2015 (10) TMI 1720 - AT - Customs

Duty free goods diverted to local market Imposition of penalty Importer imported Polyester fabrics without payment of duty, for manufacturing finished goods to be exported During investigation, it was found that importer diverted duty free imported material in local market Show cause notice was issued to importer and Appellant By impugned order, adjudicating authority confirmed demand of Customs duty alongwith interest and imposed penalty of equal amount of duty on importer and Appellant Held that - Appellant-1 was main architect of fraud for diversion of duty free goods in local market He has admitted in various statements that he had involved in diversion and delivery of duty free materials to buyers as well as procurements these goods from Dubai based suppliers Appellant-2(broker) accepted that he had arranged sale of duty free material to buyers without any bills or invoices He may get sum of as commission and therefore, quantum of penalty upon him is excessive Regarding imposition of penalty on buyers for purchase of duty free goods from importer illegally without any bills and invoices and payment made in cash, it is clearly evident that buyers had knowledge that goods were not duty paid and imposition of penalty is warranted Therefore, imposition of penalty on appellant-1 confirmed while penalty on other appellants are reduced Appeal disposed of.

Summary

Issues:
1. Duty-free imported material diversion in the local market.
2. Confirmation of demand of Customs duty, interest, and penalties.
3. Imposition of penalties on various individuals involved.
4. Knowledge and involvement of different parties in the illegal activities.

Analysis:

1. The case involved the diversion of duty-free imported Polyester fabrics by an importer for manufacturing finished goods to be exported, but it was found that the materials were diverted in the local market. A show cause notice was issued to the importer and others involved in the illegal diversion.

2. The adjudicating authority confirmed the demand of Customs duty along with interest and imposed penalties. The penalties included an amount equal to the duty on the importer, a significant penalty on the main beneficiary, and penalties on other individuals involved in the scheme.

3. The main architect of the fraud, identified as Shri Ashwin Agarwal, was found to be the main beneficiary of the illegal diversion. Penalties were imposed on him and other individuals involved, including a broker and buyers who purchased duty-free goods without proper documentation.

4. The involvement and knowledge of different parties were crucial in determining the penalties. While the broker claimed innocence and lack of knowledge about the diversion, the buyers were deemed to have knowledge of the illegal activities due to the nature of their purchases without proper documentation.

5. The Tribunal upheld the imposition of penalties on the main beneficiary but reduced the penalties on other appellants. The penalties on the buyers were deemed justified due to their knowledge of purchasing duty-free goods without proper documentation, while the penalties on other appellants were reduced.

In conclusion, the judgment addressed the illegal diversion of duty-free imported materials in the local market, confirmed the demand of Customs duty, interest, and penalties, and analyzed the knowledge and involvement of various individuals in the scheme, resulting in upheld or reduced penalties based on the parties' roles and actions.