2012 (3) TMI 460 - HC - Customs

Summary

Issues Involved:

1. Confiscation of goods and redemption fine.
2. Contravention of import conditions.
3. Competence of customs authorities for EOUs.
4. Compliance with Board circulars.
5. Diversion of goods to domestic market.
6. Evaluation of evidence and statements.
7. Cancellation of licenses.
8. Penalty imposition.

Summary:

1. Confiscation of Goods and Redemption Fine:
The Tribunal set aside the confiscation of 29 machines valued at Rs. 87,95,628/- u/s 111(o) and 111(j) of the Customs Act due to lack of detailed redemption fine calculation. The High Court found this reasoning flawed, stating that the contravention of import conditions justified the confiscation and redemption fine.

2. Contravention of Import Conditions:
The Tribunal's finding that only 5 out of 29 machines were used for domestic production was deemed insufficient by the High Court. The High Court emphasized that any use of imported machinery for domestic production without permission constitutes a violation, irrespective of the number of machines involved.

3. Competence of Customs Authorities for EOUs:
The High Court upheld the customs authorities' competence to take action against EOUs for illegal exports, contradicting the Tribunal's view.

4. Compliance with Board Circulars:
The Tribunal's reliance on a Board circular allowing idle machinery use for domestic production was rejected by the High Court, which clarified that the circular did not permit diversion of goods to the domestic market without proper authorization.

5. Diversion of Goods to Domestic Market:
The High Court found sufficient evidence of diversion of raw materials and finished goods to the domestic market, contrary to the Tribunal's conclusion. Statements from various witnesses and the admission of the managing partner corroborated the contraventions.

6. Evaluation of Evidence and Statements:
The High Court criticized the Tribunal for requiring corroboration of the managing partner's voluntary statements, which were already substantiated by other evidence. The Tribunal's dismissal of these statements was deemed erroneous.

7. Cancellation of Licenses:
The Tribunal's view that failure to cancel the import license equated to waiver of contraventions was rejected. The High Court held that non-cancellation did not invalidate the proceedings or the penalties imposed.

8. Penalty Imposition:
The High Court remanded the matter to the Commissioner to reassess the redemption fine's market value and the justification for imposing personal penalties on the assessees. The Tribunal's complete dismissal of penalties was overturned.

Final Order:
The High Court allowed the appeal, set aside the Tribunal's order, and restored the Commissioner's order with directions to reconsider the redemption fine and personal penalties.