2008 (11) TMI 223 - AT - Customs

100% EOU Import of communication equipments including a multiplexer (Promina), EPABX, router and Echo Canceller and their accessories Exemption notification no. 140/91 dated 22.10.91 - LOP was granted for specified purpose namely development and export of software; the concerned exemption notification permitted import for the said purposes and they were required to use them, (the imported goods) within the unit . In the present case, goods have been used for unintended and unauthorised purposes. held that - applicable duty shall be payable irrespective of whether they redeem the same or not independently of Section 125(2) as the duty is recoverable under Section 12 demand of duty is restricted to declared price (purchase price) and not on list price penalty on the firm reduced personal penalty set aside.

Summary

Issues Involved:
1. Validity of the investigation and initiation of recovery proceedings.
2. Cross-examination of witnesses and adherence to principles of natural justice.
3. Misuse of imported equipment and violation of exemption notifications.
4. Enhancement of declared value of imported goods.
5. Imposition of penalties and confiscation of goods.

Detailed Analysis:

1. Validity of the investigation and initiation of recovery proceedings:
The appellant contended that the Letter of Permission (LOP) granted by the STPI was valid for three years, and the investigations were premature as they commenced before the completion of this period. However, the Tribunal held that the Customs Authorities' jurisdiction and powers to demand duty are derived from the Customs Act and are not dependent on any permission from the Development Commissioner. The Tribunal found that the imported equipment was promptly installed but used for unauthorized purposes, thus violating the conditions of the exemption notification.

2. Cross-examination of witnesses and adherence to principles of natural justice:
The appellant argued that the Department did not offer cross-examination of all witnesses, and the statements were taken under coercion. The Tribunal noted that cross-examination was not allowed only for witnesses who were untraceable. It was also observed that no questions were put to the witnesses on core issues during cross-examination. The Tribunal concluded that there was no violation of principles of natural justice.

3. Misuse of imported equipment and violation of exemption notifications:
The Tribunal found that the imported equipment, meant for developing and exporting software, was used to operate as a parallel telecom authority. The equipment facilitated international calls from the USA to be routed as local calls in Delhi, violating the conditions of the exemption notification. The Tribunal confirmed that the goods were liable for confiscation under Section 111(o) of the Customs Act due to their unauthorized use.

4. Enhancement of declared value of imported goods:
The appellant contended that the Department erroneously enhanced the value of the goods based on the list price instead of the purchase price. The Tribunal accepted the appellant's submission, stating that the declared price was the actual purchase price, and there was no contrary evidence of a higher price. Therefore, the enhancement of the assessable value was not warranted, and the duty demand was accordingly restricted.

5. Imposition of penalties and confiscation of goods:
The Tribunal upheld the confiscation of the goods but reduced the redemption fine from Rs. 75 lakhs to Rs. 10 lakhs, considering the outdated nature of the equipment. The duty demand was confirmed, but the value enhancement for a specific consignment was not sustained. The penalty on the appellant-firm was reduced from Rs. 50 lakhs to Rs. 10 lakhs. The separate penalty of Rs. 50 lakhs on Shri Rakesh Gupta was set aside, as imposing a separate penalty on the proprietor was deemed unjustified.

Conclusion:
The Tribunal disposed of the appeals by upholding the confiscation of goods, reducing the redemption fine and penalties, and restricting the duty demand based on the actual purchase price. The judgment emphasized the unauthorized use of imported equipment and the adherence to principles of natural justice during the proceedings.