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2018 (11) TMI 900 - AT - Central ExciseAuction sale - Liability of paying the customs duty and Central Excise duty out of the sale proceeds from the sale of assets - imposition of penalties - Held that - No further arguments can be heard on discharge of duty by appellant herein, as the Apex Court very clearly held that duties are payable to the appellant. Dy. Commissioner of Central Excise was an appellant before the Apex Court . Nothing survives in the appeal of the appellant, though not contested in grounds of appeal, as to the demand of the duties of customs and excise. Penalty u/s 112 of CA - Held that - The adjudicating authority has come to a wrong conclusion in imposing penalty under Sec.112 of the Customs Act on the appellant, inasmuch appellant had never engaged themselves in the import of the goods which are liable for confiscation under the provisions of Sec.111 of the Customs Act, 1962 - It is also to be seen that there is no order for confiscation of the machinery which was sold by the appellant in an auction proceedings. Hence, visiting the appellant with penalty under Sec.112 is unwarranted. Appeal allowed in part.
Issues Involved:
1. Liability of customs and central excise duties. 2. Validity of the show cause notice and impugned order. 3. Priority of secured creditors over government dues. 4. Imposition of penalties under Section 112 of the Customs Act, 1962. Detailed Analysis: 1. Liability of Customs and Central Excise Duties: The appellant challenged the order directing them to discharge customs and central excise duties arising from the import of machinery by M/s Koratla Textiles India Ltd. (KTL). The appellant argued that as a secured creditor, they had priority over government dues, citing the Supreme Court's decisions in UOI vs. Sicom Ltd. and Rana Girders Ltd vs. UOI. However, the Tribunal noted that the appellant had given an undertaking before the High Court of Andhra Pradesh to pay any adjudicated amount from the sale proceeds of KTL's assets. The Supreme Court, in Civil Appeal No. 8191 of 2003, confirmed that the duty liability must be discharged by the appellant, emphasizing the commitment made in the Sale Confirmation Letter. 2. Validity of the Show Cause Notice and Impugned Order: The appellant contended that the show cause notice dated 12.04.2000 and the impugned order dated 28.03.2002 were misconceived and contained several misstatements of facts and law. They argued that the notice was issued during the pendency of Writ Petition No. 6233/2001 and that the Department's claims were refuted by the High Court's decision in the same writ petition. The Tribunal, however, upheld the validity of the show cause notice and the impugned order, emphasizing that the appellant's undertaking to pay the dues was binding. 3. Priority of Secured Creditors Over Government Dues: The appellant argued that as a secured creditor, they had priority over customs and excise duties, citing Section 29 read with Section 46B of the State Financial Corporation Act, 1951. They maintained that the seizure, auction, and recovery of the hypothecated machinery were completed before the issuance of the show cause notice. The Tribunal acknowledged the appellant's position but reiterated that the Supreme Court's decision in Civil Appeal No. 8191 of 2003 mandated the payment of duties from the sale proceeds, thereby dismissing the appellant's claim of priority. 4. Imposition of Penalties Under Section 112 of the Customs Act, 1962: The adjudicating authority had imposed a penalty of ?3,50,000 on the appellant under Section 112 of the Customs Act, 1962. The appellant contended that they were neither importers nor representatives of the importer and had not contravened any provisions of the Customs Act. The Tribunal found merit in this argument, noting that the appellant had not engaged in any import activities liable for confiscation under Section 111 of the Customs Act. Furthermore, there was no order for the confiscation of the machinery sold by the appellant in auction proceedings. Consequently, the Tribunal set aside the penalty imposed on the appellant, deeming it unwarranted and not in consonance with the law. Conclusion: The Tribunal upheld the appellant's liability to discharge customs and central excise duties as mandated by the Supreme Court but set aside the penalty imposed under Section 112 of the Customs Act, 1962. The appeal was disposed of accordingly, with the operative part of the order pronounced in the open court.
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