Concessional customs exemption conditions breached, penalty restored after imported goods were used outside the permitted manufacturing purpose.

Penalty was sustained where imported goods were cleared at a concessional customs rate subject to a notification condition that they be used in manufacturing the final product. The goods were found to have been used instead for repairs and other purposes, with an allegation of sale or transfer to other manufacturers, showing non-compliance with the exemption conditions. The absence of intention to evade duty did not justify deletion of penalty once the statutory conditions for concessional clearance were breached. The order setting aside penalty was held unsustainable, and the penalty imposed by the adjudicating authority was restored.

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Issues: Whether penalty was leviable for non-fulfilment of the conditions attached to the concessional customs notification and misuse of the imported goods otherwise than for manufacture of the final product.

Analysis: The imported goods were cleared at a concessional rate under a notification requiring their use in the manufacture of the final products. The findings recorded that the goods were instead used for repairs and other purposes, and there was also an allegation of sale or transfer to other manufacturers. On those facts, the assessee had availed the concession without complying with the notification conditions. The absence of intention to evade duty was not accepted as a ground to sustain deletion of penalty when the statutory conditions for concessional clearance were breached.

Conclusion: Penalty was rightly attracted and the order setting aside the penalty was unsustainable; the penalty imposed by the adjudicating authority was restored in favour of Revenue.

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