2019 (7) TMI 399 - AT - Customs

DEEC Scheme - violation of post import condition - import in excess of requirement against SION norms - diversion of goods to sister concerns in the name of Job-Work - imports of Hexachloroethane under DEEC Licenses - Department alleges that the Appellants have misrepresented the facts of input out ratio to the authorities of DGFT; thus they have imported HCE in excess of their requirements and also they have violated the condition of Customs Notification 30/97 dated 01.04.1997 - time limitation - penalty. HELD THAT - Learned Adjudicating Authority has given a clear finding that there was no records maintained at the factory premises of M/s. SCI for receipt of imported PCE. From the RG 23A Part I maintained by the importer, it is seen that no entry of PCE as raw material has been made through 3 consignment of PCE purchased locally were entered. Therefore, the claim of the Appellants that they have merely sent the goods for Job Work to M/s. SCF do not stand scrutiny - the investigation has successfully established that goods cleared to M/s. SCF by the Appellants have not returned back. The Appellants have taken the plea that M/s. SCF have themselves imported / locally procured PCE and sold to others and therefore the allegation that the sale of PCE, imported by the Appellants, by M/s. SCF is not proved. The investigation has successfully demonstrated that the goods even if they were supposed to have been sent to M/s. SCF on job work basis have never back to the Appellants for further use and export in their factory. In the result one has to hold that such goods have been diverted in to the local market in contravention of the Exim Policy and the Customs Notification. Violation of conditions of the notification or not? - HELD THAT - The conditions of Notification have to be read very strictly. It is found that in spite of the claim of fulfilling the export obligation and discharge of bond by DGFT and Customs authorities, the liability of the appellants to pay duty in the event of violation of Customs Notification lies with him as held by the commissioner and the case law cited by him supports this contention - Condition No (vii) to the Notification No 30/97 dated 01-04-1997 stipulates that Exempt materials shall not be disposed of or utilized in any manner except for utilization in discharge of export obligation or for replenishment of such materials and the materials so replenished shall not be sold or transferred to any other person. The condition of the Notification is violated. In view of the clear wordings of the notification, no liberal reading in to the conditions on the basis of substantial compliance is required - Having violated the conditions of the notification the importer has rendered himself liable to pay applicable duty in terms of the Notification. Time Limitation - HELD THAT - It is not the case of the appellants that the fact of diversion, of goods imported duty free under Advance License, was in the knowledge of the department. Revenue was not made aware of the acts of omission and commission of the Appellants - Learned Commissioner has correctly found that the SCN is not hit by limitation and that duty has been correctly demanded and penalty under Section 114A was rightly imposed. Penalty - HELD THAT - The goods were imported by the appellants and the appellants are liable to pay duty in case of any violation - partner of the appellants is also the authorised signatory of M/s SCF. Equal Penalty under Section 114A has been imposed on the appellants and we have upheld the same - the penalty imposed on M/s SCF appears to be higher side. The penalty on M/s SCF reduced to Rupees one Lakh only from Rs Six Lakhs. Interest on penalty under Section 114A - HELD THAT - The interest payable on the duty demanded does not require to be taken into consideration for arriving at the amount of penalty payable under Section 114A. Appeal allowed in part.

Issues Involved:
1. Jurisdiction of DRI to issue SCN.
2. Legality of job work under DEEC Scheme for fulfilling export obligation.
3. Transfer of ownership/title of goods and breach of Custom Notification 30/97.
4. Limitation period for demand when the department had knowledge of job work.
5. Validity of demand on technical grounds after dropping the main allegation.
6. Adherence to higher judicial precedents by the Adjudicating Authority.

Issue-wise Detailed Analysis:

1. Jurisdiction of DRI to issue SCN:
The appellant questioned the jurisdiction of the Directorate of Revenue Intelligence (DRI) to issue the Show Cause Notice (SCN). The judgment referenced the Delhi High Court's decision in Mangali Impex Ltd., which deals with the jurisdictional authority of DRI to issue SCNs. However, this specific issue was not elaborated further in the judgment.

2. Legality of job work under DEEC Scheme for fulfilling export obligation:
The appellant argued that job work is permissible under the DEEC Scheme and that sending goods for job work does not amount to a transfer of ownership. The judgment noted that the appellant sent 18% of the imported material to their sister concern for job work, which was claimed to be returned and used for export. However, the adjudicating authority found no records maintained for the imported PCE sent to the sister concern and concluded that the goods were diverted to the local market, thus violating the conditions of the notification.

3. Transfer of ownership/title of goods and breach of Custom Notification 30/97:
The core issue was whether the transfer of goods to the sister concern amounted to a breach of Custom Notification 30/97. The judgment held that the goods sent to the sister concern did not return to the appellant and were sold in the local market, which constituted a violation of the notification. The notification stipulated that exempt materials shall not be sold or transferred and must be used solely for fulfilling export obligations.

4. Limitation period for demand when the department had knowledge of job work:
The appellant contended that the demand was time-barred since the department had knowledge of the job work. The judgment upheld the Commissioner's finding that the SCN was not hit by limitation. The Commissioner relied on precedents that any goods imported duty-free under specific conditions are liable for duty if those conditions are not met, and the department was not aware of the actual diversion of goods.

5. Validity of demand on technical grounds after dropping the main allegation:
While the SCN initially alleged excess import, the adjudication confirmed the demand on the ground of violation of notification conditions. The judgment found that the SCN did address the issue of transferability and non-utilization of imported goods as per the notification, thus supporting the adjudication order.

6. Adherence to higher judicial precedents by the Adjudicating Authority:
The appellant argued that the adjudicating authority disregarded higher judicial precedents. The judgment noted that the Commissioner provided elaborate reasoning and distinguished the cited cases based on differing facts. The Supreme Court's principle that each case depends on its own facts was emphasized, supporting the Commissioner's decision.

Conclusion:
The appeals by the appellant (C/890/2010) and the department (C/974/2010) were dismissed. The penalty on the sister concern (C/891/2010) was reduced from ?6 Lakhs to ?1 Lakh. The judgment upheld the findings of the Commissioner that the appellant violated the conditions of Custom Notification 30/97 by diverting imported goods to the local market and failed to maintain proper records, thus justifying the demand and penalties imposed.

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