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Issues Involved:
1. Demand for differential Customs duty due to alleged misuse of concessional import duty notifications. 2. Imposition of penalty under Section 112 of the Customs Act. 3. Liability to pay interest under Section 28AB of the Customs Act. 4. Validity of adjudication proceedings due to undue delay. Detailed Analysis: 1. Demand for Differential Customs Duty: The appellants, manufacturers of Light Commercial Vehicles (LCVs), imported components under Notification No. 222/87 at a concessional rate for manufacturing purposes. They also availed benefits under Notification No. 74/85 for importing components intended for warranty coverage or after-sales services. The Department issued a Show Cause Notice alleging that the appellants diverted components imported under Notification No. 222/87 for spare parts requirements, which violated the notification's conditions. Consequently, a differential duty of Rs. 24,57,753.09 was demanded. The Commissioner confirmed the duty demand to the extent of Rs. 19,97,100/-, asserting that the use of CKD components for after-sales requirements violated Notification No. 222/87, thus necessitating full tariff rate duty. The appellants contended that they replaced the diverted components with subsequent imports under Notification No. 74/85, making the transaction revenue-neutral. They argued that the duty demand should be limited to the differential rate between the two notifications, not the full tariff rate. The Tribunal upheld the differential duty demand, stating that each exemption notification must be construed strictly within its terms. The diversion of components under Notification No. 222/87 for purposes covered by Notification No. 74/85 did not absolve the appellants from duty liability. The Tribunal emphasized that the terms of one notification could not be used to claim benefits under another. 2. Imposition of Penalty: The Show Cause Notice also proposed a penalty under Section 112 for contravention of Section 111. However, the Commissioner dropped the penalty charge, concluding that the appellants acted in good faith without any mala fide intention. The Tribunal noted that since the Commissioner dropped the penalty, no allegations of mala fide acts or suppression of facts survived. 3. Liability to Pay Interest: The Commissioner held the appellants liable to pay interest under Section 28AB of the Customs Act. The appellants argued that Section 28AB was enacted after the imports, making it inapplicable. The Tribunal agreed, setting aside the demand for interest, citing that no retrospective application of Section 28AB was permissible without express provision. 4. Validity of Adjudication Proceedings Due to Undue Delay: The appellants contended that the adjudication proceedings were inordinately delayed, vitiating the process. The Show Cause Notice was issued in September 1992, but the next personal hearing was held only in September 1997, after a gap of 4 1/2 years. The Tribunal reviewed case law on undue delay but concluded that the delay alone did not justify setting aside the impugned order, as no irreparable damage was caused to the appellants. Separate Judgments by Judges: - Member (J): A.C.C. Unni upheld the differential duty demand, emphasizing strict adherence to the terms of Notification No. 222/87 and rejecting the argument of revenue neutrality. - Member (T): C.N.B. Nair dissented, arguing that the reassessment of interchanged components was revenue-neutral and the demand should be limited to the concessional rate under Notification No. 74/85. - Third Member (T): K.K. Bhatia agreed with Member (J), asserting that the appellants were liable for the differential duty as per Notification No. 222/87's terms, and the concept of revenue neutrality did not apply. Majority Order: The majority held that the differential duty demand raised in the Show Cause Notice was valid and legal, upholding the Commissioner's order dated 4-12-1997 confirming the duty demand.
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