CESTAT Upholds Duty & Penalty for Diverting Imported Goods

The Appellate Tribunal CESTAT, MUMBAI confirmed a duty of Rs. 9,73,638/- against the appellants, along with interest and a personal penalty of Rs. 5 lakhs for diverting imported material meant for export under the DEEC Scheme into the domestic market. The appellants' admission of selling the goods led to the duty liability. Despite depositing the duty before the show cause notice, the personal penalty was reduced to Rs. 3 lakhs. The Tribunal upheld the duty confirmation, emphasizing the necessity of fulfilling export obligations to benefit from customs notifications and the consequences of diverting imported goods.

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Issues: Duty confirmation, interest imposition, personal penalty imposition, diversion of imported material, non-fulfillment of export obligation, sale of imported goods, benefit of customs notification, reduction of penalty

In this judgment by Appellate Tribunal CESTAT, MUMBAI, the duty of Rs. 9,73,638/- was confirmed against the appellants along with interest and a personal penalty of Rs. 5 lakhs. The finding was that material imported under the DEEC Scheme without duty payment was diverted in the domestic market, and the export obligation was not fulfilled. The appellants admitted to importing mulberry raw silk under an advance license but not using it for export, instead selling it due to sub-standard quality and weavers' inability to work with it. However, the adjudicating authority held that selling the material imposed duty liability on the appellants.

The Tribunal agreed with the adjudicating authority's finding, emphasizing the admission of selling the goods in the market. The duty-free importation benefit under Notification No. 80/95-Cus. required export obligation fulfillment, and any non-compliance, regardless of the reason, would negate the notification's benefit. Therefore, the demand was rightfully confirmed by the Commissioner. Despite the duty being deposited before the show cause notice, the personal penalty was reduced from Rs. 5 lakhs to Rs. 3 lakhs. Apart from this penalty adjustment, the appeal was rejected.

The judgment highlights the importance of fulfilling export obligations under customs notifications to avail duty-free import benefits. It also underscores the consequences of diverting imported goods to the domestic market and the liability it imposes. The reduction in the personal penalty showcases a consideration for the circumstances of the case, balancing penalty imposition with the duty violation.

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