2019 (5) TMI 1030 - AT - Customs

Violation of import conditions - actual user condition - Benefit of N/N. 21 of 2002-Cus dated 01.03.2002, Serial No.83 of the said Notification - Government of India entity engaged in the manufacture of Polio Drops - import of bulk polio vaccine as prepared by World Health Organization - denial of benefit on the ground that appellant did not use the imported bulk drugs for the intended purpose of manufacture of Polio Drops in their factory - time limitation. HELD THAT - The Notification grants exemption to the Bulk Drugs subject to the conditions that the procedure as laid down in 1996 Rules is followed by the appellant. The said Rules are detailed Rules requiring importer to follow a detailed elaborate prescribed procedure. As already noticed, the said Rules provided concessional rate of duty subject to the conditions that the importer would use the goods in his own factory for further manufacture of the final product - Admittedly in the present case the imported Bulk Drugs has not been utilized by the appellant in his own factory for further manufacture of Polio Drop. Instead the Bulk Drugs stands sold by them to another private party who have though used the same for intended purposes for manufacture of Polio Drops only and further supplied them to the Ministry of Health. Time Limitation - HELD THAT - The imports took place during the period April to October, 2007 and the sale of the imported goods was during the financial year 2007-08. In terms of the Rules in question the importer is required to maintain the detailed records of the use of the imported goods, which appellant had been undisputedly maintaining By considering the date of sale of bulk drugs as the relevant date, the proceedings initiated by show cause notice dated 27 March, 2015 are even beyond the period of 5 years, as provided in Section 28 of the Customs Act, 1962 - also the appellant is a Government enterprise and according to the well settled law, there cannot be any mala fide intention on the part of the Government to evade any duty - the demand is hopelessly barred by the limitation and is in fact even beyond maximum period prescribed under the law. Demand is set aside on the point of time bar - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996.
2. Compliance with conditions of Exemption Notification No.21 of 2002-Cus dated 01.03.2002.
3. Allegation of not using imported bulk drugs for intended purpose.
4. Time bar for initiating proceedings under Section 28 of the Customs Act, 1962.

Interpretation of Customs (Import of Goods at Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 1996:
The appellant, a Government entity, imported bulk polio vaccines under exemption as per Notification No.21 of 2002-Cus. The Customs Rules require the importer to follow a detailed procedure, including obtaining a certificate and maintaining accounts of imported goods. The Rules mandate using the goods in the importer's factory for further manufacture of the final product. In this case, the appellant sold a part of the imported bulk drugs to another party for manufacturing Polio Drops, not utilizing them in their factory. The Tribunal noted the detailed procedure laid down in the Rules and the non-compliance by the appellant.

Compliance with conditions of Exemption Notification:
The Revenue alleged that the appellant did not fulfill the conditions of the Customs Rules, leading to the initiation of proceedings against them. The Commissioner confirmed the duty demand, interest, and penalty, along with confiscation of the unsold bulk drugs. The Tribunal observed that the appellant's failure to use the imported bulk drugs for manufacturing Polio Drops in their factory violated the conditions of the Notification, warranting the demand and penalties imposed.

Allegation of not using imported bulk drugs for intended purpose:
The appellant imported bulk drugs for manufacturing Polio Drops but sold a portion due to lower orders from the Health Department. The Tribunal found that the appellant's actions of selling the bulk drugs to another party for manufacturing Polio Drops did not align with the intended purpose of the scheme, leading to the violation of the Customs Rules and Notification conditions.

Time bar for initiating proceedings under Section 28 of the Customs Act, 1962:
The proceedings against the appellant were initiated through a show cause notice in 2015 for imports made in 2007. The Tribunal noted that the demand was time-barred as per Section 28 of the Customs Act, which sets a limitation period of 5 years. Considering the sale of goods in 2007-08, the Tribunal found the demand beyond the prescribed period, especially for a Government enterprise where no mala fide intention to evade duty was established. Consequently, the Tribunal set aside the demand, interest, penalty, and redemption fine, ruling in favor of the appellant.

In conclusion, the Tribunal's judgment revolved around interpreting the Customs Rules, assessing compliance with the Exemption Notification, addressing the allegation of not using imported bulk drugs for the intended purpose, and determining the time bar for initiating proceedings under the Customs Act. The decision favored the appellant, setting aside the demand based on the time bar and lack of mala fide intention, ultimately allowing the appeal against the duty, interest, penalty, and redemption fine.