2016 (7) TMI 1412 - AT - Customs

Confiscation of export goods - penalty u/s 114 - it was alleged that Instead of exporting the goods manufactured out of acrylic waste the appellant manufactured sliver/carded web out of polyester procured locally - Held that - Section 113(d) of Customs Act 1962 can be invoked to confiscate the export goods. The export is allowable against free shipping bills. The goods could have been denied the privilege of fulfilment of export obligation which would have sufficient for any action to be taken on import goods - penalty also set aside - appeal allowed.

Summary

Issues:
1. Confiscation of export goods for contravention of Customs Act.
2. Imposition of fine and penalty under Sections 113(d) and 114(i) of Customs Act, 1962.
3. Interpretation of general notes in Handbook of Procedure Vol. 2.
4. Discrepancy in shipping bills and proportionality of fine and penalty.
5. Applicability of exemption Notification No. 43/2002-Cus.
6. Compliance with export obligation using different materials.
7. Invocation of Sections 113(d) and 114 of Customs Act, 1962.
8. Allowance of export against free shipping bills.

Analysis:

1. The appeal involved the confiscation of export goods by M/s. Jai Ambe Manufacturers under Section 113(d) of the Customs Act, 1962 for contravention of Section 50(2) and Notification No. 43/2002-Cus. The appellant imported 'acrylic waste' but manufactured 'sliver/carded web' from locally procured polyester, leading to a breach of export obligations.

2. The order-in-original imposed a fine of Rs. 5,00,000 and a personal penalty of Rs. 1,00,000 under Section 114(i) of the Customs Act. The appellant argued that the fine and penalty were disproportionate, especially concerning the discrepancy in the shipping bills declared for export.

3. The appellant contended that both acrylic and polyester are synthetics, assuming compliance as long as the export order was fulfilled. The interpretation of general notes in the Handbook of Procedure Vol. 2 was crucial, emphasizing the necessity to use inputs procured under advance license in the export product.

4. The discrepancy in two shipping bills, erroneously declared to fulfill export obligations already met, raised questions about the proportionality of the penalties imposed. The appellant's reliance on a previous Tribunal decision regarding imported waste diversion was also highlighted.

5. The Authorized Representative referenced exemption Notification No. 43/2002-Cus. and a Supreme Court decision, emphasizing the governing principles for import and utilization of goods under the advance license scheme.

6. The Tribunal analyzed the appellant's actions in manufacturing and exporting 'sliver/carded web' from 'polyester waste' instead of the imported 'acrylic waste'. While the export was not a due discharge of obligations as per general notes, no misdeclaration was found as both materials were synthetics.

7. The Tribunal concluded that the invocation of Sections 113(d) and 114 of the Customs Act was not justified. Export against free shipping bills was allowable, and any action on import goods could have been taken if the privilege of fulfilling export obligations was denied.

8. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief, highlighting the importance of fulfilling export obligations and the permissible use of materials under the exemption notification.