Appellants' duty demand upheld for diverting imports to sister concern; penalties waived due to lack of intent.

The Tribunal upheld the duty demand against the Appellants for diverting imported raw materials to their sister concern for manufacturing goods, breaching importation conditions. However, penalties under the Customs Act were set aside due to the lack of malicious intent, as the goods were used for manufacturing identical goods by the sister concern. The appeal was partly allowed, modifying the impugned order to uphold duty demand but waive penalties. Decision was rendered on 16.05.2017.

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Issues:
Importation of raw materials under concessional rate for manufacturing goods; Diversion of imported goods to sister concern; Liability to pay Customs Duty; Imposition of penalties under Customs Act, 1962.

Analysis:
The appeal was filed against an order dated 21.09.2016 by the Commissioner of Central Excise, Indore. The Appellants imported raw materials under Notification No. 12/2012-Cus for manufacturing FRP Rods but diverted them to their sister concern in contravention of rules, leading to a demand for Customs Duty of &8377; 7,50,371/- along with penalties under Sections 112 and 114A of the Customs Act, 1962. The Appellants argued that the imported goods were used by the sister concern for manufacturing the same goods and that they had already paid the Customs Duty along with interest before the show cause notice. The Tribunal held that the diversion of goods breached the conditions of importation without payment of duty, upholding the duty demand. However, considering the lack of malafide intention, the penalties were set aside.

The Appellants admitted to diverting the imported goods to their sister unit but contended that the sister concern also used the materials for manufacturing FRP Rods. They had already paid the Customs Duty and interest before any notice was issued. The Tribunal acknowledged that the diversion occurred but noted that the goods were used for manufacturing identical goods by the sister concern, cleared with applicable Central Excise Duty. As there was no intent to evade Customs Duty concession, the penalties under Sections 112 and 114A of the Customs Act, 1962 were deemed unjustified. Therefore, while upholding the duty demand, the penalties were set aside based on the lack of malafide intention.

In conclusion, the Tribunal upheld the impugned order with modifications, partly allowing the appeal filed by the assessee-Appellants. The duty demand was upheld, but the penalties under Sections 112 and 114A of the Customs Act, 1962 were set aside due to the absence of malicious intent in diverting the imported goods to the sister concern for manufacturing identical goods. The decision was pronounced in the open court on 16.05.2017.

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