2015 (9) TMI 818 - AT - Customs

Violation of notification No.20/99-Cus and 16/2000 Goods not used in manner intended Appellants had shut down plant and disposed entire plant and machinery consisting of old as well as new machinery by e-auction Imported goods which were cleared under concessional rate of duty forming part of plant and machinery were also disposed Such disposal was alleged by Customs as violation of condition of notification No.20/99-Cus and 16/2000 on ground that imported goods have not been put to intended use but were sold DRI seized imported machinery but were released provisionally on execution of bond and giving of bank guarantee Differential customs duty was also demanded alongwith redemption fines and penalty Held that - Appellants took decision to close down Plant within 2 years of importation Reasons for shut down of plant is irrelevant in so far as customs exemption availed under Notification No.20/99 and 16/2000 is concerned Therefore, disposal of imported goods did not serve intended purpose of notification In spite of being fully aware of fact that imported goods were to be used for intended purpose, appellants failed to fulfill undertaking given to Customs authorities as required by condition of notification That warranted appellant to pay duty in event of failure of not using goods for manufacture of fertilizer. Members of successful bidder/awardee in their statements admitted that they have to bear all duties and taxes as stipulated in e-auction but there was no mention of any payment of customs duty on imported machineries When whole plant was sold to third party, nothing prevented appellant to collect differential customs duty on imported goods contained in plant which was sold Appellant cannot take shelter on ground that mere installation of imported machinery and commissioning plant for short period shall absolve it from liability Therefore, adjudicating authority rightly demanded Customs duty from appellant who are owners and beneficiary of imports Decided against Appellant.

Summary

Issues Involved:
1. Concessional benefits under Notification Nos. 20/99-Cus and 16/2000-Cus.
2. Demand of differential duty.
3. Adjustment of voluntarily paid amount.
4. Confiscation of seized goods.
5. Liability for penal action.
6. Enforcement and adjustment of bond and bank guarantee.

Issue-wise Detailed Analysis:

1. Concessional Benefits under Notification Nos. 20/99-Cus and 16/2000-Cus:
The appellant imported machinery and parts for revamping a fertilizer plant, availing concessional customs duty under Notification Nos. 20/99-Cus and 16/2000-Cus. The key contention was whether the concessional benefits should be denied as the imported goods were sold and not utilized for the intended purpose. The tribunal noted that the concessional rate of duty was available only if all conditions stipulated in the notifications were fulfilled. The primary condition was that the imported goods must be used for the intended purpose, and in case of failure, the differential duty should be paid. The appellant's decision to shut down the plant and sell the machinery within two years of importation was found to be a breach of this condition, thus making them liable for the differential duty.

2. Demand of Differential Duty:
The adjudicating authority demanded a differential duty of Rs. 10,02,48,538/- from the appellant for violating the conditions of the notifications. The tribunal upheld this demand, noting that the appellants had failed to use the imported goods for the intended purpose, which was a mandatory condition for availing the concessional duty. The tribunal emphasized that the mere installation and temporary use of the machinery did not fulfill the condition of continuous use for manufacturing fertilizer.

3. Adjustment of Voluntarily Paid Amount:
The appellant had voluntarily paid an amount of Rs. 5,46,915/- towards the imported surplus material taken back by M/s. PDIL. The tribunal considered this amount and adjusted it against the differential duty liabilities.

4. Confiscation of Seized Goods:
The adjudicating authority ordered the confiscation of the seized goods valued at Rs. 23 crores under Section 111(o) of the Customs Act, 1962, but allowed redemption on payment of a fine of Rs. 2.30 crores. The tribunal upheld this order, noting that the disposal of the imported goods did not serve the intended purpose of the notification, thereby frustrating its object.

5. Liability for Penal Action:
The adjudicating authority imposed a penalty of Rs. 10,02,48,538/- under Section 112(a) of the Customs Act, 1962, on the appellant. However, the tribunal, considering the facts and circumstances, reduced the penalty to Rs. 2,50,00,000/-.

6. Enforcement and Adjustment of Bond and Bank Guarantee:
The adjudicating authority ordered the enforcement of the bond for Rs. 23 crores and the bank guarantee for Rs. 3 crores executed by the appellant towards the provisional release of the seized goods. The tribunal upheld this order, noting that the appellant had undertaken full responsibility for any customs disputes and had previously paid customs duty on surplus imported goods.

Conclusion:
The tribunal confirmed the demand of differential customs duty of Rs. 10,02,48,538/- and upheld the confiscation of goods with a redemption fine of Rs. 2.30 crores. The penalty imposed on the appellant was reduced to Rs. 2,50,00,000/-. The appeal was partly allowed to the extent of the reduction in penalty.