2000 (4) TMI 138 - AT - Customs

Summary

Issues Involved:
1. Diversion of imported materials.
2. Eligibility for exemption from customs duty under Notification Nos. 203/92-Cus. and 204/92-Cus.
3. Alleged violation of the conditions of Notification Nos. 203/92 and 204/92.
4. Imposition of penalty under Section 112 of the Customs Act, 1962.
5. Time-barred issuance of the show cause notice under Section 28(1) of the Customs Act.
6. Recovery of interest at 24%.

Detailed Analysis:

1. Diversion of Imported Materials:
- The appellants were accused of diverting the imported hot rolled carbon steel coils and zinc, which were meant for the manufacture of galvanized pipes and tubes for export. However, the appellants contended that there was no factual basis for this allegation since the goods had already been exported, and no evidence was found in the statutory records to prove that the imported materials were diverted or disposed of in contravention of the conditions governing advance licenses.

2. Eligibility for Exemption from Customs Duty:
- The Commissioner of Customs concluded that the imported materials were not of the kind and quality commercially required for the exported products, thus not eligible for exemption under Notification Nos. 203/92 and 204/92. The appellants argued that the imported materials conformed to the description in the Duty Exemption Entitlement Certificate (DEEC) and were cleared by the Proper Officer of Customs. They contended that there was no mis-declaration or suppression of facts, and the imported materials were indeed used in the manufacture of the exported products.

3. Alleged Violation of Conditions of Notification Nos. 203/92 and 204/92:
- The Department alleged that the appellants violated the conditions of the notifications by not using the imported materials in the manufacture of the exported products. The appellants countered that the imported materials were suitable for their manufacturing process, and there was no evidence to prove otherwise. The Tribunal found that the Department did not provide sufficient evidence to establish that the materials used were different from those imported, thus the alleged violation of conditions was not proven.

4. Imposition of Penalty under Section 112 of the Customs Act, 1962:
- The penalty was imposed on the grounds of violating the conditions of Notification Nos. 203/92 and 204/92. The appellants argued that there was no specific condition mentioned in the impugned order that had been violated, and the penalty could not be sustained in the absence of proven contraventions. The Tribunal agreed, noting that the contraventions were not established, and thus, the penalty was not maintainable.

5. Time-barred Issuance of the Show Cause Notice under Section 28(1) of the Customs Act:
- The appellants contended that the show cause notice issued on 20-11-98 for materials cleared on 9-1-95 was time-barred as no suppression or mis-declaration was established. The Tribunal noted that the show cause notice was indeed issued beyond the permissible period and was thus barred by limitation.

6. Recovery of Interest at 24%:
- The Commissioner ordered the recovery of interest at 24%, which was not proposed in the show cause notice. The Tribunal found that since the duty demand itself was not maintainable, the recovery of interest could not be sustained either.

Conclusion:
- The Tribunal concluded that the Department did not provide sufficient evidence to prove that the imported materials were not used in the manufacture of the exported products. The allegations of mis-declaration and suppression of facts were not substantiated. Consequently, the duty demand, interest recovery, and penalty imposition were set aside. The appeal was allowed, and the impugned order was annulled with consequential benefits to the appellants.