2019 (12) TMI 952 - AT - Customs

Levy of penalty - confiscation of goods - mis-declaration of imported goods - SEZ unit - It is contended that there is no duty involved as the goods were imported into SEZ and there was no restriction for import of such goods and therefore, there could not have been any intention to evade any duty. - For the purpose of said manufacturing, they are entitled to import various fabrics without payment of duty. The allegation of Revenue is that while the appellant had declared that the goods imported by them are falling under Chapter heading 5407 but some of the goods were woven fabric falling under Chapter heading 6001. HELD THAT - While making these imports the appellant would not have gained any monetary benefit as no duty is involved. We also find that appellant have not contested confiscation of the goods and abandoned the goods. In these circumstances, penalty of ₹ 3 Lakh imposed on M/s. Awin Exim Company under Section 112 of Customs Act, 1962 is excessive and the same is reduced to ₹ 1,50,000/-. Penalty is imposed on the M/s. Awin Exim Company - penalty has also been imposed on its partner Shri Satish Choudhary - HELD THAT - When penalty is imposed on partnership firm, penalty cannot be imposed on its partner - penalty imposed on Shri Satish Choudhary is set-aside. It is noticed that penalty of ₹ 2 Lakh has been imposed on Shri Subhash Choudhary, Power of Attorney holder under Section 112 of the Customs Act, 1962. Shri Subhash Choudhary has not appeared to answer the summons and his role is relatively limited and keeping in view the fact that Shri Subhash Choudhary would not have gained any monetary benefits, the penalty of ₹ 2 Lakh is excessive and the same is reduced to ₹ 1,00,000/-. Appeal allowed in part.

Summary

Issues:
Appeal against change of classification, confiscation of goods, and imposition of penalties.

Analysis:
The appeals were filed against the change of classification, confiscation of goods, and imposition of penalties by M/s. Awin Exim Company, its partner, and the Power of Attorney holder. The appellant's unit in the Special Economic Zone (SEZ) was engaged in the manufacture of Made-ups and Readymade garments. The goods imported were declared as "Shirting/ Dress Material & Pens" under different classifications. The officers found discrepancies in the imported goods during visits to the factory premises and subsequent testing. The appellant was alleged to have imported dyed knitted fabrics made wholly of polyester filament yarn and woven fabrics. Samples were seized, and statements were recorded from individuals involved in the import activities.

The appellant argued that as the goods were imported into the SEZ, where no duty was involved, there was no intention to evade duty. They decided to give up their claim on the confiscated goods. The appellant contended that penalties should be set aside due to the absence of duty implications. The Counsel also referenced a decision by the Hon'ble Gujarat High Court regarding penalties imposed on partners of a company.

Upon review, the Tribunal noted that the appellant was entitled to import fabrics without duty payment for manufacturing garments in the SEZ. The penalty imposed on M/s. Awin Exim Company was deemed excessive and reduced. The Tribunal found that the penalty on the partner, Shri Satish Choudhary, could not be upheld based on the Gujarat High Court decision. The penalty on the Power of Attorney holder, Shri Subhash Choudhary, was also reduced considering his limited role and lack of monetary gain. Consequently, the appeal of Shri Satish Choudhary was allowed, while the appeals of M/s. Awin Exim Company and Shri Subhash Choudhary were partly allowed.

In conclusion, the Tribunal addressed the issues of classification, confiscation, and penalties in the context of import activities in the SEZ, determining the appropriate penalties and setting aside some penalties based on legal precedents and individual roles in the import process.