2007 (10) TMI 56 - AT - Customs

Import of duty free capital goods under Not. 77/80 Goods found defective Goods are within bonded warehouse and not been removed Hence it is not the case of clandestine removal so confiscation and penalty are not justified No duty can be demanded so exemption under Notification is available

Summary

Issues:
- Benefit of Notification No. 77/80-Cus dt. 174-1980
- Fulfillment of conditions for duty exemption
- Duty remission under clause 9 of the Notification
- Confiscation of goods and imposition of penalty
- De-novo adjudication by Tribunal
- Appeal rejection by Commissioner (Appeals)
- Interpretation of Para(9) of the Notification
- Goods still within bonded warehouse
- Application of Gujarat High Court's decision
- Justification of duty demand confirmation

Analysis:
The appeal before the Appellate Tribunal CESTAT, Ahmedabad revolves around the benefit of Notification No. 77/80-Cus granting duty exemption for goods imported into India for production of goods for export by units in Khandla Free Trade Zone. The appellant imported various goods during 1981-1985 without duty payment, but some were found defective and unused. A show cause notice demanded duty payment and proposed confiscation for non-compliance with the notification's conditions, requiring use within a specified period. The Additional Commissioner confirmed duty payment of Rs. 9,27,306 and imposed a penalty under Section 112(a) of the Act.

The Tribunal initially set aside the order and remanded the matter for de-novo adjudication considering Para(9) of the Notification. However, during the re-adjudication, the Asst. Commissioner maintained the duty demand, stating lack of evidence for defects and non-compliance with the end-use condition. The Commissioner (Appeals) upheld this decision, leading to the present appeal before the Tribunal.

The appellant argued fulfillment of export obligations, defective goods being unused, and the goods remaining in the bonded warehouse. Citing the Gujarat High Court's decision, the appellant contended that duty can only be demanded upon goods leaving the bonded warehouse, and duty remission under Section 23 of the Act should apply to warehouse goods irrespective of other provisions. The Tribunal, after considering the arguments, noted that Para(9) of the Notification exempts duty for goods lost, destroyed, damaged, or deteriorated without willful acts. Since the goods were not removed from the factory and were unfit for use, duty demand was deemed unjustified.

Ultimately, the Tribunal set aside the duty demand confirmation, confiscation, and penalty, emphasizing that the goods remaining in the bonded warehouse could not be subject to duty payment based on the circumstances of the case and the provisions of the Notification and relevant legal precedents.

*(Pronounced in Court)*