2007 (2) TMI 490 - AT - Central Excise

Summary

Issues:
- Evasion of Customs duty by using non-duty paid imported materials
- Confiscation of goods and imposition of penalties under Section 112(b) of the Customs Act
- Involvement of the appellant company and its Director in the diversion of non-duty paid material

Analysis:

The judgment deals with two appeals arising from the Commissioner's Order, involving the evasion of Customs duty by using non-duty paid imported materials. The main noticee, a fabric manufacturer, was found to have used less material than accounted for, leading to the diversion of non-duty paid materials and Customs duty evasion. The goods manufactured using these materials were supplied to various parties, including the appellant company, which received goods covered by invoices. The Commissioner not only demanded Customs duty on the diverted materials but also confiscated goods from the appellant company and imposed penalties on the company and its Director.

The appellant argued that they procured materials under valid certificates and declarations that did not mention the alleged diversion of materials by the supplying unit. They contended that they were unaware of the diversion and should not be penalized under Section 112(b) of the Customs Act. On the other hand, the Respondent claimed that the appellant company and its Director knowingly participated in the diversion of non-duty paid materials, justifying the penalties under Section 112(b).

Upon careful consideration, the Tribunal examined the reasoning behind imposing penalties under Section 112(b) provided by the Commissioner. The Tribunal noted that the appellant company received goods under valid documents that did not indicate the diversion of materials. The confiscated goods were the only items received by the appellant, and they were not shown to benefit from the diversion. Consequently, the Tribunal held that the penalties imposed on the appellant company and its Director were unjustified, leading to the allowance of the appeals.

In conclusion, the Tribunal allowed the appeals, emphasizing that the penalties under Section 112(b) were not warranted in this case, as the appellant company was not involved in the diversion of non-duty paid materials and did not benefit from the confiscated goods.