2006 (4) TMI 407 - AT - Customs

Summary

Issues Involved:
1. Confiscation of scrap generated during repair of Barges in a notified Customs area.

Analysis:
The appeal in question was against an Order-in-Appeal that upheld the Order-in-Original regarding the confiscation of scrap and the penalty reduction on the appellants. The primary issue for consideration was whether the scrap generated during the repair of Barges at a notified Customs area and subsequently cleared would be subject to confiscation. The appellants argued that the scrap generated during the repair of Barges, which were purchased by them and repaired at a specified location, should not be confiscated as they were availing the benefit of a particular customs notification. They contended that the confiscation of the scrap was not the subject of the initial show cause notice. On the other hand, the Departmental Representative argued that any material generated during the repair of Barges in an Indian shore is liable for confiscation as duty is payable on such goods. The Tribunal examined the show cause notice, which sought to confiscate 40MT of scrap valued at Rs. 3,50,000 under various provisions of the Customs Act, 1962. The Tribunal noted that the case revolved around waste and scrap of iron and steel generated during the repair of Barges in Indian shores. It was determined that since the Barges were availing the benefit of a specific customs notification, any waste and scrap generated during their repair would fall under the category of imported goods and be liable for confiscation due to non-payment of duty.

The Tribunal found that the redemption fine imposed on the appellants was excessive and reduced it from Rs. 90,000 to Rs. 50,000. Regarding the penalty imposed, the Commissioner (Appeals) had concluded that conscious knowledge was not a prerequisite for penalty under Section 112(a) of the Customs Act. The penalty was initially set at Rs. 25,000, which the Tribunal further reduced to Rs. 15,000. The key issue in this case was the interpretation of the customs notification and whether the scrap generated during the repair of Barges constituted an import of goods. Given the interpretational nature of the issue, the Tribunal deemed the penalties imposed on the appellants to be excessive and accordingly reduced them. Consequently, the order-in-appeal was partially set aside, and the appeal was partly allowed based on the above considerations.