2017 (10) TMI 763 - AT - Customs

100% EOU - Violation of import conditions - obsolete goods - Held that - the concerned officials of the appellant themselves have admitted that goods had become obsolete and the same had not been put to use. Further there was no evidence put up on record that when the goods were usable and had operational life, they were installed and put to use by the appellant - demand of duty upheld. The impugned order confiscating the goods listed in Annexure A&B of the show-cause notice and in lieu of confiscation, imposing redemption fine of ₹ 20 lakhs is not sustainable. Therefore, though the demand of duty confirmed for the goods, there are no further reason to order confiscation for these goods and when there is no confiscation warranted, there cannot be any question of imposing any redemption fine. Consequently, the redemption fines imposed are set aside. Appeal allowed in part.

Summary

Issues:
- Confirmation of demand of duty, redemption fine, and penalty against the appellant.
- Applicability of Section 72 of the Customs Act, 1962.
- Validity of the findings of the impugned order regarding the usage of capital goods.
- Imposition of redemption fine and penalty.
- Evidence of goods becoming obsolete and not being put to intended use.
- Confiscation of goods and imposition of redemption fine.

Confirmation of Demand of Duty, Redemption Fine, and Penalty:
The appellant, M/s. AXA Business Services (P) Ltd., appealed against an Order-in-original confirming the demand of duty amounting to &8377; 19,94,512/-, along with a redemption fine of &8377; 20 lakhs and a penalty of &8377; 5 lakhs. The Commissioner upheld the demand and penalties imposed. The Tribunal found that the goods had indeed become obsolete and not utilized as intended. The demand of duty was sustained, citing the appellant's admission of the goods' obsolescence and lack of evidence of their operational use. The case laws cited by the appellant were deemed inapplicable, leading to the denial of relief on the demand of duty.

Applicability of Section 72 of the Customs Act, 1962:
The appellant argued against the applicability of Section 72 of the Customs Act, claiming that the capital goods in question were still warehoused and not expired, thus exempt from duty. They contended that the provisions of Section 72 were not relevant to confirm the duty. However, the Tribunal found that the goods had become obsolete and were not used for their intended purposes, leading to the confirmation of the duty demand.

Validity of Findings on Capital Goods Usage:
The appellant asserted that the capital goods were duly bonded and transferred between their units for legitimate business reasons. They argued that the goods were used for Information Technology Enabled Services (ITES) and were not in violation of any notification conditions. The Tribunal, after considering the submissions, upheld the confirmation of duty as the goods were found to be obsolete and not utilized as claimed by the appellant.

Imposition of Redemption Fine and Penalty:
The impugned order imposed a redemption fine of &8377; 20 lakhs and a penalty of &8377; 5 lakhs on the appellant. The Tribunal found the redemption fine unsustainable, as there was no basis for confiscation of the goods. Consequently, the redemption fines were set aside. Regarding the penalty, the Tribunal reduced the amount from &8377; 5 lakhs to &8377; 5,000, considering the facts and circumstances of the case.

Evidence of Goods Becoming Obsolete:
The Department observed that certain goods, including computer parts and accessories, were obsolete and not used for their intended purposes. The appellant contested these findings, arguing that the goods were still warehoused and had not expired. However, the Tribunal found evidence supporting the obsolescence of the goods, leading to the confirmation of the duty demand.

Confiscation of Goods and Imposition of Redemption Fine:
The impugned order proposed confiscation of goods listed in the show-cause notice and imposed a redemption fine. The Tribunal ruled against the confiscation, citing the lack of grounds for such action. Consequently, the redemption fines were set aside, providing relief to the appellant in this regard.

In conclusion, the Tribunal modified the impugned order, sustaining the demand of duty while setting aside the redemption fines and reducing the penalty imposed on the appellant. The appeal was allowed with the specified modifications.