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2016 (3) TMI 338 - AT - CustomsEligibility for exemption under Notification 21/2002 - Import of Pop corn maize cleared under Tariff Rate Quota scheme at concessional rate of Custom duty in terms of Notification No. 21/2002, dated 1-3-2002. Exemption denied on violation of Actual User Condition - Held that - by relying on the case of Sriven Marketing v. Union of India 2012 (1) TMI 204 - ANDHRA PRADESH HIGH COURT , the processes undertaken by the appellant as refrigeration, gradation, packing, fumigation, etc. in case of vending popcorn amounts to manufacture. Therefore, the Actual User condition is satisfied and the appellant are eligible for the benefit of concessional rate of duty under Notification No. 21/2002 and the demand of duty on this amount is not sustainable. Inclusion of Royalty paid - In terms of Rule 10(i)(c) of the Customs Valuation Rules - Whether the royalty paid by the appellant to their licensor is liable to be included in the assessable value for determining the Customs duty - Held that the royalty payments are made as percentage of the net proceeds of sale of products sold in India and abroad. It is quite obvious that maize product being an agricultural product, the price of the imported goods i.e. maize corn is included in the net proceeds of sale of finished goods which are essentially corn only and the royalty is paid on corn. Therefore, royalty paid by the appellant is includible in the value of the imported goods for purpose of assessment of Customs duty. Confiscation and Penalty - Vending Corn - The department contended that appellant had not used imported goods for manufacturing vending corn but sold the same in the market in the same condition as it was imported and therefore the vending corn is liable to confiscation and confiscated the same under Section 111(d), 111(m) and 111(o) of the Customs Act - Held that Section 111(m) speaks of confiscation in respect of goods which do not correspond in respect of any particulars with the entry made under Customs Act. Here the entry referred to is the Bill of entry and the declaration thereto. As the declaration did not declare the existence of the Agreement, the goods are liable to be confiscated under Section 111(m) of the Customs Act and penalty under Section 114A and 114AA are to be imposed . Also the import of the goods is not prohibited nor is there violation of post importation condition, therefore, goods can not be confiscated under Section 111(d) and 111(o). - Decided partly in favour of appellant
Issues Involved:
1. Eligibility for exemption under Notification No. 21/2002. 2. Inclusion of royalty payments in the assessable value for determining Customs duty. Issue-wise Detailed Analysis: 1. Eligibility for Exemption under Notification No. 21/2002: The appellant imported "Pop corn maize" under the Tariff Rate Quota (TRQ) scheme at a concessional rate of customs duty, as specified in Sr. No. 21 of Notification No. 21/2002. The condition for this exemption required a TRQ Allocation Certificate issued by the Directorate General of Foreign Trade (DGFT). The primary contention was whether the appellant satisfied the "Actual User" condition specified in the Foreign Trade Policy (FTP). The appellant argued that the "Actual User" condition was made non-mandatory by Public Notice 47(RE-2010)/2009-14 dated 18-5-2011, and that the processes undertaken on the imported maize (refrigeration, fumigation, grading, etc.) qualified as "manufacture" under the FTP. However, the Revenue contended that the appellant did not comply with the "Actual User" condition as the vending corn was sold in the same condition as imported. The Tribunal found that the "Actual User" condition was indeed incorporated in the appellant's license and that the processes undertaken (refrigeration, repacking, etc.) fell within the broad definition of "manufacture" under para 9.37 of the FTP. Therefore, the appellant satisfied the "Actual User" condition and was eligible for the exemption under Notification No. 21/2002. Consequently, the demand of Rs. 4,98,24,082/- was set aside. 2. Inclusion of Royalty Payments in the Assessable Value: The second issue was whether the royalty paid by the appellant to ConAgra Foods Inc., USA, should be included in the assessable value of the imported goods. The Tribunal examined the agreement between the appellant and ConAgra Foods, which detailed the control and specifications imposed by the licensor on the manufacturing process, quality control, and marketing of the products. The Tribunal concluded that the royalty payment was directly related to the imported goods and was a condition of their sale, as the licensor had comprehensive control over the quality and specifications of the imported maize. The Tribunal distinguished this case from others where the royalty was not related to the imported components. Therefore, the royalty paid was includible in the assessable value under Rule 10(i)(c) of the Customs Valuation Rules, and the demand of Rs. 1,49,70,000/- was confirmed along with interest. Confiscation and Penalties: The Tribunal upheld the confiscation of goods under Section 111(m) of the Customs Act due to mis-declaration in the Bill of Entry regarding the existence of the royalty agreement. However, it did not sustain confiscation under Sections 111(d) and 111(o) as there was no prohibition on import or violation of post-import conditions. Penalties under Sections 114A and 114AA were also upheld due to suppression of facts. Conclusion: The appeal was disposed of with the following conclusions: - Exemption under Notification No. 21/2002 was admissible, and the demand of Rs. 4,98,24,082/- was set aside. - Royalty payments were includible in the assessable value, and the demand of Rs. 1,49,70,000/- along with interest was confirmed. - Confiscation of goods under Section 111(m) and penalties under Sections 114A and 114AA were upheld.
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