2016 (5) TMI 599 - Commission - Customs

Settlement of a case - Demand of Custom duty and imposition of penalty - Section 112, 114A & 114AA of Custom Act, 1962 - Evasion of Special Additional Duty - Goods imported through Free Trade Warehousing Zone without payment of SAD by claiming exemption under Notification No. 45/2005-Customs, dated 16-5-2005 and were used in their factory for manufacturing of PVC flooring - Clearances made during the period from 12-3-2013 to 30-7-2013 - Revenue objected that the application is inadmissible because of the bar provided in Section 127L. Held that - the words and phrases used in the Section 127L are shall not be entitled to apply . The bar is on applying subsequent to order of settlement imposing the penalty. The applicant s case is not clearly hit by this bar as in their case the present application has been filed before the order imposing penalty was passed. Thus, the Bench s earlier order allowing the application to be proceeded with is unaffected. Whether the benefit of exemption from SAD under this notification would be available when a DTA unit imports goods and routes it through SEZ/FTWZ for self-consumption i.e. in the nature of stock transfer from SEZ/FTWZ - Held that - the Board through circular 44/2013, dated 30-12-2013 has clarified that the benefit of the notification is not available to the goods which are for self-consumption and consequently SAD is attracted. In the instant case, the goods were for self-consumption and condition of the notification was not satisfied. As such the provisions of Section 111(o) get attracted rendering the liable to confiscation and the applicant/co-applicant liable to penalty under Section 112. The goods are not available for confiscation but the applicant/co-applicant are liable to penalty under Section 112. As there was no misstatement, fraud, etc., neither Section 114A nor Section 114AA is attracted. Quantum of penalty under Section 112 - Held that - the opening paragraph of the Board s circular confirms the claim of the applicant that there was confusion about the applicability of SAD. This fact will have a bearing on the quantum of penalty. The immunities to the applicant and the co-applicant are granted under Section 127H(1) of the Act. Their attention is also invited to the provisions of sub-section (2) and (3) of Section 127H ibid. This order shall be void and immunities withdrawn if the Bench, at any time finds that the applicant had concealed any particular material from the Commission or had given false evidence or had obtained this order by fraud or misrepresentation of facts.

Summary

Issues Involved:

1. Applicability of Special Additional Duty (SAD) exemption under Notification No. 45/2005-Customs.
2. Invocation of the extended period for demand under Section 28 of the Customs Act, 1962.
3. Imposition of penalties under Sections 112, 114A, and 114AA of the Customs Act, 1962.
4. Liability for interest on unpaid SAD.
5. Confiscation of goods under Section 111(o) of the Customs Act, 1962.
6. Immunity from penalty and prosecution under Section 127H of the Customs Act, 1962.

Detailed Analysis:

1. Applicability of Special Additional Duty (SAD) Exemption:

The primary issue was whether M/s. Responsive Industries Ltd. (RIL) was eligible for SAD exemption under Notification No. 45/2005-Customs. The investigation revealed that RIL imported PVC resin for self-consumption in manufacturing and not for sale. They did not pay SAD, presuming VAT/Sales tax was not applicable. However, the Circular No. 44/2013 clarified that SAD exemption is not available for goods cleared from SEZ/FTWZ for self-consumption. The Bench concluded that since the goods were for self-consumption, the benefit of SAD exemption could not be extended to RIL, and thus, the unpaid SAD was recoverable.

2. Invocation of Extended Period for Demand:

The show cause notice invoked the extended period under Section 28 of the Customs Act, 1962, to demand SAD due to the alleged suppression of facts by RIL. The Bench noted that the applicant had admitted the liability and paid the duty and interest during the investigation. The extended period was justified given the circumstances.

3. Imposition of Penalties:

The Revenue argued that RIL deliberately evaded SAD and suppressed facts, making them liable for penalties under Sections 112, 114A, and 114AA. However, the Bench observed that there was no fraud or misstatement by RIL, and the confusion regarding SAD applicability was acknowledged even by the departmental officers. Consequently, penalties under Sections 114A and 114AA were not applicable, but a penalty under Section 112 was justified due to the non-compliance with the notification conditions.

4. Liability for Interest:

RIL had already paid the interest amounting to Rs. 38,60,394/- during the investigation. The Bench settled the interest liability at this amount, confirming no further liability.

5. Confiscation of Goods:

The show cause notice proposed the confiscation of goods under Section 111(o) of the Customs Act, 1962. However, the goods were not available for confiscation, and the Bench focused on the penalty aspect under Section 112 due to the non-compliance with the notification conditions.

6. Immunity from Penalty and Prosecution:

RIL requested immunity from penalty and prosecution, citing bona fide actions and full cooperation during the investigation. The Bench acknowledged the prevailing confusion during the material time and granted partial immunity. A penalty of Rs. 1,80,000/- was imposed on RIL and Rs. 20,000/- on the co-applicant. Complete immunity from prosecution under the Customs Act, 1962, was granted to both the applicant and the co-applicant.

Order:

- Customs Duty: Settled at Rs. 1,84,29,550/- (already paid).
- Interest: Settled at Rs. 38,60,394/- (already paid).
- Penalty: Rs. 1,80,000/- on RIL and Rs. 20,000/- on the co-applicant.
- Prosecution: Complete immunity granted.

The Bench emphasized that the immunities would be void if it was found that the applicants had concealed material facts or obtained the order by fraud or misrepresentation. The order was to be used solely for implementing the decision and not for any other purpose without written permission from the Commission.