2018 (7) TMI 711 - AT - Customs

Violation of conditions for Import of goods without payment of duty - actual user conditions - Benefit of N/N. 21/2002 Customs dated 01.03.2002 - it was alleged that majority of sales were affected to customers for use in non-plantations sector like agriculture, Sericulture, forestry, hospitals, Government organizations, hotels and resorts etc. and only small portion of the imports were sold for use in plantations sector - Case of appellant is that as there is no specific condition in the Notification that the said machinery should actually be used in coffee/tea/rubber plantations, it is enough if they are capable of being used in the said sector. Held that - Serial no. 252 (A) of the N/N. 21/2002 Customs, dated 01.03.2002 prescribes concessional rate of duty for the machinery or equipment specified in list (A) in List 32 (A), the said list 32 (A) parts of machinery for use in coffee/tea/rubber plantation sector. It is seen that the exemption Notification is applicable to purely a particular sector i.e. coffee/tea/rubber plantations. It would be said that it is applicable to any sector; the movement of goods are capable of being used in the said sector. Admittedly, some of the machines may be capable of being used other sectors also, however, for the same reason it cannot be held that the exemption will be applicable if the machines are used in other sectors. Such an interpretation would lead to mis-construction of the intent of the Notification. It is seen that the exemption Notification is applicable to purely a particular sector i.e. coffee/tea/rubber plantations. It would be said that it is applicable to any sector; the movement of goods are capable of being used in the said sector. Admittedly, some of the machines may be capable of being used other sectors also, however, for the same reason it cannot be held that the exemption will be applicable if the machines are used in other sectors. Such an interpretation would lead to mis-construction of the intent of the Notification. Extended period of limitation - Held that - The fact of sale or use in other sectors was never disclosed to the Department. It is only after the department conducted an enquiry the facts come to the light. There is a clear suppression of the material fact - extended period is correctly invoked. Appeal disposed off.

Summary

Issues Involved:
1. Validity of the Show Cause Notice (SCN) without appealing against the Assessment Order.
2. Interpretation of Notification No. 21/2002 Customs regarding the requirement of actual use in the plantation sector.
3. Alleged suppression of facts and invocation of the extended period.
4. Imposition of redemption fine and penalties.

Issue-wise Detailed Analysis:

1. Validity of the SCN without appealing against the Assessment Order:
The appellants argued that the SCN issued without challenging the final assessments through an appeal was invalid. They relied on various case laws, including CCE, Kanpur vs. Flock (India) Pvt Ltd, to support their claim that an assessment order cannot be reopened unless its correctness is questioned through an appeal. However, the tribunal found force in the Departmental Representative's contention that the SCN was issued under Section 28 of the Customs Act, which allows for the reopening of assessments. Therefore, the tribunal concluded that the SCN did not suffer from any legal infirmity.

2. Interpretation of Notification No. 21/2002 Customs:
The appellants contended that the notification did not require the imported machinery to be actually used in the coffee/tea/rubber plantation sector but merely to be capable of such use. They cited several case laws to argue for a broad interpretation of the notification. However, the tribunal held that the notification was sector-specific and intended for machinery used in the plantation sector only. The tribunal referred to the Commerce Ministry's clarification and previous judgments, concluding that the notification should be strictly interpreted. The tribunal rejected the appellants' contention that the machinery's capability of being used in the plantation sector sufficed for the concessional rate of duty.

3. Alleged Suppression of Facts and Invocation of the Extended Period:
The appellants argued that there was no suppression of facts and that the extended period for issuing the SCN could not be invoked. They relied on case laws such as Pushpam Pharmaceuticals Company vs CCE to support their argument. However, the tribunal found that the appellants had not disclosed the sale or use of the machinery in non-plantation sectors to the Department. This non-disclosure amounted to suppression of material facts, justifying the invocation of the extended period for issuing the SCN.

4. Imposition of Redemption Fine and Penalties:
The appellants contended that the redemption fine was incorrectly imposed as the goods were not available for confiscation. The tribunal accepted this contention and set aside the redemption fine. However, the tribunal upheld the penalties imposed on the appellants but reduced the penalties on the Managing Director and Director from ?10,00,000/- each to ?1,00,000/- each, considering the circumstances.

Conclusion:
The tribunal concluded that the SCN was validly issued under Section 28 of the Customs Act, and the extended period was correctly invoked due to the suppression of facts. The notification was interpreted strictly to apply only to machinery used in the plantation sector. The redemption fine was set aside, and the penalties on the Managing Director and Director were reduced. The appeal was disposed of accordingly.