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2018 (6) TMI 945 - AT - CustomsMisappropriation of duty free goods - Job-work - The appellants have argued that they are victim of a fraud by the job worker who misappropriated the goods and sold the same. Thus it cannot be alleged that the appellants have indulged in any fraud - Held that - There is nothing in the statement of Shri Balkrishna Trivedi, who was the excise clerk of the job worker, which indicates the role of the appellant or its employees. In fact the statement of Shri Kuber Dutt Sharma, General Manager (Commercial) of appellant there is no admission regarding making of fake challan to show receipt of the goods back in their unit - The appellant have not involved themselves in sale or diversion of goods. In fact they have themselves been a victim of a fraud. In these circumstances, the allegation of suppression, misdeclaration etc. to invoke extended period of limitation cannot be sustained - the penal provision under Section 114A cannot be sustained. Interest u/s 28AB of CA - Held that - The bond in the said notification relates only to the fulfilment of the export obligation condition. The obligation arising in the Act cannot be by passed by notification thus the appellants are liable to pay interest under Section 28AB. Appeal allowed in part.
Issues involved:
1. Imposition of penalty and demand of interest on imported goods misappropriated by job worker. 2. Applicability of penalty under Sections 112 and 114(a) of the Customs Act. 3. Confiscation of goods and imposition of penalty. 4. Applicability of interest under Section 28AB. Analysis: 1. Imposition of Penalty and Demand of Interest: The appellants imported raw material under advance license, fulfilling export obligations. The job worker, facing financial issues, sold the goods in the market instead of returning them. The appellants, upon discovering this, informed the revenue and paid the duty on the misappropriated goods. The tribunal noted that the appellants were victims of fraud by the job worker and had not engaged in any fraudulent activities. The revenue relied on statements suggesting the appellants' involvement in a cover-up operation, but the tribunal found no merit in these allegations. As the appellants promptly disclosed the incident and did not engage in the sale or diversion of goods, the tribunal held that penalties and interest demands were not justified. 2. Applicability of Penalties under Sections 112 and 114(a): The tribunal rejected the revenue's claims of suppression, misdeclaration, or fraud by the appellants. Despite statements indicating cover-up operations, there was no evidence implicating the appellants or their employees in fraudulent activities. As the appellants declared the incident to the revenue themselves and were victims of fraud, the tribunal found no basis for invoking penalties under Sections 112 and 114(a) of the Customs Act. 3. Confiscation of Goods and Imposition of Penalty: The tribunal observed that there was no proposal for confiscation of goods in the show-cause notice, and no findings supported such an action. As a result, the tribunal concluded that penalties under Section 112 of the Customs Act could not be imposed. While penalties under Section 114(a) could be imposed for willful misstatement or suppression of facts, the tribunal found no evidence to support such allegations against the appellants. 4. Applicability of Interest under Section 28AB: The appellants argued that interest under Section 28AB was not applicable as the notification itself provided a comprehensive code, requiring a bond only in case of failure to fulfill export obligations. The tribunal disagreed, stating that the bond in the notification pertained solely to export obligations and did not exempt the appellants from liability to pay interest under Section 28AB. Consequently, the tribunal partially allowed the appeal, holding the appellants liable to pay interest under Section 28AB. In conclusion, the tribunal found in favor of the appellants, dismissing the allegations of fraud, suppression, and misdeclaration. The penalties and interest demands were deemed unjustified, except for the liability to pay interest under Section 28AB.
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