2017 (6) TMI 564 - AT - Customs

Violations of conditions for import - DEEC Scheme - the respondents had diverted the imported raw materials and also had violated the conditions for import for duty free materials - benefit of N/N. 43/2002-Cus. dated 19.4.2002 - whether the raw materials imported duty-free has been diverted by the respondents and whether there is violation to fulfill the export obligation? - Held that - when there is shortage of duty-free materials, it is for the respondents to explain as to the reason for such shortage - From the records, it is clear that respondent has not been able to offer any explanation. Therefore, the respondent has not been able to fulfill the export obligation and also has violated the conditions of the advance licenses. The seized 335.293 MTs of stainless steel coils / sheets are very much liable for confiscation as proposed in the notice - only for the limited purpose of considering for extending the option for redeeming the goods with imposition of redemption fine under section 125 of Customs Act, 1962 and the quantum thereof, the matter is remanded to the adjudicating authority. Appeal allowed by way of remand.

Summary

Issues:
1. Allegations of diversion of imported raw materials under the DEEC Scheme.
2. Denial of customs duty benefit under notification Nos.43/2002-Cus.
3. Demand for duty amounting to ?3,84,33,258.
4. Confiscation of diverted/sold goods under section 111(o) of the Customs Act, 1962.
5. Confiscation of stainless steel coils/sheets.
6. Imposition of penalty under section 114A/112(a) of the Customs Act, 1962.
7. Enforcement of Bond terms for duty recovery.
8. Adjustment of voluntarily paid amount towards duty liabilities.

Analysis:
The case involved allegations against M/s.Karware Impex Pvt. Ltd. for diverting imported raw materials under the DEEC Scheme and violating export obligations. The Department issued a show cause notice demanding customs duty, interest, and penalties based on the diverted/sold quantity of raw materials. The adjudicating Commissioner initially dropped the proceedings due to lack of evidence of diversion. However, the Department appealed, arguing that the shortage of raw materials was evident during inspection, indicating diversion. The Department contended that the respondents failed to fulfill their export obligations and diverted duty-free goods. The Commissioner's reasoning that the respondents had time to manufacture and export goods was challenged, emphasizing the need for proper explanation in case of material shortage.

The Tribunal disagreed with the Commissioner's findings, noting the significant shortage of duty-free materials and the respondents' failure to explain. The Tribunal upheld the demand for duty, interest, and penalties against M/s.Karware Impex Pvt. Ltd. The decision did not interfere with the proceedings dropped against high sea sellers due to their non-involvement in the appeal. The seized stainless steel coils/sheets were deemed liable for confiscation. The matter was remanded for considering redemption of the confiscated goods. Ultimately, the appeal was allowed in part, confirming the demand against M/s.Karware Impex Pvt. Ltd. and upholding the confiscation of the seized goods.