2017 (10) TMI 1199 - AT - Customs

Violation of import conditions - demand on the ground that the steel slabs under Target Plus licences were diverted in the open market by the Appellant and were not used for the intended purposes i.e. further manufacturing - Held that - even though allegation of diversion of goods has been made against the Appellant but no investigation has been made as to where the goods were cleared or who are the buyers. None of the evidence which can show the diversion of goods has been brought on record. Though the non maintenance of job work record and transfer of payment made by Appellant to M/s AEL back to M/s MIL has been alleged but the charges of diversion of goods cannot be substantiated on this ground alone. At the one hand the allegation is made that the licence was sold by the Appellant and on the other hand it has been alleged that the goods were diverted which shows that the allegations against Appellant are themselves contradictory. No evidence has been adduced as to how the alleged diversion of imported goods took place and how the consideration for such alleged diversion was received - in absence of any evidence of diversion of imported goods or dispute regarding the identity of finished goods manufactured from such imported goods the demand against the Appellant cannot be sustained. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Alleged non-utilization of imported goods for specified purposes under the Target Plus Scheme (TPS).
2. Alleged falsification of accounts and financial transactions.
3. Alleged unauthorized sale and diversion of imported goods.
4. Non-production of job work records and supporting documents.
5. Reasonableness of job work charges.

Issue-wise Detailed Analysis:

1. Alleged non-utilization of imported goods for specified purposes under the TPS:
The Appellant, an export house, imported steel slabs under TPS Licence from M/s Amulya Exports Ltd. (M/s AEL) without payment of duty. These goods were sent to M/s Metalman Industries (M/s MIL) for job work to manufacture steel plates. The central issue was whether the imported goods were used for the intended purpose as per the TPS Licence. The Appellant provided evidence of job work, including correspondence and requests for endorsement of M/s MIL as a job worker. The Tribunal found that the goods were indeed used for the intended purpose, as the job work and subsequent sale of finished goods were documented and not disputed by the Revenue.

2. Alleged falsification of accounts and financial transactions:
The Show Cause Notice (SCN) alleged that the Appellant, in connivance with M/s AEL and M/s MIL, falsified accounts to show compliance with the TPS Licence conditions. The Tribunal noted that the financial transactions were recorded in the books of accounts of the parties involved and no evidence of diversion of funds was provided. The Tribunal found that the manner of payment and financial transactions could not substantiate the charges of falsification.

3. Alleged unauthorized sale and diversion of imported goods:
The SCN claimed that the imported goods were sold in the open market without fulfilling the TPS Licence conditions. The Tribunal found no evidence of such diversion or unauthorized sale. The Appellant had provided detailed records of the sale of finished goods by M/s MIL, which were not disputed by the Revenue. Additionally, the transportation of goods from M/s AEL to M/s MIL and the subsequent clearance of finished goods were documented and not challenged by the authorities.

4. Non-production of job work records and supporting documents:
The Revenue argued that the Appellant failed to produce job work records and supporting documents, such as contracts and challans. The Tribunal noted that the Appellant had submitted relevant correspondence and records during the investigation. The Tribunal also highlighted that the requirement for endorsement of the job worker's name on the licence came into effect after the importation of goods, and thus, could not be applied retroactively. The Tribunal found that the non-production of certain records did not prove the alleged diversion of goods.

5. Reasonableness of job work charges:
The Revenue contended that the job work charges of ?9,700/- per MT were unreasonable compared to the purchase price of ?16,669/- per MT. The Tribunal found that the job work charges alone could not substantiate the allegations of diversion or unauthorized sale. The Appellant continued its business practices, indicating that the job work charges were commercially viable. The Tribunal concluded that the reasonableness of job work charges was not a valid ground for demanding duty or alleging diversion of goods.

Conclusion:
The Tribunal found that the Appellant had complied with the conditions of the TPS Licence and there was no evidence of diversion or unauthorized sale of imported goods. The financial transactions and job work charges were not sufficient grounds to substantiate the allegations. The Tribunal set aside the impugned order and allowed the appeal in favor of the Appellant. The judgment emphasized the importance of concrete evidence in substantiating allegations of non-compliance and diversion of goods under the TPS Licence.