2012 (3) TMI 272 - AT - Customs

Waiver of predeposit of duty,interest and penalty and stay of the impugned order -the impugned goods imported namely urea, under the licence issued by the DGFT was required to be taken into the appellants-factory for manufacture of NPK Fertilizer and the same was packed and sold to authorized dealers to be used as manure for agricultural use by the farmers at the consumer price fixed by the Government in accordance with the provisions of Essential Commodities Act - the assessee contented that when the expression used in the notification 11/97, 23/98 and 20/99 is for use as manure and the urea has been sold under the Fertilizer Control Order, it has to be assumed that the urea was for use as manure and the exemption has to be allowed, in view of the affidavit filed by the appellants - Held that - the customs duty exemption states that the same is not linked to the import condition of actual use as the relevant customs notifications provided for no conditions hence, order to waiver of predeposit of the duty and interest amounts during the pendency of the appeal - the appellants have definitely violated the conditions of import license hence the appellants need to predeposit Rs.5,00,000/- towards penalty within four weeks from the date of order and report compliance .

Summary

Issues:
1. Duty demand, interest, and penalty imposition on the appellant-PSU for violation of import licensing conditions.
2. Customs duty exemption linked to actual use of imported goods for manure purposes.

Analysis:

Issue 1: Duty Demand, Interest, and Penalty Imposition
The appellant-PSU faced a duty demand of over Rs.32 crores, confiscation of goods valued at over Rs.97 crores, a fine of Rs.10 lakhs for redemption, penalty of over Rs.32 crores, and interest on duty. The appellant sought waiver of predeposit and stay of the impugned order. The appellant admitted to the violation of the import license condition but argued it was imposed by the Ministry of Fertilizer and the goods were sold in compliance with statutory control orders. The Tribunal found two separate issues: duty demand with interest and violation of import licensing conditions. The Tribunal ruled in favor of the appellant, waiving predeposit of duty and interest due to the absence of conditions in the customs duty exemption notification linked to import licensing conditions.

Issue 2: Customs Duty Exemption and Actual Use
The customs duty exemption notification had no specific conditions related to the actual use of the imported goods for manure purposes. The Tribunal emphasized that the exemption was not linked to the import license condition of actual use. The appellant had imported urea for further manufacture but sold it to authorized dealers under statutory control orders. The Tribunal noted that the exemption was allowed based on the assumption that the urea was for use as manure, especially supported by the affidavit filed by the appellant. The Tribunal clarified that the absence of a condition for actual use implied that the intention of the Government was not to mandate proof of actual use. Any diversion of urea for industrial use by dealers, even if minimal, should be addressed under a different law, not the Customs Act.

In conclusion, the Tribunal ruled in favor of the appellant-PSU, waiving predeposit of duty and interest. However, a penalty of Rs.5,00,000 was imposed for the violation of the import licensing condition, considering the statutory liability despite no personal involvement of officials being proven. The Tribunal emphasized the need for proportionate penalties and compliance within a specified timeline.