2023 (3) TMI 899 - AT - Customs

Demand of duty along with interest as well as imposition of penalty under Section 112 of Customs Act - warehousing period extension not sought as well as no steps for taking delivery of the warehoused goods taken - in the meantime goods (wine) was rendered unfit for human consumption - relinquishment to the title to goods - HELD THAT - In the facts and circumstances of this case, the appellant have exercised their right of relinquishment, as permissible under Section 68 (as amended). However, it seems that the appellant exercised the right of relinquishment when they realized that the goods are no longer fit for human consumption. It is further found that Revenue has also been sleeping over the matter and in spite of expiry of the warehousing period, as early as in June, 2004 and the last order of warehousing period expired on 16.08.2008. Revenue also kept sleeping over the period and never issued any notice for demanding the duty along with applicable interest etc., which clearly indicates the contributory negligence on the part of the Revenue. The provisions of warehousing, particularly Section 61(1) read with proviso provides, that where the goods are likely to deteriorate , the period referred to (one year) may be reduced by the authority to such shorter period as he may deem fit. Thus, there was obligation on the part of the customs authorities also to keep in mind the period of expiry of goods, which were meant for human consumption and to pass orders accordingly in the interest of Revenue. The appellant is not liable to pay duty, as till the time of relinquishment, no duty or other charges had been demanded from them. However, in the circumstances, as the appellant have also allowed the goods to deteriorate by not taking action timely to relinquish the goods within a reasonable time, they are held liable to penalty - penalty under Section 117 is imposed instead of Section 112 - reduced penalty of Rs. 1 Lakh is confirmed. Appeal allowed in part.

Summary

Issues:
- Liability of the appellant for demand of duty, interest, and penalty under Section 112 of the Act.

Analysis:

The appellant, engaged in the manufacture of various products, imported wine and warehoused it. After the warehousing period expired, the goods became unfit for consumption, and the appellant relinquished its title. The Revenue demanded duty, interest, and penalty. The appellant argued that relinquishment before clearance absolves duty liability. The Revenue cited provisions stating expired goods are chargeable. The appellant appealed the demand, contesting the ruling in Kesoram Rayon case, claiming subsequent amendments to Section 68 support their right to relinquish. The appellant also referenced a Karnataka High Court case where the court ruled in favor of the importer relinquishing title before clearance. The appellant sought relief based on these arguments.

The Commissioner (Appeals) upheld the demand, relying on the Kesoram Rayon case. The appellant contended that subsequent amendments to Section 68 allowed them to relinquish title. The appellant cited the Karnataka High Court case where the court ruled in favor of the importer relinquishing title before clearance. The appellant sought relief based on these arguments.

The Tribunal noted the appellant's right to relinquish under amended Section 68 but found the appellant's delay in action contributed to the goods deteriorating. The Revenue's inaction in demanding duty promptly was also highlighted. The Tribunal held the appellant not liable for duty as no demand was made before relinquishment but imposed a reduced penalty for negligence. The appeal was allowed in part, confirming a reduced penalty of Rs. 1 Lakh.

In conclusion, the Tribunal found the appellant not liable for duty due to the Revenue's contributory negligence and the appellant's right to relinquish under amended Section 68. However, a reduced penalty was imposed for the appellant's delay in action. The appeal was allowed in part, confirming a reduced penalty of Rs. 1 Lakh.