2024 (5) TMI 1281 - AT - Customs

Demand of duty - Capital goods destroyed by villagers and subsequent clearance as scrap - challenged the show-cause notices invoking extended period under proviso to Section 28 (1) / 28 (4) of the Customs Act, 1962 - HELD THAT - From the facts, it is clear that the appellant had intimated about the riots and taken the necessary permissions from the authorities concerned for de-bonding the burnt capital goods as per the Customs procedures and to pay duty on the scrap value on the highest bidder of the scrap. Since permission was granted by the customs, the question of suppression of facts or misrepresentation of facts does not arise and hence, the show-cause notice cannot invoke extended period of limitation. It is also pertinent to mention that the Commissioner (A) in the impugned drops the penalty imposed under Section 114A stating that in the instant case, there had been continuous correspondence between the appellant and the department on this issue and there is no suppression of facts . It is also observed that in the impugned Order-in-Appeal, the Commissioner (A) upholds the demand under Sections 72 (1) of the Customs Act, 1962 in terms of B17 bond executed by the appellant; while the order in original confirmed the demand Section 28 (8) of the Customs Act, 1962. The show-cause notice dated 13.12.2012, the demand was under Section 28 (1) and 28 (4) of the Customs Act, 1962. As rightly submitted by the appellant, the order cannot traverse beyond the show-cause notice and hence, the demand confirmed by the Commissioner (A) in the impugned order under Section 72 of the Customs Act, 1962 is not sustainable in view of the decision in the case of CCE vs. Gas Authority of India Ltd. 2007 (11) TMI 276 - SUPREME COURT . Thus, the impugned orders are set aside and the appeals are allowed.

Summary

Issues:
1. Invocation of extended period under proviso to Section 28 (1) / 28 (4) of the Customs Act, 1962.
2. Demand of duty on original capital goods burnt by villagers.
3. Compliance with customs procedures and payment of duty on scrap value.
4. Upholding of penalty equivalent to duty and interest.

Analysis:

Issue 1: Invocation of extended period under proviso to Section 28 (1) / 28 (4) of the Customs Act, 1962
The appellant contested the sustainability of show-cause notices invoking the extended period under the proviso to Section 28 (1) / 28 (4) of the Customs Act, 1962. They argued that the demand confirmed under Section 72 of the Act exceeded the scope of the show-cause notice. The appellant relied on various decisions to support their position, emphasizing that the order could not traverse beyond the show-cause notice. The Commissioner (A) had already acknowledged the absence of suppression of facts, leading to the dropping of the penalty under Section 114A. The Tribunal agreed with the appellant's contentions and set aside the impugned orders.

Issue 2: Demand of duty on original capital goods burnt by villagers
The appellant's 100% Export Oriented Unit (EOU) faced a situation where their imported capital goods were burnt by a mob of villagers. Despite the destruction, the appellant had duly informed the authorities, sought permission for debonding the damaged goods, and paid the applicable duties on the scrap value. The Tribunal noted that the appellant had followed proper procedures, obtained necessary permissions, and discharged their duty liabilities promptly. Consequently, the demand for duty on the original capital goods, which were destroyed, was deemed unjustified.

Issue 3: Compliance with customs procedures and payment of duty on scrap value
The appellant had diligently informed the authorities about the damage to the capital goods and had taken steps to de-bond the burnt goods as per customs procedures. They had also paid duty on the scrap value in accordance with the permissions granted by the authorities. The Tribunal recognized the appellant's proactive approach in handling the situation and complying with all necessary formalities, thereby negating any allegations of suppression or misrepresentation of facts.

Issue 4: Upholding of penalty equivalent to duty and interest
The Revenue had sought to uphold penalties equivalent to duty and interest, which were confirmed by the Commissioner (A). However, the Tribunal, after considering the entire scenario and the appellant's compliance with customs regulations, found no grounds for imposing such penalties. The continuous correspondence between the appellant and the department, along with the absence of any suppression of facts, led to the dropping of the penalties under Section 114A. The Tribunal ultimately allowed the appeals and set aside the impugned orders, emphasizing the importance of adherence to procedural requirements and the absence of any deliberate wrongdoing on the appellant's part.