2013 (10) TMI 1004 - AT - Customs

100% EOU - violation of conditions - Suspension of license - Import of fabrics under duty free licence for 100% EOU - The appellant has imported duty free polyester fabric and disposed it off in the open market. Notice No. 1 exported Ready made garments procured from the open market without undertaking any manufacturing activity in the factory. - Duty demand - Liability u/s 112 of Customs Act - Held that - The seized polyester dyed embossed fabrics has been found to be actually knitted fabrics classifiable under Chapter 60 of CTA as is evident from the test report and the said fabrics do not correspond to the material imported i.e. polyester fabrics 58/60 and 100% polyester dyed fabrics 58/60 of chapter 54 of Customs B 601007 dated 15.01.2002 filed by Noticee-1 under Section 46 of the said Act and claimed to have been sent to Noticee-2 by Noticee-1 under ARE-3 No.1&2, both dated 11.6.2002, therefore, the seized fabric held is held liable to confiscation under Section 113 (i) of the said Act. It is further held that the seized fabrics, are also liable to confiscation under Section 113 (d) of the said Act as the same were attempted to be exported through another EOU contrary to the provisions under said Act and the Notification No. 53/97-Customs dated 3.6.1997, as amended, I hold that the Customs duty of ₹ 24,37,818/- on the imported polyester fabrics measuring 52829.92 meters and valued at ₹ 22,45,759/- vide Bill of Entry No. 539120 dated 22.01.2002 and IMP-B-B-601007 dated 15.02.2002, so diverted in the local market, and not utilized for intended purpose is recoverable from Notiee-1 under proviso to Section 28(1) of the said Act read with Notification No. 53/97-Cus dated 3.6.1997, as amended Noticee-1 is also hold liable to penal action under Section 114 as well as under Section 112 of the Said Act. The license granted to noticee-1 under Section 58(1) of the said act is also held liable to be cancelled under Section 58(2) of the said Act for contravention of the provisions of the said Act. Commissioner (Appeals) has rightly held that Shri Karamveer Singh, Proprietor M/s Singh Overseas is liable for action under section 112 of Customs Act, 1962 for the contraventions of the provisions of Customs Act, 1962. Accordingly the demand of Customs duty of ₹ 24,37,818/- on polyester fabric imported duty free and diverted in open market and not utilized for intended purpose is upheld by us for no rebuttal to appellate findings. Interest on duty amount of ₹ 24,37,818 is also confirmed - Imposition of penalty of ₹ 25 lakhs on Shri Karamveer Singh, Proprietor does not appear to be unreasonable. Therefore the appellant does not deserve any leniency who has also committed fraud against Revenue by his ill design - Decided against assessee.

Issues Involved:
1. Misuse of 100% EOU Scheme.
2. Suspension and cancellation of Private Bonded Warehouse License.
3. Import and disposal of duty-free polyester fabric.
4. Non-compliance with customs procedures.
5. Seizure and classification of imported goods.
6. Imposition of penalties and recovery of customs duty.

Issue-wise Detailed Analysis:

1. Misuse of 100% EOU Scheme:
The appellant, holding a Private Bonded Warehouse License, was found to have misused the 100% EOU Scheme by importing duty-free polyester fabric and disposing of it in the open market rather than using it for manufacturing export goods. This was admitted by the proprietor in his statements dated 11.2.2002 and 12.2.2002, corroborated by the lack of manufacturing activity and necessary materials in the unit during the officers' visit.

2. Suspension and Cancellation of Private Bonded Warehouse License:
The appellant's Private Bonded Warehouse License was suspended on 21.5.2002 after the misuse was detected. Despite the suspension, the appellant continued to receive and clear imported fabrics without proper authorization, leading to a proposal for the cancellation of the license under Section 58(2) of the Customs Act.

3. Import and Disposal of Duty-Free Polyester Fabric:
The appellant imported 52829.92 meters of polyester dyed fabrics without payment of customs duty under Notification No. 53/97-Customs. These fabrics were removed without examination and clearance by the proper officer, and without issuance of a re-warehousing certificate, in violation of Sections 60, 62, 67, 71, and 72 of the Customs Act.

4. Non-Compliance with Customs Procedures:
The appellant failed to intimate the receipt of goods, get them examined, and warehouse them as required. Instead, the imported fabrics were transferred without permission, violating the conditions of the notification and customs provisions. This non-compliance indicated a clear intention to evade customs duty.

5. Seizure and Classification of Imported Goods:
The imported fabrics were seized and found to be misdeclared as 'polyester dyed fabrics' when they were actually 'knitted fabrics' as per the test report from the Chemical Examiner. This misdeclaration and subsequent seizure under Section 110 of the Customs Act led to the goods being classified under Chapter 60 of the Customs Tariff Act.

6. Imposition of Penalties and Recovery of Customs Duty:
The Commissioner (Appeals) confirmed the imposition of a customs duty demand of Rs. 24,37,818/- on the diverted fabrics, along with interest. A penalty of Rs. 25 lakhs was imposed on the proprietor under Sections 112 and 114 of the Customs Act for fraud and contravention of customs provisions. The judgment upheld these penalties and the cancellation of the warehouse license.

Conclusion:
The Tribunal upheld the findings and penalties imposed by the Commissioner (Appeals), confirming the misuse of the 100% EOU Scheme, non-compliance with customs procedures, and the imposition of penalties and recovery of customs duty. The judgment emphasized the appellant's fraudulent actions and the resultant financial implications for the Revenue.

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