2010 (8) TMI 498 - AT - Customs

Search - Confiscation - private bonded warehouse - 100% EOUs - Rule 25 of Central Excise Rules, 2002 - Penalty - The Commissioner has observed that the 100% EOU, after obtaining CT-3 certificates and after procuring goods from the other 100% EOUs is expected to manufacture the same in their factory - the goods have to be examined, on 100% basis before shipment and the officers should have noticed that the same were of inferior quality - Officers failure to perform their duties of scrutinizing/examining, at best be the dereliction of duties, which can be proceeded with in terms of CCR Rules - In the present case the Commissioner has himself observed that there were lapses on the part of officers to perform their duties, which can be equated to dereliction of duties by them and as such, no justification in imposition of penalty upon them - Decided in the favour of the assessee

Issues Involved:
1. Confiscation of goods under Section 113(1)(i) of the Customs Act, 1962 and Rule 25 of Central Excise Rules, 2002.
2. Imposition of redemption fine.
3. Imposition of penalties on the partnership firms and their partners.
4. Imposition of composite penalties under two different statutes.
5. Penalties on Shri Bilal Latif Memon.
6. Penalties on government officers Shri D.M. Julka and Shri R.B. Singh.

Issue-wise Detailed Analysis:

1. Confiscation of Goods:
The appellants, M/s. Sunshine and M/s. Alamin Exports, were found to have diverted duty-free procured fabrics into the local market and exported cheaper quality scarves to cover exports. The goods were confiscated under Section 113(1)(i) of the Customs Act, 1962, as they did not correspond to the quality and value required. The confiscation under Rule 25 of Central Excise Rules, 2002, was not upheld because the adjudicating authority did not clarify how the goods violated the Central Excise Act provisions.

2. Imposition of Redemption Fine:
The redemption fine of Rs. 8 Lakhs for goods valued at Rs. 36.98 Lakhs for M/s. Sunshine Overseas and Rs. 15 Lakhs for goods valued at Rs. 70.09 Lakhs for M/s. Al Amin Exports was upheld. The court found the fines reasonable and did not interfere with the quantum.

3. Imposition of Penalties on Partnership Firms and Partners:
Penalties of Rs. 5 Lakhs on M/s. Sunshine Overseas and Rs. 8 Lakhs on M/s. Al-Amin Exports under Section 114 (iii) (i) of the Customs Act, 1962, were confirmed as the penal liability was accepted by the appellants. Additionally, penalties on the partners were contested on the grounds that separate penalties on the firm and partners are not permissible, referring to previous Tribunal decisions.

4. Composite Penalties Under Two Different Statutes:
The court set aside composite penalties imposed on the partners under Section 114 of the Customs Act and Rule 26 of the Central Excise Rules, 2002. It was noted that penalties under different statutes cannot be consolidated, as supported by several Tribunal and High Court decisions.

5. Penalties on Shri Bilal Latif Memon:
Penalties on Shri Bilal Latif Memon were set aside. The court found no evidence of his involvement in any offense beyond supplying goods to the 100% EOUs. His actions did not constitute an offense, and there was no statutory provision invoked against him.

6. Penalties on Government Officers:
Penalties on Shri D.M. Julka and Shri R.B. Singh were also set aside. The court concluded that their failure to perform duties amounted to dereliction of duty but did not constitute abetment under Section 114 of the Customs Act. The absence of evidence showing their connivance with the exporters led to the setting aside of penalties.

Conclusion:
The appeals were disposed of by confirming the confiscation of goods under Section 113(1)(i) of the Customs Act, upholding the redemption fines, confirming penalties on the firms, setting aside composite penalties on the partners, and setting aside penalties on Shri Bilal Latif Memon and the government officers.

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