2019 (6) TMI 1033 - AT - Customs

Imposition of penalties u/s 112(a) as also under Section 114AA of the Customs Act - advance license for duty free import of the raw materials i.e. Remelted Lead Ingots - the revenue s allegations and findings are to the effect that entire imported lead ingots, which were meant for utilization in the manufacture of lead alloys at the appellants factory located at Kathua, stand diverted by them in the local market - HELD THAT - Such findings are primarily based upon the statement of one Shri Ved Nath Tripathi of M/s Grape Marketing Pvt. Ltd. Even that statement is not specific but a general statement of clearance of the lead alloys ingots from the godown of M/s Grape Marketing Pvt. Ltd. The said deponent was neither examined by the adjudicating authority nor by the appellant during the course of adjudication and as such the reliance on the said sole statement of Shri Ved Nath Tripathi is neither justified nor warranted. Revenue has not been able to bring on record any other evidence to establish its case. On the contrary, the goods were transported from ICD, Loni to New Delhi and from New Delhi to Kathua under the cover of proper documents issued by the transporters. Revenue has not bothered to investigate the transporters and record the statements of their representative so as to establish beyond doubt that the GRs issued by them were not proper and were fake - the appellant had produced on record the toll receipts issued by to toll check post located at Lakhnpura, thus indicating and establishing beyond doubt that the goods passed through the said check post. The Original Adjudicating Authority has neither referred to nor discussed the said plea of the assessee. The revenue is not disputing the fact that the appellant had exported 103.76 MT of lead alloys. Admittedly, the lead alloys can be manufactured by using the raw material. If the said imported lead ingots have not reached the appellant s factory at Kathua as alleged by revenue, we fail to understand as to how the appellant could have manufactured and exported the said quantity of lead alloys. Admittedly, lead alloys cannot be manufactured from Vacuum and the revenue has not even alleged that they have procured the lead ingots from the other source. In the absence of any evidence to show alternate source of procurement of lead ingots and in the absence of any dispute of export of the final product lead alloys, the revenues case is on weak legs and cannot be sustained. Inasmuch as, the appellant has accepted their liability in respect of that quantum of imported lead ingots which could not been utilized by them for export of the goods and had already discharged duty liability to the tune of ₹ 40 lakhs approximately, we are of the view that the balance confirmation of demand would not sustain - Appeal allowed in part.

Issues:
1. Confirmation of duty of Customs against M/s Bharat Udyog
2. Imposition of penalties under various sections of the Customs Act
3. Allegation of diversion of imported goods in the local market
4. Reliance on statement of witness without examination
5. Lack of evidence by the revenue to establish the case
6. Discrepancies in the revenue's allegations and findings

Confirmation of duty of Customs against M/s Bharat Udyog:
The appeals arose from an Order-in-Original confirming duty of Customs against M/s Bharat Udyog. The duty was confirmed to the extent of ?60,97,885 along with penalties under Sections 114A, 112(a), and 114AA of the Customs Act. The appellants were partners of M/s Bharat Udyog or M/s Grape Marketing Pvt. Ltd., involved in the import of goods on high sea sale basis. The dispute related to the import of Remelted Lead Ingots procured under an advance authorization scheme for manufacturing lead alloys in J & K. The appellants filed Bills of Entries for clearance of goods, which were then transported to Kathua for manufacturing final products meant for export.

Imposition of penalties under various sections of the Customs Act:
Penalties were imposed on the appellants under Sections 114A, 112(a), and 114AA of the Customs Act. The revenue alleged diversion of the entire consignment of imported goods in the local market, leading to the demand for payment of forgone customs duty. Investigations were initiated, culminating in the impugned order confirming the demand and imposing penalties. The Original Adjudicating Authority relied on a statement by a witness from M/s Grape Marketing Pvt. Ltd. to support the allegations.

Allegation of diversion of imported goods in the local market:
The revenue alleged that the imported goods meant for manufacturing lead alloys at the appellants' factory were diverted in the local market. The allegations were primarily based on the witness statement, which lacked specificity and was not substantiated by further evidence. The revenue failed to establish the diversion conclusively, as the goods were transported with proper documentation, including toll receipts, and the exported lead alloys were not disputed.

Reliance on statement of witness without examination:
The revenue's case heavily relied on the statement of a witness, Shri Ved Nath Tripathi, without examining him during adjudication. The statement lacked specific details and was not corroborated by additional evidence. The Tribunal found the reliance on the sole statement unjustified and unwarranted, highlighting the lack of thorough investigation by the revenue.

Lack of evidence by the revenue to establish the case:
Apart from the witness statement, the revenue failed to provide substantial evidence to support its allegations of diversion of imported goods. The Tribunal noted discrepancies in the revenue's findings and highlighted the lack of investigation into crucial aspects, such as the transportation process and the authenticity of documents issued by transporters.

Discrepancies in the revenue's allegations and findings:
The revenue's allegations of diversion of goods and non-utilization for export purposes were contradicted by the appellants' production of toll receipts and export records. The Tribunal found the revenue's case weak, lacking evidence of alternate procurement sources or concrete proof of diversion in the local market. The impugned order confirming the duty demand and penalties was deemed unsustainable, except for the admitted liability by M/s Bharat Udyog.

In conclusion, the Tribunal set aside the penalties imposed on all appellants, except for the admitted liability by M/s Bharat Udyog, highlighting the lack of substantial evidence and weak grounds for confirming the duty demand.

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