2004 (11) TMI 193 - AT - Customs

100% E.O.U. - Entitlement to exemption under Notification No. 140/91-Cus.- Interpretation of Modular Furniture and its components - Duty Demand - Limitation - Confiscation (Customs) - Penalty - HELD THAT - It is not the case of the Department that the goods were imported without knowledge of the Department. In fact, the goods were exempted and allowed to be bonded. Under these circumstances, the Commissioner's decision to hold that the goods are not entitled for the benefit of exemption Notification No. 140/91-Cus. cannot be sustained. In other words, the authorization of STPI cannot be questioned without taking steps for the cancellation of the authorization. If the Department holds that the goods are not covered by the exemption Notification, they should have issued the show cause notice within the time limit under Section 28 or Section 11A of the Acts. There are absolutely no ground in any of the four cases to invoke the longer period as all the goods were imported and installed only with the knowledge of the Department. The adjudicating authority has blindly invoked the longer period without any reason. We also find that the goods are held liable for confiscation u/s 111(o) of the Act. This is not correct. Section 111(o) of the Customs Act will come into effect only when the post importation conditions of exemption Notification are not fulfilled. In other words, Section 111(o) is only for exempted goods. When the Department feels that the exemption is not applicable to the impugned goods, Section 111(o) cannot be invoked at all. The demand can be made only u/s 28. It is clearly seen that no ground exists for invoking the longer period. Hence all the demands are clearly time barred. In our view, the Commissioner of Customs has denied the benefit of exemption, because the Modular Furniture have come in different consignments. The Commissioner of Customs has interpreted the Notification in such a manner as to defeat the objects of the Notification contrary to various judicial pronouncements. There is no rule that the benefit of exemption would be given to the goods only after all the components come in one consignment and not otherwise. Customs Authorities when they are blind to the practical realities of world and adopt a pedantic approach in interpreting laws, no longer act as facilitators of trade but remain as insurmountable obstacles to development. There is absolutely no merit in the Orders-in-Original. Once again we want to make it abundantly clear that Modular Furniture authorized by STPI or appropriate authority imported in different consignments would be entitled for the benefit of exemption Notification No. 140/91-Cus., dated 22-10-1991. Hence all these 04 (four) appeals are allowed with consequential relief.

Summary

Issues Involved:
1. Entitlement to exemption under Notification No. 140/91-Cus.
2. Validity of duty demand and penalties under Section 28 of the Customs Act and Section 11A of the Central Excise Act.
3. Applicability of Section 111(o) of the Customs Act for confiscation.
4. Interpretation of Modular Furniture and its components.

Summary:

1. Entitlement to exemption under Notification No. 140/91-Cus.:
The appellants, being 100% EOUs, imported Modular Furniture under Notification No. 140/91-Cus., which allows duty-free import of specified goods. The appellants obtained necessary certificates from the Software Technology Parks of India (STPI) or Development Commissioner, authorizing the import. The goods were bonded under Customs supervision and assembled into Modular Furniture. The Department issued show cause notices alleging that the items imported were not Modular Furniture but assemblies and sub-assemblies, thus not entitled to the exemption. The Tribunal held that once the STPI or Development Commissioner authorizes the import, Customs authorities cannot deny the exemption without canceling the authorization. The goods were correctly classified as Modular Furniture, and the exemption under Notification No. 140/91-Cus. was applicable.

2. Validity of duty demand and penalties under Section 28 of the Customs Act and Section 11A of the Central Excise Act:
The adjudicating authority confirmed the duty demand and imposed penalties, invoking the longer period under Section 28 of the Customs Act and Section 11A of the Central Excise Act. The Tribunal found that the Department was aware of all facts at the time of importation and installation. Hence, invoking the longer period was unjustified, and the demands were time-barred.

3. Applicability of Section 111(o) of the Customs Act for confiscation:
The goods were held liable for confiscation under Section 111(o) of the Customs Act. The Tribunal clarified that Section 111(o) applies only when post-importation conditions of an exemption notification are violated. Since the Department argued that the exemption was not applicable, Section 111(o) could not be invoked. The demand should have been made under Section 28, and no grounds existed for invoking the longer period.

4. Interpretation of Modular Furniture and its components:
The Tribunal emphasized that Modular Furniture consists of different modules/parts that can be assembled at the workplace. The Customs authority's insistence that the entire furniture should come in one consignment was impractical. The Tribunal criticized the Commissioner's interpretation of the notification, which defeated its purpose. The goods imported in different consignments were still entitled to the exemption as Modular Furniture.

Conclusion:
The Tribunal allowed all four appeals, granting consequential relief to the appellants. The goods were correctly classified as Modular Furniture, and the exemption under Notification No. 140/91-Cus. was applicable. The duty demands and penalties were time-barred, and the confiscation under Section 111(o) was not justified.