2014 (1) TMI 168 - AT - Customs

Duty demand - Sales made from the duty-free shop - Imposition of equivalent penalty - Held that - bond officers who were on duty during the relevant period have given statements to the effect that only sales in bulk were being escorted and individual sales to passengers/crew members were not been escorted. This being the case, we find, prima facie, no justification for confirmation of demand - A part of the demand related to vessels which were treated by the Commissioner as coastal vessels. It appears from the record that the appellant has produced evidence to the effect that such vessels, after touching an intermediate port in India, have travelled to foreign destination and claimed that they have to be treated as foreign going vessel in view of the specific definition of foreign going vessel contained in Section 2(21) of the Customs Act - Prima facie demand is not sustainable - Stay granted.

Summary

Issues:
Demand of Rs. 2,09,45,632/- on sales made from a duty-free shop, violation of conditions in the bond license, imposition of penalties on the appellants, requirement of consignments to be escorted to the ship, treatment of vessels as coastal vessels, demands raised on grounds not mentioned in the show cause notice.

Analysis:
The judgment by the Appellate Tribunal CESTAT Bangalore involved the case of an appellant-assessee, M/s. Flemingo (DFS) Pvt. Ltd., with a duty-free shop in the Vizag Port area. The demand of Rs. 2,09,45,632/- was made on various grounds, primarily focusing on sales made to crew members/international passengers where the liquor/cigarettes were allegedly not escorted to the ship by Escort Officers, violating the bond license conditions. A significant part of the demand related to clearances made to ships touching an intermediate port in India. The Commissioner confirmed the demand and imposed penalties on the appellants, challenging which the appellants submitted that the demand confirmation was based on unmentioned grounds in the show cause notice.

The Tribunal carefully considered the submissions and records, noting that there was no specific authority requiring every consignment from the duty-free shop to be escorted by preventive officers to the ship. The Bond Officers' statements indicated that only bulk sales were escorted, not individual sales to passengers/crew members. Thus, the Tribunal found no justification for confirming the demand of Rs. 1.5 crores related to these sales. Additionally, the appellant provided evidence that vessels treated as coastal vessels had actually traveled to foreign destinations after touching an intermediate port, qualifying as foreign-going vessels as per the Customs Act, 1962. Consequently, a substantial part of the demand was deemed prima facie unsustainable.

Furthermore, the Tribunal agreed that demands were raised on grounds not mentioned in the show cause notice, supporting the contention of the learned senior advocate. In light of these findings, the Tribunal waived the pre-deposit of dues as per the impugned order and stayed the recovery until the disposal of the appeals, ultimately allowing all three applications presented.

This comprehensive analysis of the judgment showcases the Tribunal's detailed examination of the issues raised, the legal arguments presented by both sides, and the reasoning behind the decision to grant relief to the appellants based on the lack of justification for the demands and procedural irregularities in the show cause notice.