2004 (4) TMI 246 - AT - Customs

Denial of benefit of exemption notifications - Special Additional Duty - interest - confiscation and penalty - associated company - HELD THAT - The admitted facts that all the jumbo rolls imported by CPFL from FUJI were sold only to JPFL and that ST-XI Forms issued by JPFL to enable CPFL to claim deduction of the sales turnover from the gross turnover of sales were produced by CPFL before the assessing authority have got to be read with the above order of the assessing authority. The result would be that sale as such of the imported jumbo rolls by CPFL to JPFL in the normal course of trade during the relevant period stands established. We therefore hold that the goods in question had been imported for sale as such, other than by way of High Sea Sale. The necessary declaration to this effect was made in the Bills of Entry filed by CPFL for clearing the goods. The requirements in terms of the main part of the entry at Serial No. 12/Serial No. 5 of Notification No. 56/98-Cus./No. 22/99-Cus. stood fulfilled. Thus, we hold that the goods in question, sold by CPFL to JPFL during the period of dispute are to be treated as chargeable to tax for the purpose of the entries at Sr. Nos. 12 and 5 under Notification Nos. 56/98-Cus. and 22/99-Cus. respectively. Consequently, the provisos to the said entries are not applicable to the subject goods and the goods are eligible for the benefit of 'Nil' rate of duty in terms of the said entries. The demand of SAD raised in the impugned order is, therefore, unsustainable. Consequently, the confiscation of the goods and imposition of penalties on CPFL and JPFL are also liable to be set aside. In the result, we set aside the impugned order and allow these appeals.

Summary

Issues Involved:

1. Denial of benefit of exemption notifications.
2. Liability to pay interest.
3. Liability for confiscation and penalty.
4. Penalty on associated company.

Summary:

1. Denial of Benefit of Exemption Notifications:
The Commissioner denied the benefit of Notification Nos. 56/98 and 22/99 and confirmed the Special Additional Duty (SAD) amounting to Rs. 4,88,04,606/- for the period from 18-9-98 to 30-6-98 on imports of photographic jumbo rolls by CPFL. The Commissioner found that the goods imported in the name of CPFL were not eligible for exemption from SAD and concluded that CPFL and JPFL conspired to evade duty by routing imports through CPFL. The Commissioner invoked the principle of "lifting of corporate veil" to determine that JPFL was the real importer and held that the sale of jumbo rolls by CPFL to JPFL was a pre-determined transaction akin to a High Sea Sale, thus not qualifying for exemption.

2. Liability to Pay Interest:
The Commissioner held that CPFL was liable to pay interest at 24% on the duty amount in terms of Section 28AB of the Customs Act.

3. Liability for Confiscation and Penalty:
The imported goods were held liable for confiscation u/s 111(m) and 111(o) of the Customs Act, although they were not available for confiscation. Consequently, CPFL was penalized Rs. 4,88,04,606/- u/s 114A of the Customs Act.

4. Penalty on Associated Company:
JPFL was held liable for a penalty of Rs. 50,00,000/- u/s 112(b) of the Customs Act for being associated directly and being the ultimate beneficiaries.

Judgment:
The Tribunal examined the nature of transactions and found that CPFL lawfully imported the goods and sold them to JPFL. The Tribunal held that the sale of imported goods by CPFL to JPFL was not a High Sea Sale and that the goods were chargeable to tax under the DNH Sales Tax Regulations, 1978. The Tribunal concluded that the goods were eligible for the benefit of 'Nil' rate of SAD under the relevant notifications. Consequently, the demand of SAD, confiscation of goods, and imposition of penalties on CPFL and JPFL were set aside. The appeals were allowed.