2017 (9) TMI 399 - AT - Customs

100% EOU - clandestine clearance of duty free imported fabric in domestic area without payment of duty - imposition of penalty - Held that - as regards penalty on Shri Govind Hariram Khubchandani It is established on record that he is not concerned with any other aspect expect storage of goods & receiving rent. Therefore with regard to serious offence of duty free imported goods removed by M/s Mayur Impex the Appellant cannot be held responsible therefore penalty imposed upon him is not sustainable - penalty set aside. Penalty u/s 112 (b) of Customs Act 1962 upon the Appellant Shri Jairaj Kalyani and Shri Pawan Lulla - Held that - it could not be proved that these Appellants have physically received offended import fabric. In their statement recorded under Section 14 of Central Excise Act 1944 / 1.08 of Customs ACT 1962 there is no admission regarding the dealing of said offended goods. Merely on the basis of call details it cannot be concluded that Appellant might have dealt with offended goods. These call details at the most lead to suspicion. However the same cannot take the place of tangible evidence. Therefore on the basis call details the alleged guilt of Appellants cannot be proved - penalty set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Clandestine clearance of duty-free imported fabric in the domestic market.
2. Confirmation of demand for custom duty and confiscation of seized goods.
3. Imposition of penalties under section 112(b) of the Customs Act, 1962.
4. Appeals challenging the impugned order.

Analysis:
1. The case involved M/s Mayur Impex, a 100% Export Oriented Unit (EOU), engaged in manufacturing and exporting readymade garments. The company was found to have diverted duty-free imported fabric into the domestic market. This led to the issuance of a Show Cause Notice, culminating in the confirmation of a demand for custom duty and the confiscation of seized goods by the Adjudicating Authority.

2. The penalties under section 112(b) of the Customs Act, 1962 were imposed on the appellants, with specific amounts levied on each individual based on their involvement in handling the offending goods. The penalties were challenged through appeals due to the appellants' disagreement with the imposed sanctions.

3. The appellants presented their defenses, arguing that they were not knowingly involved in handling the offending goods. They relied on specific judgments to support their claims and contested the evidence presented against them, particularly emphasizing the lack of direct proof linking them to the diverted goods.

4. Upon careful consideration of the submissions and evidence, the Member (Judicial) observed that the godown owner, one of the appellants, could not be held responsible for the technical and legal violations related to the EOU provisions, as his involvement was limited to providing storage space. Regarding the other appellants, it was noted that the circumstantial evidence, such as call details, did not conclusively prove their direct involvement in dealing with the diverted goods.

5. The Member (Judicial) concluded that the revenue failed to establish the alleged offenses against the appellants. The penalties imposed under section 112(b) were set aside, and the appeals were allowed, emphasizing the insufficiency of evidence to prove the appellants' guilt beyond a reasonable doubt.

6. The judgment was pronounced on 16-08-2017 by the Appellate Tribunal CESTAT MUMBAI, highlighting the importance of tangible evidence and the burden of proof in establishing liability under the Customs Act, 1962.