2016 (11) TMI 6 - AT - Customs

100% EOU (STPI unit) - leasing out the duty-free goods in violation of the relevant customs and central excise Notifications - Redemption fine - Penalty - Notifications No.52/2003-Cus. as well as Notification No.22/2003-CE dated 31.3.2003 - Held that - some of the conditions of the Notifications stand violated in the process of leasing of the premises and the goods, such transfer of goods have taken place only to other STP units - It is also pertinent to record that the diversion of such units has not been made outside the EOU scheme/STP scheme. The imported as well as indigenous goods have been procured duty free by the respondent under the STP schemes, which involves obligation to export software. Transferring such duty-free goods out of their own possession would amount to de facto de-bonding of such goods. The demand of duty foregone on the imported as well as indigenous goods is in order. It is also on record that the entire duty liability along with interest stands already paid by the respondent - waiver of redemption fine and penalty confirmed - Decided against the revenue.

Issues:
- Appeal against Order-in-Original dated 9.12.2005 passed by Commissioner of Customs, Bangalore
- Allegation of contravention of Notifications No.52/2003-Cus. and Notification No.22/2003-CE
- Payment of customs duty and central excise duty by the respondent
- Imposition of redemption fine and penalty by the Commissioner
- Appeal by Revenue against the impugned order
- Cross-objections filed by the respondent

Analysis:
1. Appeal against Order-in-Original: The appeal was filed by Revenue against the Order-in-Original dated 9.12.2005 passed by the Commissioner of Customs, Bangalore. The respondent-assessee, a STP unit under the 100% EOU scheme, was found to have leased out their premises containing bonded duty-free goods, both imported and indigenous, to other STP units. Customs Authorities alleged a contravention of Notifications No.52/2003-Cus. and Notification No.22/2003-CE. The Commissioner confirmed the duty demand already paid by the respondent and held the goods liable to confiscation under Section 112(a) of the Customs Act, 1962, but refrained from imposing redemption fine and penalty.

2. Allegation of Contravention of Notifications: The Commissioner found that the leasing of duty-free goods to other STP units was done without obtaining permission from the proper authorities, leading to a violation of the conditions of duty-free goods. Consequently, the goods were held liable for confiscation under Section 111(o) of the Customs Act, 1962. The Commissioner's decision was based on the violation of conditions, and Revenue's grievance was the lack of imposition of redemption fine and penalty despite the violations.

3. Payment of Customs Duty and Central Excise Duty: The respondent had paid the total customs duty and central excise duty voluntarily on the imported and indigenous duty-free goods during the pendency of the proceedings. The Commissioner confirmed the duty demand and interest paid by the respondent. The respondent argued that they were not liable to pay such duties as the duty-free goods were transferred to other STP units on an Inter Unit Transfer (IUT) basis, permissible under the Foreign Trade Policy and relevant Notifications.

4. Imposition of Redemption Fine and Penalty: Revenue appealed against the impugned order, seeking the imposition of redemption fine on goods liable for confiscation and penalty on the respondent. However, the Commissioner refrained from imposing redemption fine and penalty, taking a lenient view due to the circumstances of the case.

5. Cross-objections filed by the Respondent: The respondent filed cross-objections, contending that the entire order should be set aside as the duty demand was unjustified. They argued that the transfer of duty-free goods to other STP units did not result in revenue loss to the Government and should not lead to the imposition of redemption fine and penalty. The Tribunal upheld the impugned order, dismissing the appeal by Revenue and disposing of the cross-objections filed by the respondent.

In conclusion, the Tribunal upheld the Commissioner's decision, emphasizing that the transfer of duty-free goods to other STP units, though violating some conditions, did not result in revenue loss and did not warrant the imposition of redemption fine and penalty. The duty demand and interest paid by the respondent were confirmed, and the appeal by Revenue was dismissed.

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