2007 (3) TMI 565 - AT - Customs

Summary

Issues Involved:
1. Unauthorized importation and fraudulent clearance of Nickel and Copper under the DEEC Scheme.
2. Alleged non-manufacturing activity and non-export by the supporting manufacturer.
3. Diversion and sale of duty-free imported materials in the local market.
4. Validity of advance licenses obtained through misrepresentation.
5. Confirmation of duty demand and imposition of penalties.

Detailed Analysis:

1. Unauthorized Importation and Fraudulent Clearance of Nickel and Copper under DEEC Scheme:
The Customs (Prev.) Commissionerate, Mumbai received specific information about unauthorized importation and fraudulent clearance of Nickel and Copper by M/s. Metropolitan Group of Industries under the DEEC Scheme. The investigations revealed that M/s. Metropolitan Industries had obtained four DEEC licenses for importing copper wire bars/scrap nickel metal and claimed to be engaged in the export of marine grade engineering goods. However, it was found that the declared supporting manufacturer, M/s. Fairlon Engineering Pvt. Ltd., did not carry out any manufacturing activity, and no exports were effected by the importers.

2. Alleged Non-Manufacturing Activity and Non-Export by the Supporting Manufacturer:
Investigations indicated that M/s. Fairlon Engineering Pvt. Ltd. did not have the necessary infrastructure, manpower, or technical know-how for manufacturing cupro nickel fittings. The statements of various individuals, including workers and managers, confirmed the non-receipt of raw materials and non-manufacture of cupro nickel fittings at the factory premises. The RT 12 returns and GP 2 Gate Passes showing manufacture of cupro nickel fittings were found to be bogus and substituted.

3. Diversion and Sale of Duty-Free Imported Materials in the Local Market:
The evidence gathered during the investigations showed that the duty-free imported materials were diverted and sold in the local market instead of being used for manufacturing goods for export. The statements of transporters and octroi receipts from Delhi Municipal Authorities confirmed the diversion and sale of the imported materials. The appellants admitted to the diversion and expressed willingness to pay duty and penalty as per law.

4. Validity of Advance Licenses Obtained Through Misrepresentation:
The investigations revealed that the advance licenses and DEEC Book obtained by M/s. Metropolitan Industries through willful misrepresentation were ab initio invalid to effect any duty-free imports. Therefore, the duty-free imports were liable to confiscation under Sec. 111(d) and (o) of the Customs Act, 1962, and the importers were liable to penalty under Sec. 112 of the Customs Act.

5. Confirmation of Duty Demand and Imposition of Penalties:
A show cause notice was issued to the merchant exporter and the supporting manufacturer, and the duty demand of Rs. 1,84,50,567/- was confirmed along with penalties on various individuals. The Tribunal, however, found overwhelming evidence of export of cupro nickel fittings by the appellants. The shipping bills for export of 695 MTs were filed and assessed by the customs authorities, and foreign exchange equivalent to nearly Rs. 7 crores was received against the exports. The Tribunal concluded that the appellants had fulfilled their export obligation prior to the import of goods and, therefore, there was no bar to their sale/disposal in the open market. Consequently, the duty demand and penalties were set aside, and the appeals were allowed.

Conclusion:
The Tribunal accepted the appellants' stand that they had fulfilled their export obligation and allowed the appeals, setting aside the duty demand and penalties. The judgment emphasized the importance of genuine export documentation and fulfillment of export obligations under the DEEC Scheme.