2009 (11) TMI 273 - AT - Customs

Demand- Perishable goods warehoused by assessee and eventually destroyed under departmental supervision pursuant to settlement commission s order. Show cause Notice itself contained a proposal to destroy the goods. Thus destruction of goods was in pursuance to show Cause Notice, apart from settlement commission s order. Warehouse licence suspended w.e.f. 15.11.1999 beyond which there was no licence to warehouse and no warehoused goods demand not sustainable under section 72(1) of the Act. Show cause notice proposed confiscation under clause (d) and clause (o) of section 111 of Act. Same notice proposed to destroy the goods. Mutually inconsistent proposal. Held that- no finding as to how assessee rendered the goods liable to confiscation. Penalty not imposable.

Summary

Issues:
1. Demand of duty under Section 72(1) of the Customs Act challenged by the assessee.
2. Appeal by the department against dropping of redemption fine and penalty.

Analysis:
1. The first issue revolves around a demand of duty of Rs. 1,85,407/- raised under Section 72(1) of the Customs Act against the assessee. The department issued a show cause notice under Section 124 of the Act, proposing duty demand, confiscation of goods under Section 111(d) and (o), and penalty under Section 112. The Settlement Commission directed destruction of goods, which was carried out, and subsequently, duty liability was confirmed by the Joint Commissioner. The Commissioner (Appeals) upheld the order, leading to appeals by both the assessee and the Revenue against adverse portions of the appellate Commissioner's decision.

2. The second issue pertains to the imposition of redemption fine and penalty by the department. The judgment highlights that the goods in question were destroyed under departmental supervision pursuant to the Settlement Commission's order. The question arises whether duty could be demanded on goods that were destroyed after the warehouse license was suspended. Section 72(1) allows duty demand on warehoused goods, but in this case, the goods ceased to be warehoused post the license suspension. Therefore, the demand under Section 72(1) was deemed inappropriate. Additionally, the judgment emphasizes that redemption cannot be sought for destroyed goods, and in the absence of goods for confiscation, redemption fine cannot be imposed. The penalty was also deemed inapplicable as there was no finding on how the assessee rendered the goods liable to confiscation under Section 111 of the Act.

In conclusion, the appellate tribunal ruled in favor of the assessee, allowing the appeal against the duty demand while rejecting the Revenue's appeal for imposing fine and penalty. The judgment provides a comprehensive analysis of the legal provisions and factual circumstances surrounding the issues at hand, ultimately resulting in a clear decision in favor of the assessee.