2018 (5) TMI 1623 - AT - Customs

100% EOU - Debonding of goods on payment of duty - some of the goods had become obsolete and were not being put to use - Held that - As per the verification carried out by the departmental officers, it stands concluded that many of these capital goods had become obsolete and were no longer capable of being used. From the record, it is found that the appellant had agreed to the de-bonding of such goods and voluntarily paid the duty - the duty paid is in order. There is no justification for ordering confiscation of the imported goods inasmuch as the goods were found in the bonded premises of the appellant during the course of verification - confiscation and penalty set aside. Appeal allowed in part.

Summary

Issues:
1. Duty payment on obsolete goods
2. Confiscation of imported goods
3. Penalty imposition under Section 112(a) of the Customs Act

Analysis:

Issue 1: Duty payment on obsolete goods
The appellant, a STPI unit, imported capital goods duty-free under the 100% EOU (STPI Scheme) for software development. The Department alleged that a major portion of the goods had become obsolete and were not being used. The appellant admitted to this during the investigation and voluntarily debonded the obsolete goods by paying customs duty amounting to ?1,79,31,160. The Department issued a show-cause notice for demand and appropriation of the duty paid, leading to the impugned order that also included confiscation of the goods and imposition of a penalty under Section 112(a) of the Customs Act. The appellant contended that duty payment was not required as the goods were put to use within their unit and were available during the Department's visit.

Issue 2: Confiscation of imported goods
The Tribunal found that the capital goods in question were indeed imported duty-free for software development and had been warehoused within the bonded premises. Verification revealed that many of these goods had become obsolete and were no longer usable. Despite the appellant voluntarily paying the duty on the obsolete goods, the Tribunal held that there was no justification for ordering the confiscation of the imported goods, as they were found within the appellant's premises during verification. Consequently, the Tribunal set aside the confiscation of goods and the penalty imposed, while upholding the duty payment made by the appellant.

Issue 3: Penalty imposition under Section 112(a) of the Customs Act
The Tribunal's decision to set aside the penalty imposed on the appellant under Section 112(a) of the Customs Act was based on the finding that the duty paid on the obsolete goods was justified, and there was no valid reason for the confiscation of the goods. By upholding the duty payment and overturning the penalty and confiscation, the Tribunal partially allowed the appeal and modified the impugned order.

In conclusion, the Tribunal upheld the duty payment made by the appellant on obsolete goods but set aside the confiscation of imported goods and the penalty imposed, as there was no valid justification for such actions. The decision was based on the findings that the goods were within the appellant's premises and that duty payment was in order despite the goods being obsolete.