1996 (2) TMI 279 - AT - Customs

Summary

Issues Involved:
1. Imposition of penalty on past consignments without show cause notice.
2. Violation of actual user condition for the live consignment.
3. Classification and import eligibility of stainless steel flexible tubes under OGL.

Detailed Analysis:

1. Imposition of penalty on past consignments without show cause notice:
The appellants contended that the penalty of Rs. 1 lakh imposed on the past seven consignments was illegal as they had waived the show cause notice only for the live consignment. The Learned Collector had not indicated during the personal hearing that the past consignments would also be subject to penalty. The Tribunal found merit in this argument, noting that the department did not provide evidence that the importer had waived the show cause notice for past clearances. Consequently, the penalty imposed on past clearances without issuing a show cause notice was deemed illegal and unsustainable. The Tribunal ordered the penalty of Rs. 1 lakh to be set aside.

2. Violation of actual user condition for the live consignment:
The department argued that the appellants had not undertaken any manufacturing activity with the imported stainless steel flexible tubes, which was a violation of the actual user condition under the Import Policy. The investigation revealed that the appellants had not used the imported tubes for manufacturing but had merely cut and sold them. The Tribunal upheld the Collector's finding that mere cutting of tubes does not constitute manufacturing. The appellants admitted they were not fully equipped to carry out manufacturing due to the absence of a tube-forming machine. This admission, coupled with the evidence that the braiding machine was not operational, supported the department's claim of violation of the actual user condition. The Tribunal upheld the confiscation of the live consignment under Section 111(d) of the Customs Act, 1962, and the imposition of a penalty of Rs. 5,000 along with a redemption fine of Rs. 30,000.

3. Classification and import eligibility of stainless steel flexible tubes under OGL:
The appellants claimed that the imported stainless steel flexible tubes were eligible for clearance under OGL Appendix 6, List 8, Part I, Sl. No. 744, arguing that these tubes were not covered under Item 685(F) of Appendix 3, Part A, which mentions only pipes and hoses. The Collector, however, found that the term "hose" as per the dictionary of Scientific and Technical terms is synonymous with "flexible tube," and therefore, the imported tubes fell under Sl. No. 685 of Appendix 3, Part A. The appellants' sales invoices described the goods as hoses, supporting the Collector's finding. The Tribunal agreed with the Collector's conclusion that the imported tubes were indeed covered under Appendix 3, Part A, and thus not eligible for clearance under OGL as claimed by the appellants. The Tribunal upheld the confiscation and penalties imposed on the live consignment.

Conclusion:
The Tribunal set aside the penalty of Rs. 1 lakh imposed on past consignments due to the lack of a show cause notice but upheld the confiscation, redemption fine, and penalty for the live consignment, confirming the violation of the actual user condition and the incorrect classification claim under OGL by the appellants.