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Issues:
Violation of Condition No. (vi) of Notification No. 204/92-Cus., Duty liability on imported goods, Imposition of penalty under Section 112 of the Customs Act. Analysis: 1. The case involved M/s. Shree Ganesh Forgings P. Ltd. holding Quantity-Based Advance Licences (QBALs) and subsequently selling them to M/s. Kunal Engineering Co. Ltd. The issue arose when investigations revealed that the respondents had availed Modvat credit on inputs used in the manufacture of products exported under the QBALs, violating Condition No. (vi) of Notification No. 204/92-Cus. A show-cause notice was issued, demanding Customs duty and proposing penalties. The Commissioner of Customs later dropped the proceedings against the respondents, granting amnesty based on a Circular and noting the reversal of credit and interest payment. The appeal by the Revenue challenged this decision. 2. The Revenue contended that the respondents fraudulently obtained transferability endorsements on QBALs by suppressing the availed input-stage credit, rendering the imported goods liable for confiscation under Section 111(o) of the Customs Act. The appeal sought to set aside the Commissioner's order in favor of the respondents. Despite notice, no representation was made on behalf of the respondents. 3. The Tribunal examined the substantive and procedural conditions of Notification No. 204/92-Cus., specifically focusing on Condition No. (vi) regarding the transferability of QBALs. It was clarified that availing Modvat credit on inputs used in exported final products did not disqualify the importer from claiming exemption on raw material imports. The condition only restricted transferability if credit was availed on exported goods. The Tribunal rejected the department's argument of penalizing the respondents for obtaining transferability endorsements fraudulently. 4. The Tribunal emphasized that the Customs authorities were not tasked with penalizing the respondents for obtaining endorsements, suggesting that the Customs officer could have appealed under the Foreign Trade Act instead. Additionally, it was highlighted that the proposed penalty under Section 112 depended on the liability of imported goods for confiscation under Section 111, which was dropped by the Commissioner in this case. As the goods were imported by M/s. Kunal and proceedings against them were dropped, imposing penalties on the respondents was deemed untenable. 5. Ultimately, the Tribunal upheld the Commissioner's decision, dismissing the appeal by the Revenue. The order was pronounced in open court on 28-2-2007, concluding the legal proceedings in this case.
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