2017 (6) TMI 306 - AT - Customs

Goods were imported without payment of duty - stock transfer - Notification No. 12/2012-Cus dated 17.03.2012 read with Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. - Held that - the imported goods have been diverted by the Appellants to their sister unit situated in Ambarnath (Maharashtra), which is in contravention of the relevant Rules in terms of which the Appellants imported the goods without payment of Customs Duty - This charge is not being contested by the Appellants. Accordingly, there is no hesitation in holding that the Appellants are liable to pay the applicable Customs Duty along with interest payable thereon. Penalty u/s 112 and 114A of CA - Held that - It is evident from the facts and circumstances of the case that diversion of the goods to their sister concern has not been done with intention to evade the Customs Duty concession. Consequently, there is no justification to impose the penalty on the Appellants. Appeal allowed - decided partly in favor of appellant-assessee.

Summary

Issues:
Importation of raw materials under concessional rate for manufacturing goods; Diversion of imported goods to sister concern; Liability to pay Customs Duty; Imposition of penalties under Customs Act, 1962.

Analysis:
The appeal was filed against an order dated 21.09.2016 by the Commissioner of Central Excise, Indore. The Appellants imported raw materials under Notification No. 12/2012-Cus for manufacturing FRP Rods but diverted them to their sister concern in contravention of rules, leading to a demand for Customs Duty of &8377; 7,50,371/- along with penalties under Sections 112 and 114A of the Customs Act, 1962. The Appellants argued that the imported goods were used by the sister concern for manufacturing the same goods and that they had already paid the Customs Duty along with interest before the show cause notice. The Tribunal held that the diversion of goods breached the conditions of importation without payment of duty, upholding the duty demand. However, considering the lack of malafide intention, the penalties were set aside.

The Appellants admitted to diverting the imported goods to their sister unit but contended that the sister concern also used the materials for manufacturing FRP Rods. They had already paid the Customs Duty and interest before any notice was issued. The Tribunal acknowledged that the diversion occurred but noted that the goods were used for manufacturing identical goods by the sister concern, cleared with applicable Central Excise Duty. As there was no intent to evade Customs Duty concession, the penalties under Sections 112 and 114A of the Customs Act, 1962 were deemed unjustified. Therefore, while upholding the duty demand, the penalties were set aside based on the lack of malafide intention.

In conclusion, the Tribunal upheld the impugned order with modifications, partly allowing the appeal filed by the assessee-Appellants. The duty demand was upheld, but the penalties under Sections 112 and 114A of the Customs Act, 1962 were set aside due to the absence of malicious intent in diverting the imported goods to the sister concern for manufacturing identical goods. The decision was pronounced in the open court on 16.05.2017.