2009 (8) TMI 281 - AT - Customs

Clearances by one EOU to another Setting up fake consignee units - Procurement of forged CT-3 and re-warehousing certificates Diversion of goods to local market - Appellant plea is that in case of clearance of goods against CT-3 certificates and re-warehousing certificates having been found forged, duty liability cannot be fastened against the consignor and the same is to be recovered from the consignee, who produced the forged re-warehousing certificates Fact that consignee unit was only on paper and created by consigner for diversion of goods, established by statements of Directors of consigner, broker and truck owners who transported the goods - In the instant case, we find that the goods were, in fact, never delivered to M/s. DDTC (consignee). The diversion of the same in the local market was also by M/s. Sunstar Impex (consigner). The arrangement of procuring CT-3 certificates and subsequent forged re-warehousing certificate was also at the behest of M/s. Sunstar Impex. As already observed, DDTC was only a paper entry and did not exist in reality. M/s. Sunstar Impex knew that the consignee was a fake entity. As such, at this stage, they cannot shift their duty liability to M/s. DDTC (consignee). Duty stands rightly confirmed against consigner by the impugned order of Commissioner. Exemption cannot be granted in terms of Notification No. 137/00-Cus. Admittedly directors of M/s. Sunstar Impex, were actively involved in the day to day functioning of the trading unit and they were actively conniving with other for setting up fake consignee units and in diversion of duty free goods to local market, they are liable to penalty. Their appeals are also rejected.

Issues:
1. Duty liability on M/s. Sunstar Impex Pvt. Ltd.
2. Imposition of penalties on directors of M/s. Sunstar Impex.
3. Application of Tribunal's decisions in similar cases.
4. Validity of re-warehousing certificates.
5. Liability of consignor in case of diversion of goods.
6. Existence of M/s. DDTC as a recipient unit.
7. Confirmation of duty and penalties by the Commissioner.

Analysis:
1. The case involves the confirmation of duty against M/s. Sunstar Impex Pvt. Ltd. for importing goods without payment of duty. The investigation revealed that the goods were diverted to the local market instead of reaching the intended recipient, M/s. DDTC. The Tribunal rejected the argument that duty liability should shift to DDTC, emphasizing that the evidence showed the diversion was orchestrated by M/s. Sunstar Impex.

2. Penalties were imposed on the directors of M/s. Sunstar Impex for their active involvement in setting up DDTC to falsely show it as the recipient of the goods. The Tribunal upheld the penalties, stating that the directors were liable due to their connivance in the diversion of goods.

3. The Tribunal considered the applicability of previous decisions where duty liability was shifted to the consignee in cases of diversion. However, in this instance, as the goods were never delivered to DDTC and the diversion was orchestrated by M/s. Sunstar Impex, the Tribunal held that the duty liability rightfully rested with the importer.

4. The validity of re-warehousing certificates was crucial in determining duty liability. The investigation revealed that the certificates were forged, indicating a deliberate attempt to evade duty payment. The Tribunal found no infirmity in the Commissioner's decision to confirm the duty and penalties based on this evidence.

5. The Tribunal clarified that in cases where goods are diverted by the consignee after delivery against valid certificates, the consignor may not be held liable. However, in this case, where the consignee was a fake entity and the diversion was orchestrated by the importer, the duty liability could not be shifted.

6. The existence of M/s. DDTC as a recipient unit was questioned, with evidence suggesting it was a paper entity created to facilitate the diversion of goods. Statements from various individuals involved confirmed that DDTC was not a genuine recipient, further solidifying the Tribunal's decision to uphold duty liability on M/s. Sunstar Impex.

7. The Commissioner's decision to confirm duty and penalties against M/s. Sunstar Impex and its directors was upheld by the Tribunal, citing overwhelming evidence of diversion and forgery. The appeals were rejected, and the duty liability was maintained.

In conclusion, the Tribunal upheld the duty liability on M/s. Sunstar Impex and the penalties on its directors due to their involvement in orchestrating the diversion of goods. The decision was based on the evidence of forged certificates, the non-existence of the intended recipient, and the active role of the appellants in the fraudulent scheme.

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