2017 (3) TMI 757 - AT - Customs

DEEC Scheme - duty discharged on the imported goods under DEEC Scheme of Tin Ingots & Nickel, which were diverted in violation of condition of actual user as per DEEC Scheme - whether M/s Metal Link Alloys Ltd is liable to discharge the duty liability on the Tin Ingots & Nickel which were imported under DEEC Scheme (Actual User Condition)? - whether the penalty imposed on Shri Bhanwarlal M Jain, Director, another appellant in this appeal is correct or otherwise? Held that - the import of Tin Ingots & Nickel under DEEC Scheme is on Actual User Condition, the main appellant has to use the same for manufacture of final products. In the absence of any such manufacture, appellant could not have diverted the imported Tin Ingots & Nickel as per the DEEC licence - the duty liability upheld and interest on the said duty liability, and the penalty imposed is also correct. The penalty imposed on the individual Shri Bhanwarlal M Jain set aside and appeal allowed subject to condition that the main appellant discharges the entire Customs duty, liability and interest thereof. Appeal disposed off - decided partly in favor of appellants.

Summary

Issues:
1. Duty liability on imported goods under DEEC Scheme (Actual User Condition)
2. Penalty imposed on the director for diversion of imported goods

Analysis:
1. Duty Liability on Imported Goods:
The main issue in this case was whether the appellant, a company, was liable to discharge duty on Tin Ingots & Nickel imported under the DEEC Scheme with Actual User Condition. The appellant had diverted the imported goods in violation of the scheme's conditions. The appellant argued that they had procured the DEEC license for import and had already exported goods manufactured from the imported materials. They believed duty liability was not required in such a scenario. However, the tribunal found that the appellant had diverted the goods to home consumption without manufacturing final products, breaching the DEEC scheme conditions. The tribunal upheld the duty liability, interest on the duty, and the penalty imposed, as the appellant failed to comply with the scheme's requirements.

2. Penalty Imposed on the Director:
The second issue revolved around the penalty imposed on the director, another appellant in the case, under Section 112(i) for his involvement in diverting the imported goods. The adjudicating authority had imposed the penalty based on the director's knowledge of the Actual User Condition and his attempts to divert the goods. However, the tribunal found the authority's reasoning lacking and inconsistent. The tribunal referred to a similar case decided by the Hon'ble High Court of Gujarat and the Supreme Court, where penalties on individuals were not upheld due to insufficient evidence and reasoning. Consequently, the tribunal set aside the penalty imposed on the director, allowing the appeal subject to the condition that the main appellant fulfills the entire customs duty liability along with interest.

In conclusion, the tribunal upheld the duty liability on the imported goods under the DEEC Scheme due to the appellant's diversion of goods for home consumption. Simultaneously, the penalty imposed on the director was set aside based on the lack of substantial reasoning and evidence. The judgment highlighted the importance of complying with the conditions of import schemes and the necessity for clear and cogent reasoning for imposing penalties on individuals involved in such violations.