2018 (2) TMI 30 - AT - Customs

Customs Act Penalty Upheld, Reduced for Apparel Company in Duty Loss Dispute

The Tribunal upheld the liability for penalty under section 112(a) of the Customs Act, 1962, against M/s. Hi-Bright Apparels India Pvt. Ltd., reducing the ... 100% EOU - Penalty u/s 112 (a) - The case against the EOU is that they have not undertaken any manufacture as mandated in the permission nor they have followed the procedure for getting the goods manufactured from the job workers - Held that: - The role of the appellant for the violation of various provisions of Customs Act, 1962 connected to duty-free import of items for the EOU cannot be contested with any force. The original authority examined the depositions made by the appellant during investigation as corroborated by various other evidences before arriving at his conclusion. In the present appeal there is no substantial ground to reverse the finding of the original authority. The appellant cannot shift the blame to the carelessness of the employees for the violation of Customs Act - the liability for penalty u/s 112(a) cannot be contested - appeal dismissed - decided against appellant. Issues:Violation of Customs Act resulting in loss of revenue, imposition of penalty under section 112(a) of Customs Act, 1962.Analysis:1. The case involves M/s. Hi-Bright Apparels India Pvt. Ltd., an approved 100% EOU for manufacturing and exporting readymade garments, facing proceedings for loss of customs duty due to violations of the Customs Act, 1962. The original authority confirmed a demand of Rs. 1,38,42,452/- against the main noticee, along with penalties and confiscation of goods. The present appeal challenges the imposition of Rs. 15.00 lakhs as penalty under section 112(a) of the Customs Act, 1962.2. The appellant, the Managing Director of the EOU, argued that he was not directly involved in the day-to-day activities and that the duty loss calculation was incorrect as they were entitled to a concessional duty rate under Notification No.14/2005-Cus. The appellant's inability to contest the case's merits due to the main noticee's appeal dismissal for failure to predeposit hindered the present appeal's effectiveness in presenting their case.3. The opposing party contended that the appellant, as the Managing Director, was actively involved in operations and was responsible for diverting duty-free imported materials meant for the Chennai unit to another unit in Coimbatore, leading to misuse. The investigating facts did not support a case for waiving or reducing the penalty.4. The Tribunal analyzed the appellant's role in the violations related to duty-free imports for the EOU under the Customs Act, 1962. The original authority's findings based on the appellant's statements during the investigation and corroborating evidence concluded that the appellant was liable for penalty under section 112(a) for improper removal and diversion of warehouse goods, contravening the intended purpose.5. The Tribunal upheld the liability for penalty under section 112(a), stating that the appellant could not blame employee carelessness for Customs Act violations. While acknowledging the lack of appeal or examination on merits due to the main noticee's appeal dismissal, the Tribunal reduced the penalty to Rs. 5,00,000/- considering the appellant's arguments regarding duty loss calculation under Customs Notification No.14/2003.6. The appeal was dismissed, except for the modification of the penalty amount, based on the analysis of the appellant's role in the violations and the quantification of duty loss without extending the benefit of the relevant Customs Notification.