. Confiscation of 251 bales of mulberry raw silk yarn.
5. Imposition of penalties under Section 112(a) and 112(b) of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Alleged Misdeclaration and Misuse of DEEC Scheme by ESI:
The appeals were filed against a common order of the Commissioner of Customs (Port), Kolkata, regarding the export of women's headgear made from cheap materials instead of silk products by ESI. Investigations revealed discrepancies in the quantities of raw silk imported under DEEC by ESI. The goods were allegedly sold in the open market instead of being used for manufacturing specified articles to fulfill export obligations.

2. Liability of Duty and Interest on Imported Goods:
Show Cause Notices were issued to ESI and others to explain why the duty of Rs. 88,31,541/- on the imported goods should not be realized along with interest at 24% per annum from the date of clearance. The Commissioner found that the goods were imported duty-free under the Advance Licensing Scheme but were diverted and sold in the open market before fulfilling the export obligation.

3. Confiscation of 46 Bales of Mulberry Raw Silk Yarn:
46 bales of mulberry raw silk yarn, weighing 2791 Kgs and valued at Rs. 44,54,805/-, were alleged to have been sold in the open market, leading to their confiscation under Section 111(o) of the Customs Act, 1962. The Commissioner concluded that these bales were sold without fulfilling the export obligation, making them liable for confiscation.

4. Confiscation of 251 Bales of Mulberry Raw Silk Yarn:
The remaining 251 bales, weighing 15099 Kgs and valued at Rs. 2.14 crore, were found intact but were also considered liable for confiscation under Section 111(o) of the Customs Act, 1962. The Commissioner held that these bales were meant for sale and not for manufacturing specified articles to fulfill export obligations.

5. Imposition of Penalties under Section 112(a) and 112(b) of the Customs Act, 1962:
Penalties were imposed on ESI, EEL, and Hari Prasad Agarwal for their involvement in the diversion and sale of duty-free imported goods. The Commissioner imposed penalties of Rs. 4.00 lakhs on ESI and EEL and Rs. 2.00 lakhs on Hari Prasad Agarwal under Section 112(a) and 112(b) of the Customs Act, 1962.

Tribunal's Findings:
- The Tribunal noted that the job work arrangement was confirmed by statements from ESI and EEL. The Commissioner's findings that the goods were not at Varanasi for job work conversion were not based on facts.
- The Tribunal found that the export obligation on the DEEC Advance Licences was met, and the transferability obtained. The Commissioner's rejection of this evidence was not sufficient to uphold the violation or liability to confiscation.
- The Tribunal held that the 46 bales sold in the open market were for weaving silk fabrics by local weavers, a recognized trade practice. The sale to weavers for conversion into silk articles was not a violation of the Exim Policy or DEEC Scheme.
- The Tribunal concluded that both 251 bales and 46 bales were not liable for confiscation under the Customs Act, 1962, and the penalties imposed were not justified.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeals, concluding that there was no violation of the Exim Policy or DEEC Scheme, and the confiscation and penalties imposed were not warranted. The decision was pronounced in court on 4-9-2006.