Applicants Misrepresented Imported Goods, Settled with Duty Liability

The Settlement Commission found that the applicants misrepresented imported goods as intended for the Indian Navy but diverted them to the local market. They were not eligible for duty exemption under Section 90 of the Customs Act, 1962. The Commission settled the case with a duty liability of Rs. 93,88,432/-, interest, and a nominal penalty. Immunity from prosecution was granted as the applicants voluntarily settled the dispute, with a warning that the settlement would be void if obtained fraudulently.

---

---

Issues Involved:
1. Misrepresentation and diversion of imported goods.
2. Unauthorized removal of goods from the warehouse.
3. Eligibility for customs duty exemption under Section 90 of the Customs Act, 1962.
4. Settlement of duty liability and penalties.

Detailed Analysis:

1. Misrepresentation and Diversion of Imported Goods:
The applicants imported several consignments of engineering goods and filed into Bond Bills of Entry (B/E). These goods were assessed for duty and warehoused. They later filed shipping bills claiming exemption under Section 90 of the Customs Act, 1962, stating the goods were for the Indian Navy. However, investigations by the Directorate of Revenue Intelligence (DRI) revealed that the goods were diverted to the local market instead of being supplied to the Indian Navy. Statements from various individuals, including partners of the applicant firm and a storekeeper at the Naval Dockyard, confirmed the misrepresentation and unauthorized diversion of goods.

2. Unauthorized Removal of Goods from the Warehouse:
The goods were cleared without payment of duty under the pretense of being ship stores for the Indian Navy. The shipping bills were signed by a storekeeper who was not authorized to do so. The goods were taken back from the gate and sold in the local market, violating Section 71 of the Customs Act, 1962. The investigation and statements recorded under Section 108 of the Customs Act, 1962, corroborated these findings.

3. Eligibility for Customs Duty Exemption under Section 90 of the Customs Act, 1962:
The applicants claimed exemption under Section 90, which allows duty-free import of stores for use on board a ship of the Indian Navy. However, the investigation revealed that the goods were not used on a ship of the Indian Navy but were installed on a tug, which does not qualify as a ship under Section 90. The Commission emphasized that the exemption applies strictly to stores for use on a ship of the Indian Navy and not other vessels like tugs.

4. Settlement of Duty Liability and Penalties:
The Settlement Commission allowed the application to proceed and adjusted the admitted duty liability of Rs. 9,72,579/- from the amount already deposited by the applicant. The Commissioner (Investigation) concluded that the applicants were not entitled to duty exemption as no procurement certificate was issued for the goods. The Commission settled the case for Rs. 93,88,432/-, directing the appropriation of the balance deposit and payment of the remaining duty within 30 days. The applicants were also liable to pay interest at 10% per annum and a nominal penalty of Rs. 9 lakhs. Immunity from prosecution under the Customs Act, 1962, and the Indian Penal Code was granted as the applicants volunteered to settle the dispute.

Conclusion:
The Settlement Commission concluded that the applicants misrepresented the purpose of the imported goods and diverted them to the local market. They were not entitled to duty exemption under Section 90 of the Customs Act, 1962. The case was settled with a duty liability of Rs. 93,88,432/-, interest, and a nominal penalty, with immunity from prosecution granted. The settlement would be void if obtained by fraudulent means or misrepresentation.

---