2003 (7) TMI 643 - Commission - Customs

Issues Involved:
1. Application under Section 127B of the Customs Act, 1962.
2. Alleged clandestine removal of warehoused goods.
3. Liability for duty and penalty.
4. Admissibility of the application before the Settlement Commission.
5. Relevance of the Bill of Entry (BE) filed at the time of import.

Issue-wise Detailed Analysis:

1. Application under Section 127B of the Customs Act, 1962:
The applicant, M/s. Cochin Shipyard Limited, filed an application under Section 127B of the Customs Act, 1962, seeking settlement of proceedings initiated by the Show Cause Notice (SCN) dated 24-2-2003. The applicant held a Private Bonded Warehouse licence and was engaged in the manufacture and repair of ocean-going vessels. They imported goods under warehousing Bills of Entry and were permitted to warehouse the goods for in-bond manufacturing.

2. Alleged Clandestine Removal of Warehoused Goods:
The SCN alleged that a substantial quantity of warehoused goods, certified as fully fitted on the vessel under construction, was removed from the Carpentry Shop to the Dolphin Club without payment of duty and without following the prescribed procedure. The goods were intercepted and detained while being brought back into the shipyard area. The SCN held the goods liable for confiscation under Section 111(j) read with Section 71 of the Customs Act and the Regulations, proposing a penalty under Section 112 and recovery of duty amounting to Rs. 2,83,468/-.

3. Liability for Duty and Penalty:
The applicant contended that the surplus quantity of goods was treated as waste/scrap and did not need to be re-warehoused. They argued that the fitment certificate covered the entire materials issued, including the marginal quantity rendered surplus. They also pleaded that the duty rate applicable should be for waste/scrap, not the original imported item. Despite these arguments, the applicant accepted the duty liability of Rs. 2,83,468/- and requested waiver of penal action, including penalty, interest, and prosecution.

4. Admissibility of the Application before the Settlement Commission:
The Revenue contested the admission of the application, arguing that it was an offence case of clandestine removal, not a proceeding for levy, assessment, and collection of duty. The Bench considered the rival contentions and found that the application met the conditions of Section 127B, including the filing of a BE, receipt of an SCN, and disclosure of a duty liability exceeding Rs. 2 lakhs. The Bench did not accept the Revenue's contention that the BE filed at the time of import was irrelevant. It noted that the goods were assessed at nil rate of duty under a conditional notification, and the duty liability disclosed in the application was an additional disclosure over the BE.

5. Relevance of the Bill of Entry (BE) Filed at the Time of Import:
The Bench found that the BE filed at the time of import was relevant as the goods were assessed at nil rate of duty under Customs Notification 17/2001, subject to post-importation conditions. The SCN referred to the warehousing Bs/E filed for the goods and the undertaking to use them exclusively for in-bond manufacture. The duty liability arose due to the breach of the notification's conditions, and the additional disclosure of duty liability in the application exceeded Rs. 2 lakhs, meeting the requirements of Section 127B(1).

Conclusion:
The Bench concluded that the application merited admission and allowed it to proceed under Section 127C(1) of the Customs Act, 1962. The admitted duty liability of Rs. 2,83,468/- paid by the applicant was adjusted towards the duty liability. The Bench acquired exclusive jurisdiction to perform the functions of any officer of Customs concerning this case under Section 127F(2) of the Customs Act, 1962.

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