2017 (5) TMI 938 - AT - Customs

100% EOU - import of second hand machinery for installation and use at Nagpur unit - benefit of N/N. 53/97 dated 3.6.97 - Subsequently, the appellant obtained permission from the Assistant Commissioner, Nagpur to transfer the machinery to their Raipur unit - denial of benefit of notification on the ground that the goods were not installed by the appellant and is transferred to another unit - the claim of appellant is that the goods were not cleared for home consumption and is merely transferred from one warehouse to another - Held that - goods have been removed from one warehouse to another. However, even though the goods have not been cleared for home consumption, the same have not been accounted for to the satisfaction of the proper officer inasmuch as the condition under which such warehousing was permitted was not satisfied - the Customs authorities have rightly demanded the Customs duty on the goods which have been found uninstalled and unused - benefit denied - appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Demand of customs duty and penalties on uninstalled and unused machinery.
2. Applicability of amended conditions of Notification No. 53/97-Cus.
3. Jurisdiction and authority of customs officials to demand duty under Section 72 of the Customs Act.

Issue-wise Detailed Analysis:

1. Demand of Customs Duty and Penalties on Uninstalled and Unused Machinery:
The appellant, a 100% Export Oriented Unit (EOU), imported second-hand machinery under Customs Notification No. 53/97-Cus, claiming exemption from customs duty. The machinery was initially warehoused at the Nagpur unit and later transferred to the Raipur unit with proper permissions. During an investigation by DGCEI, it was found that the machinery remained uninstalled and unused even by March 2005. Consequently, a show cause notice was issued, and the Commissioner confirmed the demand for customs duty and imposed penalties on the appellant and its officials. The Tribunal had earlier set aside the Commissioner’s order and remanded the matter for reconsideration. In the denovo proceedings, the Commissioner reaffirmed the duty demand of ?1,88,26,572 and imposed penalties on the appellant and its officials.

2. Applicability of Amended Conditions of Notification No. 53/97-Cus:
The appellant argued that at the time of import in 1997, there was no condition requiring the installation of machinery within one year. This condition was introduced later by Notification No. 65/99-Cus dated 19.05.1999. The appellant contended that the amended conditions should not apply retrospectively. However, the Tribunal noted that the machinery was rewarehoused at the Raipur unit in April 2000, after the amendment. Thus, the appellant was required to comply with the amended conditions, which mandated installation within one year. The Tribunal held that the appellant failed to meet these conditions, justifying the duty demand.

3. Jurisdiction and Authority of Customs Officials to Demand Duty Under Section 72 of the Customs Act:
The appellant contended that customs duty could only be demanded upon the removal of goods from the warehouse for home consumption. However, the Tribunal referred to Section 72(1)(d) of the Customs Act, which allows the proper officer to demand duty if warehoused goods are not duly accounted for. In this case, the machinery was not installed or used as required, leading to the conclusion that the goods were not accounted for satisfactorily. Therefore, the customs authorities were within their rights to demand the duty.

Conclusion:
The Tribunal upheld the Commissioner’s order, confirming the duty demand and penalties. The appeals were rejected, and the Tribunal emphasized that the appellant was required to comply with the amended conditions of Notification No. 53/97-Cus, given the rewarehousing occurred after the amendment. The customs authorities were justified in demanding duty under Section 72 of the Customs Act due to the appellant's failure to install and use the machinery as stipulated.