2022 (3) TMI 1269 - AT - Customs

Benefit of nil rate of additional duty of Customs (SAD) - Department formed an opinion that said exemption was applicable only to the pre-packaged goods intended for retail sale where as the software imported by the appellant was not for retail sale but was meant for the machines imported by them - section 5 of section 3 of Customs Tariff Act, 1975 - Time limitation - HELD THAT - Coming to the facts of the present case, a mere fact that notification under which appellants were claiming exemption was not applicable to them, at the time of first audit, there was no reason with the appellant to discontinue the availment of exemption of NIL duty. Appellant stopped availing the same immediately it was pointed out by department at the time of 2nd audit. Thus there seems no mis-statement or suppression. The appellant, in addition, immediately paid the differential duty that too with interest and even penalty, question of any intent of evading duty by the appellant does not at all arise. Hon ble Apex Court decision in the case of PAHWA CHEMICALS PRIVATE LIMITED VERSUS COMMISSIONER OF C. EX., DELHI 2005 (9) TMI 92 - SUPREME COURT wherein it was held that mere failure to declare does not amount to willful mis-declaration or willful suppression. There must be some positive act on the part of the party to establish either willful mis-declaration or willful suppression. When all facts are before the Department. Hon ble Apex Court in the case of Union of India vs Ashok Kumar and Ors. reported as 2005 (10) TMI 536 - SUPREME COURT observed that it cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demand proof of a high order of credibility. Reverting to the facts of the present case, there already was an audit in the year 2013 hence entire information was with the department since then. Also no shortcoming was noticed during that audit, question of evasion of duty for the same period does not at all arise. Invoking the extended period under the proviso of Section 11A is accordingly not sustainable. Demand for extended period is barred by time. For the normal period also there is no evidence to prove the allegation of short payment of duty. Appeal dismissed.

Issues Involved:
1. Wrongful availment of exemption from additional duty of Customs (SAD).
2. Allegation of suppression of facts by the appellant.
3. Applicability of the extended period of limitation for recovery of duty.
4. Imposition of penalty on the appellant.

Detailed Analysis:

1. Wrongful Availment of Exemption from Additional Duty of Customs (SAD):
The appellants were engaged in importing and trading precision measurement instruments and their accessories. During an onsite post-clearance audit conducted in March 2015, it was observed that the appellants had wrongly availed the benefit of a nil rate of additional duty of Customs (SAD) under Notification No. 21/2012-Cus dated 17.03.2012 for the period from 17.03.2012 to 17.04.2013. The Department contended that the exemption was applicable only to pre-packaged goods intended for retail sale, whereas the software imported by the appellant was not for retail sale but for the machines imported by them. The appellant discontinued the practice of availing the exemption after 17.04.2013 and deposited ?62,671/- as Customs duty along with interest and penalty for the period from 2013-14 on 17.04.2015. However, the total differential Customs duty of ?12,63,673/- for the period 2011-12 to 2013-14 was still alleged to have been evaded.

2. Allegation of Suppression of Facts by the Appellant:
A Show Cause Notice dated 28.01.2016 was issued proposing recovery of the differential amount of duty along with interest, alleging suppression on the part of the appellant. The extended period of limitation was invoked, and a penalty was proposed. The appellant argued that there was no suppression on their part as the Department had already conducted an audit for the period 2012-2013 and no objections were raised at that time. They maintained all relevant records which were regularly audited by the Department, and thus, the question of suppression or collusion did not arise.

3. Applicability of the Extended Period of Limitation for Recovery of Duty:
The appellant contended that the demand raised was barred by time as the Show Cause Notice was issued after the expiry of five years. They relied on the case of Nizam Sugar Factory vs Collector of Central Excise A.P. and Tamil Nadu Housing Board vs Collector of Central Excise, Madras. The Department argued that the extended period of limitation was justified as the appellant failed to establish that complete facts were disclosed to the previous audit team. The Tribunal, however, held that there was no mis-statement or suppression by the appellant. The appellant stopped availing the exemption immediately after it was pointed out by the Department during the second audit. The Tribunal drew support from the Hon’ble Supreme Court’s decision in Pahwa Chemicals Private Limited vs Commissioner of Central Excise, Delhi, stating that mere failure to declare does not amount to willful mis-declaration or willful suppression.

4. Imposition of Penalty on the Appellant:
The appellant argued that the penalty was not imposable due to the absence of mens rea (intention to evade the payment of duty). The Tribunal found that the Department did not produce any evidence to prove willful mis-statement or suppression of facts. The Tribunal referred to the Hon’ble Supreme Court’s decisions in Continental Foundation Jt. Venture vs. CCE, Chandigarh I and Anand Nishikawa Co. Ltd. v. Commissioner of Central Excise, Meerut, which clarified that suppression must be deliberate with the intent to evade duty. Since the appellant paid the differential duty along with interest and penalty immediately after the discrepancy was pointed out, the Tribunal concluded that there was no intent to evade duty.

Conclusion:
The Tribunal held that the demand for the extended period was barred by time and there was no evidence to prove the allegation of short payment of duty for the normal period. The order under challenge was set aside, and the appeal was dismissed. The Tribunal emphasized that invoking the extended period under the proviso of Section 11A was not sustainable in the absence of evidence of willful suppression or mis-statement.

← Previous Next →