2015 (12) TMI 228 - HC - Customs

Denial of Exemption of duty - Held that - Respondent no.1 Tribunal, while rejecting the petitioner s application for exemption from paying the custom duty at the time of filing the appeal, has not taken into account the fact that the assets of the petitioner have been taken over and sold under the provisions of the SARFASI Act and that the machine in question was taken into custody by the receiver under order of the Mumbai High Court and was sold by the receiver. - this relevant factor, has been taken into consideration by the Tribunal while deciding the application under Section 129E of the Act, for the purposes of arriving at a conclusion as to whether insistence on pre-deposit of the custom duty would have caused undue hardship to the petitioner. It is also observed that the respondents have not filed any document nor have they controverted the assertion of the petitioner. - Decided partly in favour of assessee.

Issues involved:
1. Rejection of exemption from depositing custom duty under Section 129E of the Customs Act, 1962.
2. Interpretation of a Hire Purchase Agreement and its impact on the liability to pay custom duty.
3. Consideration of the petitioner's status as a sick industry and its impact on the obligation to pay duty.
4. Enforcement of liability for custom duty against a third party.
5. Impact of asset dispossession under the SARFASI Act on the ability to pay custom duty.
6. Assessment of undue hardship in relation to pre-deposit of custom duty.

Detailed Analysis:
1. The petitioner challenged the order of the Customs Excise and Service Tax Appellate Tribunal rejecting their application for exemption from depositing the entire amount of duty under Section 129E of the Customs Act. The High Court observed that both the assessing authority and the First Appellate Authority had found the petitioner liable to pay custom duty. However, the Court noted that the Tribunal did not consider the fact that the petitioner's assets had been taken over and sold under the SARFASI Act, which could impact the ability to pay the duty and cause undue hardship.

2. The petitioner argued that a Hire Purchase Agreement with M/s Tata Finance Limited relieved them of the liability to pay custom duty as per the terms of the agreement. The respondent contended that the petitioner had executed a bond accepting liability for duty payment, making them responsible regardless of the agreement. The Court found that the existence of the agreement did not absolve the petitioner from statutory duty obligations, emphasizing that legal provisions supersede private agreements.

3. The petitioner's status as a sick industry, declared by the BIFR, was raised as a point of contention. The petitioner claimed that asset dispossession under the SARFASI Act had left them unable to pay the duty. The Court considered these factors and acknowledged the financial hardship faced by the petitioner due to the asset dispossession, leading to a partial allowance of the petition.

4. The issue of enforcing liability for custom duty against a third party, M/s Vamptex Traders, was raised. The petitioner argued that since the machine in question was purchased by M/s Vamptex Traders, they should bear the duty liability. The Court noted this argument but primarily focused on the petitioner's immediate obligation to pay duty under the law.

5. The Court highlighted the impact of asset dispossession under the SARFASI Act on the petitioner's ability to comply with the duty payment order. The Court considered the sale of assets and the financial constraints faced by the petitioner due to the asset dispossession, leading to the decision to set aside the Tribunal's order and allow a partial deposit of 50% of the custom duty within a specified period.

6. The Court assessed the undue hardship faced by the petitioner in relation to the pre-deposit of custom duty. Considering the financial constraints and asset dispossession, the Court found that insisting on the full amount of duty deposit would cause undue hardship to the petitioner. Hence, the Court ordered a partial deposit of 50% within a specified timeframe, taking into account the petitioner's circumstances and the need to balance statutory obligations with financial constraints.

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