1999 (12) TMI 217 - AT - Customs

Summary

Issues Involved:
1. Demand for differential duty on imported software.
2. Imposition of penalties on office bearers.
3. Applicability of the extended period for demand under Section 28.
4. Confiscation of goods under Section 111(m).
5. Liability for duty under Section 125(2).

Detailed Analysis:

1. Demand for Differential Duty on Imported Software:
The Collector of Customs, Mumbai, demanded differential duty on software imported by the importer, Tata Infotech Limited, on the grounds of mis-declared value during importation. The importer declared the software and manuals separately in the bills of entry, splitting the value in a 60:40 ratio to benefit from duty exemptions on printed books. The Tribunal noted that this practice of splitting values was in line with the prevailing customs practice until 1991, as confirmed by the Commissioner of Customs, Delhi.

2. Imposition of Penalties on Office Bearers:
Penalties were imposed on the Managing Director, Business Manager, and Senior Finance Manager of Tata Infotech for their roles in the alleged undervaluation. However, since the value split was a common practice sanctioned by the customs authorities, the Tribunal found no grounds for penalties, emphasizing that the split was a consequence of the department's practice rather than an act of suppression by the importer.

3. Applicability of the Extended Period for Demand under Section 28:
The Collector at Mumbai invoked the extended period under the proviso to Section 28, citing suppression of facts. However, the Tribunal, referencing the Commissioner of Customs, Delhi's order, highlighted that the practice of splitting values was well-known and accepted by customs authorities until 1991. Therefore, there was no suppression, and the extended period could not be applied. The Tribunal also noted that the Special Valuation Branch had been informed about the invoicing practice, further negating the suppression claim.

4. Confiscation of Goods under Section 111(m):
The Commissioner of Customs, New Delhi, ordered the confiscation of software under Section 111(m) due to mis-declared value but allowed its release upon payment of a fine. The Tribunal found that the goods, having been cleared and sold, could not be confiscated as their location was unknown. The Tribunal cited precedents where confiscation was deemed inapplicable once goods were no longer in the importer's possession.

5. Liability for Duty under Section 125(2):
The Tribunal addressed whether duty could be demanded under Section 125(2) following confiscation. It concluded that Section 125(2) is applicable only when the date of importation is unknown and the goods are not duty-paid. Since the import details were known, duty recovery should proceed under Section 28, not Section 125(2). The Tribunal found the confiscation order and subsequent duty demand under Section 125(2) unsustainable.

Conclusion:
The Tribunal allowed all appeals, setting aside the impugned orders. It concluded that the extended period for demanding duty was inapplicable due to the established customs practice, and there was no intent to evade duty. Consequently, penalties on the importer and its employees were unwarranted, and the confiscation and duty demand under Section 125(2) were invalid.