2012 (11) TMI 876 - AT - Customs

Advance licence - Diversion of materials - Violation of the conditions of Notification No. 93/2004 Held that - Diversion of material to their own unit took place in June, 2008 and the Notification was amended on 16-7-2008 - diversion of materials by the appellant in the month of June, 2008 cannot be said to be a violation of the conditions of Notification No. 93/2004 since the amendment took place only in July, 2008 - it may be violation of Foreign Trade Policy but that would attract penal provisions under the relevant statute and not under the Customs Act.

Summary

Issues:
1. Interpretation of Customs Notification No. 93/94-Cus. regarding diversion of imported material to own unit.
2. Applicability of Foreign Trade Policy on diversion of surplus material.
3. Assessment of liability for non-fulfillment of conditions of Notification No. 93/2004-Cus.
4. Imposition of duty, confiscation of goods, redemption fine, and penalty.

Analysis:

1. The appellant imported seamless steel wide coils/strips under Customs Notification No. 93/94-Cus., with the condition to use the material for manufacturing finished goods for export and not to divert the surplus. However, the Foreign Trade Policy allowed diversion to another unit of the same manufacturer. The appellant diverted surplus material to their own unit after fulfilling the export obligation. Subsequently, the policy was amended to restrict diversion to own units benefiting from Notification No. 39/2001-C.E. located in a specific area. The Customs Notification was also amended. The impugned order held the appellant liable for duty on the entire imported quantity, confiscation of goods, redemption fine, and penalty.

2. The appellant argued that the diversion to their unit occurred before the policy amendment, thus not violating the Customs Notification conditions. The diversion might breach the Foreign Trade Policy, attracting penalties under that statute, not the Customs Act. The timing of the diversion concerning the policy amendment is crucial for assessing compliance with the Customs Notification requirements.

3. The Tribunal found the appellant's argument valid, stating that the diversion in June 2008 did not contravene the Customs Notification as the amendment occurred in July 2008. The diversion could be a violation of the Foreign Trade Policy, warranting penalties under the relevant statute. The Tribunal considered this ground sufficient to grant a waiver of pre-deposit and stay against dues recovery.

4. While the appellant made additional submissions, the Tribunal deemed the argument regarding the timing of the diversion vis-a-vis the policy amendment decisive. Consequently, the Tribunal granted a stay against the recovery of dues based on the appellant's prima facie case for waiver of pre-deposit. The judgment focused on the interpretation of the Customs Notification, the impact of the Foreign Trade Policy amendment, and the distinction between penalties under different statutes.

This comprehensive analysis highlights the key legal issues, arguments presented, and the Tribunal's decision, providing a detailed understanding of the judgment's implications and reasoning.