Unauthorised transfer of imported goods supports penalty, but personal liability needs proof of active participation or connivance.

Unauthorised transfer and sale of imported machinery, after rejection of permission, breached the no-transfer condition under the export-linked scheme and justified penalty against the company and its Managing Director, while the employee's personal penalty was not supported because active participation, connivance, or abetment was not proved. The duty-related issue also remained unresolved on the record, as it was unclear whether excess duty had been collected twice and whether any amount was refundable. That question was remitted for limited reconsideration on excess recovery and possible refund.

---

---

Issues: (i) Whether the penalties imposed on the appellant company and its Managing Director for unauthorised transfer and sale of the imported machinery and sale of imported silk yarn were sustainable, and whether the penalty on the Assistant Designer was justified; (ii) whether the plea regarding excess duty collection and encashment of bank guarantee required reconsideration.

Issue (i): Whether the penalties imposed on the appellant company and its Managing Director for unauthorised transfer and sale of the imported machinery and sale of imported silk yarn were sustainable, and whether the penalty on the Assistant Designer was justified.

Analysis: The imported machinery had been transferred and sold after a request for permission to DGFT had been rejected, which amounted to a breach of the condition prohibiting transfer or disposal within the stipulated period under paragraph 5.4 of Chapter 5 of the Handbook of Procedures 1997-2002. The sale of imported mulberry silk yarn in the open market was also admitted. On that basis, liability of the company and its Managing Director was established, but the role of the Assistant Designer was not proved by sufficient evidence of active participation, connivance, or abetment.

Conclusion: The penalty on the company and its Managing Director was upheld but reduced, and the penalty on the Assistant Designer was set aside in her favour.

Issue (ii): Whether the plea regarding excess duty collection and encashment of bank guarantee required reconsideration.

Analysis: The record did not contain a clear finding on whether duty had been collected twice, once from the appellants and again from the purchaser who had already redeemed the goods. That aspect required examination by the Commissioner to determine whether any excess amount had been recovered and, if so, whether it was refundable.

Conclusion: The matter was remitted for reconsideration on the limited question of excess duty collection and possible refund.

Final Conclusion: The appeals succeeded in part, with relief granted by reducing the penalties for the company and its Managing Director, setting aside the penalty on the Assistant Designer, and sending the duty-refund issue back for reconsideration.

Ratio Decidendi: Unauthorised transfer or sale of goods imported under a concessional export-linked scheme, in breach of the prescribed no-transfer condition and without prior permission, warrants confiscation and penalty; but personal penalty on an employee requires proof of active participation or connivance.

---