2022 (5) TMI 1506 - AT - Customs

Levy of penalty u/s 112(b) of the Customs Act, 1962 - diversion of goods imported under DEEC scheme, which were diverted to the domestic market without fulfilment of export obligation as provided for - HELD THAT - The company of the appellant was undertaking the job work on the material supplied by M/s. Sumira Plastics. It is nowhere recorded that the appellant had any knowledge with regard to the fact of importation of the goods claiming the benefit under DEEC scheme. Only because the appellant knew Shri G.N. Pai cannot be a reason for claiming that the appellant was in hand in glove for the fraud committed by Shri Pai in diverting the goods imported by him under DEEC scheme. Appellant s company was acting in normal job work activities on the material provided by Shri G.N. Pai. It is not even the case of the Revenue that certain documents or certain evidences have been received showing that the appellant could be attributed with a positive knowledge about the imported nature of the goods. It is evident from Section 112(b) of the Customs Act that positive knowledge or mens rea is an active ingredient for imposition of penalty under Section 112(b) - In absence of any positive knowledge, penalty imposed under Section 112(b) of the Customs Act cannot be sustained. Appeal allowed.

Summary

Issues:
- Imposition of penalty under Section 112(b) of the Customs Act, 1962 for diversion of goods imported under DEEC scheme without fulfilling export obligation.

Analysis:
1. Imposition of Penalty:
- The appeal challenged the penalty imposed on the appellant under Section 112(b) of the Customs Act, 1962 for diversion of goods imported under DEEC scheme without fulfilling export obligations. The penalty of Rs. 1,00,000/- was imposed by the Commissioner of Customs (Adjudication), Mumbai.

2. Role of the Appellant:
- The appellant, a co-noticee in the proceedings against M/s. Sumira Plastics, was penalized based on the observation that he knew Mr. G.N. Pai of M/s. Sumira Plastics. The appellant's company was involved in job work activities on materials supplied by M/s. Sumira Plastics, but there was no evidence of the appellant's knowledge of the imported nature of the goods.

3. Legal Provisions - Section 112(b) of Customs Act:
- Section 112(b) of the Customs Act imposes liability on individuals who are in any way concerned with goods they know or have reason to believe are liable to confiscation. Mens rea or positive knowledge is a crucial element for the imposition of penalties under this section.

4. Tribunal's Observations:
- The Tribunal, while granting a waiver of pre-deposit, noted that there was no evidence to suggest that the appellant knew about the import of raw materials under the DEEC scheme. The appellant's job-work activities were exempt under Central Excise laws, and there was no indication of any violation by the supplier.

5. Decision and Conclusion:
- The Tribunal allowed the appeal, emphasizing that in the absence of positive knowledge or mens rea on the part of the appellant regarding the importation of goods under the DEEC scheme, the penalty imposed under Section 112(b) of the Customs Act could not be sustained. The appellant was granted relief, and the penalty was waived off.

This detailed analysis of the judgment highlights the key issues, legal provisions, the appellant's role, and the Tribunal's decision, providing a comprehensive understanding of the case.