2005 (12) TMI 520 - Commission - Customs

Summary

Issues:
Settlement application for duty liability; Examination of duty demand on rejected goods and shortages during specific periods; Investigation into accounting discrepancies; Utilization of major components; Backward calculation method; Settlement terms and conditions.

Analysis:
The case involved an application for settlement of duty liability by an EOU importing items for export production. The applicant admitted a total duty liability of Rs. 1,29,31,502/- out of the total demand of Rs. 3,96,59,937/-. The Commissioner directed investigations into duty demands on rejected goods, shortages during specific periods, and correctness of accounting methods. The investigation revealed three distinct categories of duty demands: goods rejected, shortages during IMS period, and shortages during Oracle software period.

The Commissioner's report highlighted discrepancies in accounting for components, especially during the IMS period. The investigation focused on major components like CT Max Insert and Heat Exchangers, utilizing a backward calculation method. It was found that the applicant failed to account for components worth Rs. 1,72,01,951/- with a duty liability of Rs. 93,16,408/-. The Commissioner recommended an additional payment of Rs. 19,15,917/- for this period.

During the final hearing, the applicant's advocate argued for settlement based on payments made and requested immunity from further liabilities. The Revenue insisted on full payment but acknowledged the suitability of the backward calculation method. The Bench considered the contentions and found that the Revenue failed to prove the allegations convincingly. It emphasized the principle that the burden of proof lies with the department and settled the case based on the backward calculation method.

The Bench settled the application under Section 127C(7) of the Customs Act, fixing the total duty liability at Rs. 1,71,65,060/-, which was already paid. The applicant was directed to pay 10% simple interest per annum on the duty liability for the period from 1997 to 2001. Immunity was granted from fines, penalties, and prosecution under the Customs Act, 1962, to the applicant and co-applicants. The settlement terms were in accordance with Section 127H(1) of the Customs Act, with attention drawn to relevant sub-sections.

In conclusion, the case highlighted the importance of utilizing appropriate methods for accounting discrepancies in duty demands. The settlement was reached based on a thorough examination of the evidence and application of legal principles governing duty liabilities and immunities.