2006 (3) TMI 472 - AT - Customs

Issues Involved:
1. Liability of MMTC for customs duty on gold loaned to BRGL.
2. Compliance with the bond executed under Notification No. 177/94-Cus.
3. Applicability of the proviso to Section 59(3) of the Customs Act.
4. Validity and enforceability of the bond executed by MMTC.
5. Calculation of customs duty.

Detailed Analysis:

1. Liability of MMTC for customs duty on gold loaned to BRGL:
The appellant, MMTC, imported gold under the EXIM Policy of 1992-97 and supplied it to M/s. BRGL on a loan basis for export purposes. BRGL failed to fulfill the export obligation, and the gold was found missing from the unit. The customs authorities held MMTC liable for the customs duty on the gold, as per Section 72(d) of the Customs Act, due to the failure to discharge the export obligation.

2. Compliance with the bond executed under Notification No. 177/94-Cus.:
MMTC executed a bond under Notification No. 177/94-Cus., which required them to ensure that the imported gold was used for manufacturing jewellery for export. The bond stipulated that MMTC would pay customs duty if the export obligation was not met. The Commissioner found that MMTC failed to fulfill the terms of the bond, making them liable for the customs duty on the gold loaned to BRGL.

3. Applicability of the proviso to Section 59(3) of the Customs Act:
MMTC argued that their liability ceased when BRGL executed a general bond under Section 59(3) of the Customs Act. However, the tribunal found that the bond executed by BRGL was not the type contemplated by the proviso to Section 59(3), which requires a fresh bond from the transferee. Therefore, MMTC's liability under the original bond remained intact.

4. Validity and enforceability of the bond executed by MMTC:
The tribunal examined the bond executed by MMTC, which was never challenged for its validity. The bond explicitly stated that MMTC would pay customs duty if the gold was not used for manufacturing jewellery for export. The tribunal dismissed MMTC's contention that the bond should be treated as a transit bond, affirming its enforceability under the terms of Notification No. 177/94-Cus.

5. Calculation of customs duty:
MMTC contended that the duty was incorrectly calculated and should be Rs. 9,20,000/-. However, the tribunal upheld the Commissioner's calculation of Rs. 84,18,550/-, based on the material on record and the terms of the bond executed by MMTC.

Conclusion:
The tribunal dismissed the appeal, holding MMTC liable for the customs duty on the gold loaned to BRGL, due to the failure to fulfill the export obligation. The bond executed by MMTC under Notification No. 177/94-Cus. was found to be valid and enforceable, and the liability under Section 59(3) of the Customs Act remained with MMTC. The calculation of customs duty by the Commissioner was upheld.

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