2013 (9) TMI 219 - AT - Customs

Benefit of Notification NO. 21/2002 - Excess Quantity Shown - Not fulfillment of the End Use Condition - Confiscation of Gods Interest and Penalty - Assesse were importing Naphtha falling under CTH 27101990 of the first Schedule of the Customs Tariff Act, 1975 by availing benefit of Notification NO. 21/2002 - The appellant failed to declare the actual quantity of Naphtha in the end use certificate, the excess quantity was detained - Department was of the view that they have imported Naphtha in violation of the condition of the Notification NO. 21/2002-Cus as amended by way of showing excess quantity as consumed when compared to actual quantity consumed by submitting false End Use Certificate and thereby evaded Customs duty on suppressed quantity of Naphtha - Held that - Confiscation and penalty was not justified in the case thus confiscation of Naphtha and order for redemption fine and penalty imposed under Section 114 of Customs Act, 1962 were set aside - The appellants were not denying the duty was payable therefore, they have discharged the duty liability rightly - The appellants did not declared the correct quantity of the balance of unutilized Naphtha - Therefore, they were rightly liable to pay interest on the quantity which was not disclosed while furnishing End Use Certificate - Hence the order of appropriating interest amount in case of duty paid on 33950 MT of Naphtha was upheld. The appellant could not use certain quantity of the entire amount of Naphtha imported subsequently since they found generation of electricity not viable by use of Naphtha and found more viable by using the natural gas - This was not a case of levy or non levy of duty by reason of misstatement or suppression of facts etc. but a case of not fulfilling the end use condition of the exemption notification - Penalty cannot be imposed under Section 114A of the Customs Act since there was no mis-declaration etc - The department had proceeded on the sole ground that the appellants have mis-declared quantity of naphtha remaining in stock by providing an incorrect consumption statement.

Summary

Issues:
1. Interpretation of Section 111(o) of the Customs Act, 1962.
2. Application of Notification No. 21/2002-Cus for exemption of duty on imported Naphtha.
3. Allegations of misdeclaration and evasion of Customs duty.
4. Imposition of penalty under Section 114A of the Customs Act, 1962.
5. Liability for interest payment on unutilized Naphtha.

Interpretation of Section 111(o) of the Customs Act, 1962:
The appellant contended that Section 111(o) is not applicable as there was no violation of the conditions of the exemption notification. The Tribunal noted that the case did not involve contravention of any prohibition or restriction during importation. The issue arose due to the failure to meet the end-use condition of the exemption notification. Consequently, the Tribunal ruled that confiscation and penalty were not justified, setting aside the order for redemption fine and penalty under Section 114 of the Customs Act, 1962.

Application of Notification No. 21/2002-Cus for exemption of duty on imported Naphtha:
The appellant imported Naphtha under the benefit of Notification No. 21/2002-Cus, which granted duty exemption for Naphtha used in electricity generation. The Tribunal acknowledged that the appellant could not utilize the entire imported quantity for electricity generation. As the appellant admitted the duty liability and paid the duty, the Tribunal upheld the interest payment on the unutilized Naphtha quantity not declared in the End Use Certificate.

Allegations of misdeclaration and evasion of Customs duty:
The appellant argued against the imposition of penalty under Section 112 of the Customs Act, 1962, stating that they did not mis-declare the quantity with the intention to evade duty. The Tribunal found that the case did not involve misdeclaration for duty evasion purposes but rather the failure to fulfill the end-use condition of the exemption notification. Therefore, the penalty under Section 114A was deemed unjustified.

Imposition of penalty under Section 114A of the Customs Act, 1962:
The department imposed a penalty under Section 114A based on the alleged misdeclaration of the quantity of Naphtha remaining in stock. The Tribunal ruled that since there was no misdeclaration for the purpose of evading duty, the penalty under Section 114A was not warranted, especially considering the appellant's genuine intent to comply with the exemption notification.

Liability for interest payment on unutilized Naphtha:
Regarding interest payment, the Tribunal upheld the interest amount on the unutilized Naphtha quantity not disclosed in the End Use Certificate. The interest on the undisclosed quantity was deemed payable from the first day of the month following the Commissioner (Appeals)'s order date, as unchallenged by any party.

In conclusion, the Tribunal disposed of the appeal by affirming the duty payment, upholding interest payment on undisclosed Naphtha quantity, and setting aside the penalties and confiscation, emphasizing the importance of fulfilling the end-use condition of the exemption notification for duty exemption eligibility.