2004 (12) TMI 535 - AT - Customs

Confiscation of goods - Valuation - Demand beyond show cause notice - Confiscation of goods - Misdeclaration

Issues Involved:
1. Whether the import of Incoloy steel plates was covered by the Licence which has been specifically endorsed to include refurbishing material.
2. Whether the calculation of duty liability on Incoloy steel plates at Rs. 56,38,880/- is correct.
3. Whether there was any mis-declaration of value with regard to the containers so as to justify their confiscation under section 111(m).
4. Whether duty of Rs. 17,40,000/- could be demanded on the containers.

Issue-wise Detailed Analysis:

1. Import of Incoloy Steel Plates:
(a) The licence was issued for the import of a second-hand plant and was specifically amended to include the cost for dismantling, refurbishing, replacement of parts and equipment, packing, and loading.
(b) The Commissioner's narrow interpretation of "refurbishing material" was incorrect. The term should include materials used for modification and improvement, which aligns with the dictionary meaning of refurbishment as "brighten up, clean up, renovate, restore, redecorate."
(c) The plates, used in fabricating Easy Flow devices, Briquette Chute Wear Plates, and Discharge Chute Wear Plates, were essential for making the plant operable in India and thus covered under the licence.
(d) The licence permitted not only refurbishing but also replacement, implying that refurbishing includes acts beyond mere replacement.
(e) The Bombay High Court's judgment in National Machinery Manufacturers Ltd. v. Union of India supports the interpretation that in case of doubt, the benefit should go to the importer, thus covering the import of the plates under the licence.

2. Calculation of Duty Liability on Incoloy Steel Plates:
(a) The duty on Incoloy plates was incorrectly computed at Rs. 56,38,880/-.
(b) The dispute arose due to:
- Separate addition of freight and insurance by the Department at 20%, despite these costs already being included in the assessable value declared on the Bill of Entry.
- Non-allowance of a 2% cash discount for prompt payment, which was clearly documented and agreed upon between the parties.
- The Commissioner applying a higher duty rate of 70% Basic + 45% Auxiliary + Rs. 715 pmt CVD, contrary to the show-cause notice which specified 50% basic + 15% CVD.
(c) The correct duty rate of 90% (45% Basic + 45% Auxiliary) applicable to project imports should have been applied. The matter was remanded for re-determination of the duty at the project rate.

3. Mis-declaration of Value Regarding Containers:
(a) The value of the containers was part of the overall packing contract with M/s Decotrans and included in the value of the second-hand plant.
(b) The Commissioner incorrectly rejected the clarification from Decotrans about the containers being part of the overall packing charges.
(c) There was no separate material evidence indicating amounts paid for the containers separately.
(d) Since the value of the containers was included in the cost of the second-hand plant, there was no mis-declaration of value, and thus, confiscation under section 111(m) was unwarranted.
(e) The Commissioner found no mala fides on the part of the appellant, and no penalties were imposed on any officers, exonerating the appellant from the charge of mis-declaration.

4. Duty Demand on Containers:
(a) Since duty had already been paid on the entire packing cost, including the cost of hiring containers, no separate demand for duty on these containers could be sustained.
(b) The order was set aside and remitted for re-quantification of duty only on the plates.

Conclusion:
The appeal was disposed of with directions to re-determine the duty on the Incoloy steel plates as per the project rate and to set aside the confiscation and duty demands on the containers.

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