2004 (7) TMI 493 - AT - Customs

Issues Involved:
1. Misdeclaration of the intended use of imported raw materials.
2. Applicability of concessional rate of duty under specific notifications.
3. Imposition of penalty and demand of interest.
4. Invocation of the extended period of limitation for duty demand.

Detailed Analysis:

1. Misdeclaration of the Intended Use of Imported Raw Materials:
A Show Cause Notice was issued to M/s. R.S. Electronics Ltd. alleging that they misdeclared the intended use of imported raw materials (Stainless Steel 305 Strips and Nickel Iron Cobalt Alloy) under Notification No. 13/97-Cus. and Notification No. 25/99-Cus. These materials were supposed to be used for manufacturing "Semi Conductor Devices; Electronic Valves and Tubes; Transistor Headers; Glass to Metal Seals; Lead Frames; Cast Alloy Permanent Magnets; Hybrid Micro Circuits; Gas Discharge Tubes," but were instead used to manufacture "Parts of Electron Gun/Tube." The appellants argued that there was no wilful misstatement as their Registration Certificate and Bond executed before the Asstt. Commissioner of Central Excise indicated the intended use for manufacturing parts of Electron Guns/Tubes. They cited the case of Samtel Color Ltd. v. CCE, Meerut, arguing that the Registration Certificate under Rule 3 of the Customs (IGCDMEG) Rules, 1996, is mandatory for availing concessional duty rates.

2. Applicability of Concessional Rate of Duty Under Specific Notifications:
The appellants contended that they followed the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996, and obtained the necessary Registration Certificate and executed the Bond. They argued that there was no misdeclaration in Annexure-III, as they had stated the imported materials were for manufacturing parts of Electron Gun/Tubes. The Department, however, argued that the intended purpose must align with the conditions specified in the relevant notifications, and the appellants provided different information to the Central Excise and Customs Authorities, constituting a deliberate misdeclaration.

3. Imposition of Penalty and Demand of Interest:
The appellants argued that the demand for interest is not sustainable as the Customs (IGCDMEG) Rules, 1996, did not provide for interest before the amendment on 1-3-2002. They also contended that the penalty imposed under Section 28(1) of the Customs Act, 1962, was incorrect. The Department countered that interest was leviable under the general provisions of the Customs Act and that the penalty was justified despite the wrong section being quoted, as the charge was clearly brought out in the show cause notice and order.

4. Invocation of the Extended Period of Limitation for Duty Demand:
The Department argued that the appellants misdeclared the intended use of the imported materials to evade customs duty, justifying the invocation of the extended period of limitation. The appellants contended that the extended period was not applicable as there was no wilful misstatement and both the Department and the appellants operated under a bona fide understanding of the eligibility for concessional duty rates. The Tribunal found that the appellants misdeclared the intended use in Annexure-III and Bills of Entry, but also noted the negligence of the Central Excise Officers who signed the Annexure-III without verifying the correct declaration.

Judgment:
The Tribunal concluded that the appellants misdeclared the intended use of the imported materials, but also acknowledged the negligence on the part of the Central Excise Officers. Consequently, the extended period for demanding duty was not applicable. The demand for duty was reduced from Rs. 20,00,837/- to Rs. 11,55,017/-, and the imposition of penalty and demand for interest were set aside. The demand was restricted to six months under Section 28(1) of the Customs Act.

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