2007 (2) TMI 165 - AT - Customs

Assessee fraudulently obtained transferability endorsements from the licensing authority, for transfer of Advance license For this violation assessee cannot be penalized, however Customs officer could have preferred appeal to the appellate authority u/s 18 of the FTDR Act - Where the action proposed u/s 111 stands dropped by commissioner, there is no question of invoking Section 112 for imposing penalty Moreover there is no confiscation because subject goods were not imported by assessee

Summary

Issues:
1. Violation of Condition No. (vi) of Notification No. 204/92-Cus.
2. Liability of penalization for breach of conditions.
3. Imposition of penalty under Section 112 of the Customs Act.

Issue 1: Violation of Condition No. (vi) of Notification No. 204/92-Cus.
The case involved M/s. Akshatt Forge holding Quantity-Based Advance Licences (QBALs) which were later sold to M/s. Kunal Engineering Co. Ltd. Investigations revealed that the respondents had availed Modvat credit on inputs used in products exported under the QBALs, violating Condition No. (vi) of Notification No. 204/92-Cus. The issue was whether the respondents were liable for breaching this condition, affecting the transferability of the licences.

Issue 2: Liability of penalization for breach of conditions
The department sought to penalize the respondents under Section 112 of the Customs Act for obtaining transferability endorsements without disclosing Modvat credit availed on export goods. The argument was that the respondents' actions rendered the imported goods liable for confiscation under Section 111(o) of the Act, justifying penal provisions. The question was whether the respondents could be penalized for this breach.

Issue 3: Imposition of penalty under Section 112 of the Customs Act
The proposal to impose penalties under Section 112 on the respondents was questioned. The penalty under this section depends on the liability of imported goods for confiscation under Section 111. However, the duty demand on goods imported by M/s. Kunal was dropped, and penal liability under Section 112 hinges on confiscability of goods imported by the person. Since the goods were not imported by the respondents and proceedings against M/s. Kunal were dropped, the plea for imposing penalties on the respondents under Section 112 was deemed untenable.

In conclusion, the Appellate Tribunal upheld the Commissioner's decision to drop proceedings against the respondents, stating that the Customs authorities were not entitled to penalize the respondents for obtaining transferability endorsements. The proposal to impose penalties under Section 112 was rejected, as the penal liability depended on the confiscability of goods imported by the person, which did not apply to the respondents in this case. The appeal was dismissed, sustaining the impugned order.