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2011 (4) TMI 1002 - AT - CustomsWhether the exemption from Special Additional Duty of Customs (SAD in short) leviable under Section 3A of the Customs Act, 1975 provided in Notification No.34/98 dated 13.06.1998 its succssor Notifications would be available, when the goods are sold in an area where no sales tax or purchase tax is chargeable - Appellant are not eligible for duty exemption from Special Additional Duty of Customs on Kerosene imported by them under Notification No.34/98-CUS dt.13.06.1998 or under successor Notifications in respect of Kerosene sold in the State of Orissa without payment of sales tax - exemption has been availed in complete violation of the declaration/undertaking given by them at the time of importation, there is a clear mis-declaration on their part and the duty demand for the extended period of 5 years under the provision of Section 28 of the Customs Act, 1962 is valid in law - duty demand for the period beyond 5 years from the date of Show Cause Notice is incorrect - penalty imposed under Section 114A of the Customs Act, 1962 is not legally sustainable - duty demand needs to be re-quantified - matter remanded to the Commissioner of Customs for the limited purpose of quantification of demand i.e. excluding the demand in respect of period beyond five years and also for computing the duty demand on the correct value, i.e. excluding the Basic Customs Duty and Special Duty of customs since those levies were exempted during the relevant period
Issues Involved:
1. Eligibility for exemption from Special Additional Duty of Customs (SAD) under Notification No.34/98 and successor Notifications when goods are sold in an area where no sales tax or purchase tax is chargeable. 2. Validity of duty demand and the imposition of penalty under Section 114A of the Customs Act, 1962. 3. Applicability of the extended period of limitation under Section 28 of the Customs Act, 1962. 4. Correct computation of duty demand. Issue-wise Detailed Analysis: 1. Eligibility for Exemption from SAD: The primary issue was whether the exemption from SAD under Notification No.34/98 and its successor Notifications was available when the goods were sold in an area where no sales tax or purchase tax was chargeable. M/s. Indian Oil Corporation (I.O.C.) imported kerosene and sold it in Orissa, where sales tax on kerosene was exempted. The Tribunal held that the expression "chargeable" in the Notification should be interpreted to mean "payable," and since no sales tax was payable due to the exemption, the SAD exemption was not applicable. The Tribunal relied on previous judgments, including Tarsem Singh Multani & Sons and Hindusthan Petroleum Corporation, which held that if no sales tax is payable, the SAD exemption is not available. Consequently, I.O.C. was not eligible for the SAD exemption. 2. Validity of Duty Demand and Imposition of Penalty: The Tribunal confirmed the duty demand of Rs.4,34,99,743/- but noted an error in the computation. The duty should be computed on the correct value, excluding Basic Customs Duty and Special Duty of Customs, which were exempted during the relevant period. The Tribunal also addressed the imposition of a penalty under Section 114A of the Customs Act, 1962. It was argued that without a specific provision for imposing a penalty for non-payment of SAD, the penalty under Section 114A was not legally sustainable. The Tribunal agreed, citing judgments from the Hon'ble Apex Court and the Tribunal, and set aside the penalty. 3. Applicability of Extended Period of Limitation: The Tribunal considered whether the extended period of limitation under Section 28 of the Customs Act, 1962, was applicable. The Commissioner had confirmed the duty demand invoking the extended period due to mis-declaration by I.O.C. However, the Tribunal held that the demand could not go beyond five years from the relevant date, as specified under Section 28. Therefore, the demand for the period beyond five years from the date of the Show Cause Notice was incorrect. 4. Correct Computation of Duty Demand: The Tribunal identified an error in the computation of the duty demand. The SAD should be computed on the imported value, excluding Basic Customs Duty and Special Duty of Customs, as these were exempted. The Tribunal directed the Commissioner of Customs to re-quantify the duty demand, excluding the period beyond five years and computing the duty on the correct value. The matter was remanded for this limited purpose, with instructions for the Commissioner to complete the re-quantification and inform the appellant within one month. Conclusion: The Tribunal held that M/s. I.O.C. was not eligible for the SAD exemption under Notification No.34/98 or its successor Notifications for kerosene sold in Orissa without payment of sales tax. The duty demand for the extended period of five years was valid, but the demand beyond five years was incorrect. The penalty under Section 114A was set aside, and the duty demand needed re-quantification. The matter was remanded to the Commissioner of Customs for re-quantification, excluding the period beyond five years and computing the duty on the correct value. (Pronounced and dictated in the open court.)
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