2018 (9) TMI 1156 - AT - Customs

Benefit of exemption from customs duty - import of cables - telecom equipment for which these cables are used all have an operating voltage of less than 80V. - Department took the view that the cables imported by the appellants are power cables of voltage of more than 80V and not all the cables are designed for telecommunication use as evident by the manufacturer's product data sheet - Sl. No. 28 of Notification No. 25/2005-Cus. dated 1.3.2005 - Held that - The purpose and intent of the 1996 Rules is basically to monitor the route taken by goods imported under certain exemption notification benefits, inter alia, to ensure that they are being used for intended purpose and in the intended manner. While this may be so, it is relevant to note that appellants herein cannot be judged in the same manner as a fly-by-night operator. Even as per the narration in para-8 of the impugned order, they are a 100% subsidiary of the Volex Group, UK and are in the business in the manufacturing cable assemblies for telecommunication and consumer electronic goods industries with major clients such as Erickson India, Idea Cellular, Tata, Nokia, Dell, Lenovo, Samsung, Philips etc. The appellants are also a unit registered with the Central Excise authorities filing periodical returns indicating the excise product manufactured and cleared from their factory. While no doubt, the procedural requirements of the 1996 Rules would be required to be followed for availing the benefit of exemption under Sl.No.33, we hold that unintended aberrations in such compliance should not result in derailment of the exemption benefit otherwise eligible. While holding that appellant cannot take benefit of the exemption under Sl.No.28 of notification No. 25/2005-Cus. for the impugned imported goods, it is held that they can very well avail the benefit under Sl.No.33 of the same notification instead. Penalty u/s 112 (a) of the Customs Act, 1962 - Held that - The penalty of ₹ 4,66,000/- imposed on appellants under Section 112 (a) of the Customs Act, 1962 is also unjustified and the same is therefore set aside. Appeal allowed.

Summary

Issues Involved:

1. Eligibility for exemption under Sl. No. 28 of Notification No. 25/2005-Cus.
2. Alternative eligibility for exemption under Sl. No. 33 of Notification No. 25/2005-Cus.
3. Imposition of penalty under Section 112(a) of the Customs Act, 1962.

Detailed Analysis:

1. Eligibility for exemption under Sl. No. 28 of Notification No. 25/2005-Cus:

The appellant, M/s. Volex Interconnect (India) Pvt. Ltd., imported telecom cables and claimed exemption under Sl. No. 28 of Notification No. 25/2005-Cus. The department argued that the cables were power cables with a voltage capacity exceeding 80V, contrary to the exemption criteria. The appellant contended that the term 'for' in the notification referred to the intended use in telecommunications rather than the actual voltage capacity. However, the Tribunal noted that the notification specifically limited the exemption to cables with a voltage capacity not exceeding 80V. Since the imported cables had a rated capacity closer to 1000V, they were deemed ineligible for the exemption under Sl. No. 28.

2. Alternative eligibility for exemption under Sl. No. 33 of Notification No. 25/2005-Cus:

The appellant alternatively claimed exemption under Sl. No. 33 of the same notification, which covers all goods used for manufacturing items specified in Sl. Nos. 1 to 32, provided the importer follows the Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996. The adjudicating authority initially denied this benefit due to non-compliance with procedural requirements. However, the Tribunal observed that the appellant had substantially complied with the substantive conditions of the 1996 Rules, such as being a registered unit, accounting for the imported goods, and using them for manufacturing telecom equipment. The Tribunal held that minor procedural lapses should not result in the denial of the exemption, especially since the appellant had subsequently followed the correct procedures for similar imports.

3. Imposition of penalty under Section 112(a) of the Customs Act, 1962:

The Tribunal found the imposition of a penalty of ?4,66,000/- under Section 112(a) of the Customs Act, 1962 to be unjustified. Given that the appellant had a reasonable belief in their eligibility for exemption under Sl. No. 28 and had substantially complied with the conditions for Sl. No. 33, the penalty was deemed inappropriate and was set aside.

Conclusion:

The Tribunal concluded that the appellant was not eligible for the exemption under Sl. No. 28 of Notification No. 25/2005-Cus. but was eligible under Sl. No. 33 of the same notification. Consequently, the penalty imposed was also set aside. The appeal was allowed, and the impugned order was set aside, granting consequential benefits to the appellant as per law.