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2017 (9) TMI 1787 - Commission - CustomsViolation of import conditions - import of Zip Fasteners - N/N. 21/2002-Cus., dated 1-3-2002 - misuse of benefits of the Notification - garment accessories imported vide 8 Bills of entry were neither brought to the factory premises of the applicant nor used in export production as mandated in the said Notification. Instead the imported garment accessories were sold in the domestic market - Section 123 of the Customs Act, 1962. Held that - The impugned goods were neither smuggled nor seized to make it illegal import under Section 123 of the Customs Act, 1962. It was imported against the import certificate issued by the AEPC. The only allegation in the impugned SCN is that the applicant has not fulfilled the conditions of Notification No. 21/2002-Cus., dated 1-3-2002, thereby making them ineligible for Nil rate of duty on the accessories imported. As the goods were neither seized by the DRI nor there is any allegation against the applicant that they smuggled clandestinely these goods, the Bench is of the considered view that under the facts and circumstances of the case, import under Bill of Entry 4572044 dated 7-9-2011 is not hit by the bar envisaged under Section 123 of the Customs Act, 1962. Pendency of another SCN demanding Anti-Dumping Duty - Held that - The Bench has considered this issue and is of the firm view that the SCN demanding Anti-Dumping Duty is not a proceeding pending before an adjudicating authority against which the applicant has filed settlement application and the applicant has approached the Settlement Commission in settling the issue arising out of SCN regarding the wrong availment of benefits of Notification No. 21/2002-Cus., dated 1-3-2002. Hence the Bench holds that the pendency of another SCN demanding Anti-Dumping Duty is not an impediment in settling this case. The Bench is of the opinion that the applicant has made full and complete disclosure of the duty liability, co-operated with the investigation and discharged their duty liability along with interest immediately on commencement of investigation i.e., over one year before issuance of SCN dated 31-3-2015. Accordingly, the Bench considers it as a fit case to settle the differential duty liability at ₹ 23,19,372/- along with interest amounting to ₹ 6,35,309/-. Redemption fine - Held that - The Bench holds that the Commission/Omission on part of the applicant have rendered the goods liable for confiscation. However, as the goods had not been seized at any point of time in this case, the question of imposition of any fine on the goods in lieu of confiscation does not arise. Penalty on applicant - Held that - The applicant had deliberately misused the ICs of the exporters and availed unintended benefit of nil duty. However, once the investigation started, the applicant extended full co-operation, made no attempt to cover up the wrong doing and paid the entire amount of duty along with interest before the issue of Show Cause Notice. But for the painstaking investigations carried out by the Officers of DRI, Coimbatore Regional Unit, the fact of the matter would not have surfaced - The act of the applicant attracts penalty under Section 114A and also under Section 114AA of the Customs Act, 1962 separately for having rendered the goods liable for confiscation under Section 111(d) and 111(o) of the Customs Act, 1962 for not fulfilling the conditions prescribed under Notification No. 21/2002, dated 1-3-2002 and accordingly the applicant is liable for penalty under the provisions of the Customs Act invoked in the SCN. Penalty on co-appellants - Held that - It is inconceivable to believe that the Directors failed to monitor their import transactions and activities of their staff till it was detected by the DRI. The Directors of the applicant firm cannot wash their hands off saying that they were not aware of the said illegal arrangements. Shifting the blame on Shri Kannan will not absolve them of the act of evasion or duty. The applicant firm is equally responsible for actions of its employee and the Directors of the applicant firm equally responsible for the imports made in their name resulting in the revenue loss for the Government. The omissions and commissions of the three directors of the applicant company, viz., Shri K. Tamizharasan, Director - the Co-applicant I , Shri N. Sridhar, Managing Director - the Co-applicant II and Shri S. Ramachandran, Director - the Co-applicant III have rendered the impugned goods liable for confiscation - the Bench imposes a penalty of ₹ 10,000/- (Rupees Ten thousand only) each on Shri K. Tamizharasan Director - the Co-applicant I , Shri N. Sridhar, Managing Director - the Co-applicant II , Shri S. Ramachandran, Director - the Co-applicant III under the provisions invoked in the show cause notice and grants immunity to the applicant in excess of the above amount. The penalty should be paid within 30 days from the date of receipt of this Order and compliance reported to the jurisdictional Commissioner. The Bench is inclined to consider grant of immunity from prosecution to the applicant and co-applicants.
Issues Involved:
1. Misuse of customs duty exemption under Notification No. 21/2002-Cus. 2. Non-fulfillment of end-use conditions. 3. Liability for differential customs duty and interest. 4. Confiscation and penalty under Sections 111(d), 111(o), 112, 114A, and 114AA of the Customs Act, 1962. 5. Maintainability of the application under Section 127B of the Customs Act, 1962. 6. Settlement of the case and immunity from prosecution. Detailed Analysis: 1. Misuse of Customs Duty Exemption: The applicant company imported garment accessories at nil rates of customs duty under Notification No. 21/2002-Cus. However, the imported goods were neither brought to the factory premises nor used in export production as mandated. Instead, they were sold in the domestic market, resulting in a demand for differential customs duty of ?23,19,372/- and interest thereon. 2. Non-fulfillment of End-Use Conditions: Investigations revealed that out of 67 consignments imported, only 53 were used in export production. The remaining 14 consignments were imported by third parties in collusion with certain individuals and were sold domestically, violating the conditions of the notification. 3. Liability for Differential Customs Duty and Interest: The applicant admitted the misuse and wrong availment of the notification benefits and paid the differential duty and interest before the issuance of the show cause notice. The total duty evaded was ?23,19,372/-, and interest amounted to ?6,35,309/-. 4. Confiscation and Penalty: The impugned goods were liable for confiscation under Sections 111(d) and 111(o) of the Customs Act, 1962, and penalties under Sections 112, 114A, and 114AA were proposed. The Bench noted that the goods were not seized, so the question of imposing a fine in lieu of confiscation did not arise. However, penalties were imposed on the applicant and co-applicants for their roles in the misuse. 5. Maintainability of the Application: The application was initially deemed not maintainable because one of the consignments contained zip fasteners, a notified item under Section 123 of the Customs Act. However, the Hon'ble High Court of Madras remanded the case for fresh consideration, noting the applicant's pragmatic stand and cooperation. 6. Settlement of the Case and Immunity from Prosecution: The Bench found that the applicant made a full and complete disclosure, cooperated with the investigation, and discharged the duty liability along with interest. The case was settled with a differential duty liability of ?23,19,372/- and interest of ?6,35,309/-. Penalties were imposed as follows: - ?40,000/- on the applicant company. - ?10,000/- each on the three directors (co-applicants). Immunity from prosecution was granted, subject to the payment of penalties within 30 days. Conclusion: The Bench settled the case under Section 127(5) of the Customs Act, 1962, with specific terms for duty, interest, penalties, and immunity from prosecution. The order emphasized the applicant's cooperation and full disclosure, while also noting the gravity of the misuse and the role of the directors in failing to monitor import transactions.
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