2006 (6) TMI 132 - HC - Customs

Summary

Issues involved:
Violation of conditions under Customs Act regarding imported goods diversion and imposition of penalty under Section 112(b) - Mens rea, knowledge of confiscability, and liability of indenting agent.

Analysis:

Issue 1: Violation of conditions under Customs Act regarding imported goods diversion
The case involved an appeal against the dismissal of appeals by the Customs, Excise and Service Tax Appellate Tribunal, Chennai, regarding the penalty imposed under Section 112(b) of the Customs Act. The appellant, an indenting agent of various exporting firms, diverted imported goods (polyester lining fabrics) to the local market after availing duty concession under a specific notification. The conditions for availing the duty concession included using the goods only for manufacturing textile garments for export, as certified by the AEPC. The appellant admitted to diverting the goods in violation of these conditions. The Commissioner of Customs imposed penalties on the appellant for each transaction. The Tribunal upheld these penalties, leading to the current appeal.

Issue 2: Mens rea, knowledge of confiscability, and liability of indenting agent
The appellant raised substantial questions of law regarding the imposition of penalties under Section 112(b) of the Customs Act. The questions raised were whether the appellant's involvement needed to be conscious or knowing, whether mens rea was required for penalty imposition, and whether a penalty could be imposed on a person other than the importer without knowledge of the goods' confiscability. The court referred to Section 112 of the Act, emphasizing that liability arises if a person is concerned with goods they know or have reason to believe are liable to confiscation. The court found that the appellant, by diverting the goods in violation of the notification conditions, had the requisite knowledge of confiscability. The court held that the appellant's actions were conscious and knowing, justifying the penalty under Section 112(b) of the Act. As the appellant contravened statutory conditions and admitted to the violations, the court dismissed the appeals, concluding that no substantial question of law arose for consideration.

In conclusion, the court upheld the penalties imposed on the appellant for diverting imported goods in contravention of statutory conditions, emphasizing the appellant's knowledge of confiscability and conscious involvement in the diversion. The judgment highlights the importance of complying with statutory requirements for availing duty concessions and the liability of agents involved in such violations under the Customs Act.