2019 (7) TMI 399 - AT - Customs

Customs Violation Appeal Dismissed, Penalty Reduced

Scottish Chemical Industries Versus Commissioner of Customs

Scottish Chemical Industries Versus Commissioner of Customs - 2019 (370) E.L.T. 1165 (Tri. - Mumbai) Issues Involved:1. Jurisdiction of DRI to issue SCN.2. Legality of job work under DEEC Scheme for fulfilling export obligation.3. Transfer of ownership/title of goods and breach of Custom Notification 30/97.4. Limitation period for demand when the department had knowledge of job work.5. Validity of demand on technical grounds after dropping the main allegation.6. Adherence to higher judicial precedents by the Adjudicating Authority.Issue-wise Detailed Analysis:1. Jurisdiction of DRI to issue SCN:The appellant questioned the jurisdiction of the Directorate of Revenue Intelligence (DRI) to issue the Show Cause Notice (SCN). The judgment referenced the Delhi High Court's decision in Mangali Impex Ltd., which deals with the jurisdictional authority of DRI to issue SCNs. However, this specific issue was not elaborated further in the judgment.2. Legality of job work under DEEC Scheme for fulfilling export obligation:The appellant argued that job work is permissible under the DEEC Scheme and that sending goods for job work does not amount to a transfer of ownership. The judgment noted that the appellant sent 18% of the imported material to their sister concern for job work, which was claimed to be returned and used for export. However, the adjudicating authority found no records maintained for the imported PCE sent to the sister concern and concluded that the goods were diverted to the local market, thus violating the conditions of the notification.3. Transfer of ownership/title of goods and breach of Custom Notification 30/97:The core issue was whether the transfer of goods to the sister concern amounted to a breach of Custom Notification 30/97. The judgment held that the goods sent to the sister concern did not return to the appellant and were sold in the local market, which constituted a violation of the notification. The notification stipulated that exempt materials shall not be sold or transferred and must be used solely for fulfilling export obligations.4. Limitation period for demand when the department had knowledge of job work:The appellant contended that the demand was time-barred since the department had knowledge of the job work. The judgment upheld the Commissioner's finding that the SCN was not hit by limitation. The Commissioner relied on precedents that any goods imported duty-free under specific conditions are liable for duty if those conditions are not met, and the department was not aware of the actual diversion of goods.5. Validity of demand on technical grounds after dropping the main allegation:While the SCN initially alleged excess import, the adjudication confirmed the demand on the ground of violation of notification conditions. The judgment found that the SCN did address the issue of transferability and non-utilization of imported goods as per the notification, thus supporting the adjudication order.6. Adherence to higher judicial precedents by the Adjudicating Authority:The appellant argued that the adjudicating authority disregarded higher judicial precedents. The judgment noted that the Commissioner provided elaborate reasoning and distinguished the cited cases based on differing facts. The Supreme Court's principle that each case depends on its own facts was emphasized, supporting the Commissioner's decision.Conclusion:The appeals by the appellant (C/890/2010) and the department (C/974/2010) were dismissed. The penalty on the sister concern (C/891/2010) was reduced from Rs. 6 Lakhs to Rs. 1 Lakh. The judgment upheld the findings of the Commissioner that the appellant violated the conditions of Custom Notification 30/97 by diverting imported goods to the local market and failed to maintain proper records, thus justifying the demand and penalties imposed.