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2013 (5) TMI 807 - AT - CustomsBenefit of duty exemption under serial No. 230 of Notification No. 21/2002-Cus., dated 1-3-2002 - violation of condition No. 40(b) - confiscation of the goods imported - penalties under Sections 112(a)/(b) and 114A - Held that - Since the contract was terminated vide letter dated 26-4-2007, all the materials, plant, equipment, etc. became the property of the employer. This included the imported equipment on which the JV had availed customs duty concession subject to fulfilment of post importation condition. The goods were imported on 26-3-2003 and the five year period for use and possession by the importer expired only on 25-3-2008. However, with the termination of the contract on 26-4-2007, the importer JV alienated the imported equipment and it became the property of CHPRCL before the stipulated period of 5 years. The condition of importation was that the importer shall use the imported equipment for construction of roads and he shall not sell or otherwise dispose of the imported equipment in any manner. Though there was no sale, the imported equipment became the property of CHPRCL due to default of contract by the importer JV. Thus the condition of exemption stood violated and consequently, the goods became liable to confiscation under Section 111(o) of the Customs Act. Therefore, the confiscation of the imported equipment by the adjudicating authority under Section 111(o) cannot be faulted as the same is sustainable in law. Once the goods are confiscated under Section 111, the question of option to redeem the same on payment of fine automatically arises, if the goods are not prohibited. In the present case, the goods are not prohibited and hence, option of redemption on payment of fine has to be necessarily given - assessable value of the goods declared was ₹ 1,87,25,400/- and the cum duty value works out to ₹ 2,82,37,903/-. For depreciation purposes, the normal life of a machinery is taken as 10 years. Therefore, the value of the machinery at the time of its acquisition by CHPRCL and its subsequent seizure would have come down substantially. Besides, the machinery was not acquired in a commercial transaction of purchase or sale and therefore, the question of a profit margin while deciding the quantum of redemption fine also would not arise - Penalty imposed is also reduced - Decided partly in favour of appellants.
Issues Involved:
1. Violation of post-importation conditions under Notification No. 21/2002-Cus. 2. Confiscation of imported goods under Section 111(o) of the Customs Act. 3. Imposition of customs duty and penalties under Sections 112(a), 112(b), and 114A of the Customs Act. 4. Liability for payment of customs duty, redemption fine, and penalties. Detailed Analysis: 1. Violation of Post-Importation Conditions: The primary issue was whether the importer JV company violated condition No. 40(b) of Notification No. 21/2002-Cus., which required the importer not to sell or otherwise dispose of the imported equipment within five years from the date of importation. The JV company imported two units of dynapac paver finishers claiming duty exemption but failed to complete the contracted work, leading to the termination of the contract by CHPRCL. The equipment was taken over by CHPRCL and subsequently auctioned. The Customs authorities seized the goods, alleging a violation of the condition since the equipment was disposed of within the five-year period. 2. Confiscation of Imported Goods: The adjudicating authority confiscated the goods under Section 111(o) of the Customs Act, citing the violation of post-importation conditions. The goods were imported on 26-3-2003, and the five-year period expired on 25-3-2008. However, the contract was terminated on 26-4-2007, and the equipment became the property of CHPRCL before the five-year period ended. Thus, the condition of exemption was violated, justifying the confiscation. 3. Imposition of Customs Duty and Penalties: The duty demand of Rs. 95,12,503/- was confirmed under Section 125(2) of the Customs Act, along with interest, to be recovered from CHPRCL. Penalties were imposed on the JV company, CHPRCL, and their officials under Sections 112(a) and 112(b). The importer JV company was penalized for their negligence in fulfilling the contract, leading to the breach of conditions. The penalties on CHPRCL and its officials were based on their involvement in taking possession and auctioning the goods without informing Customs. 4. Liability for Payment: The Tribunal upheld the duty demand and interest from CHPRCL, as they were in possession of the goods at the time of seizure. The redemption fine was reduced from Rs. 40 lakhs to Rs. 20 lakhs. The penalty on CHPRCL was reduced to Rs. 1 lakh, and penalties on its officials were set aside. The penalty on the importer JV company was reduced to Rs. 20 lakhs, with the individual constituents of the JV jointly liable if the JV failed to pay. Penalties on the constituents and officials of the JV were set aside. Conclusion: The Tribunal held that CHPRCL was liable to pay the duty demand of Rs. 95,12,503/- along with interest. The redemption fine was reduced to Rs. 20 lakhs, and the penalty on CHPRCL was reduced to Rs. 1 lakh. The penalty on the importer JV company was reduced to Rs. 20 lakhs, with the individual constituents jointly liable if the JV failed to pay. Penalties on the officials of CHPRCL and the constituents of the JV were set aside. The appeals were disposed of accordingly.
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