1999 (7) TMI 480 - AT - Customs

Summary

Issues Involved:

1. Entitlement to customs duty exemption under Notification 210/82.
2. Validity of demand for duty without a written notice under Section 28 of the Customs Act, 1962.
3. Imposition of penalties on Virgo Steel and ACC for alleged abetment of illegal importation.

Detailed Analysis:

1. Entitlement to Customs Duty Exemption:

The primary issue was whether the supplies made by Virgo Steel to ACC's project qualified for customs duty exemption under Notification 210/82, which exempts raw materials and components imported for IBRD aided projects. The Tribunal concluded that the project did not qualify as an IBRD aided project because no financial assistance was actually received from IBRD. The letters exchanged between ACC and IDBI confirmed that although a loan was sanctioned, it was never availed, and thus the project did not acquire the status of an IBRD aided project. Therefore, the exemption under Notification 210/82 was not applicable.

2. Validity of Demand for Duty Without Written Notice:

The Tribunal examined whether the demand for duty could be confirmed in the absence of a written notice under Section 28 of the Customs Act, 1962. It was noted that Virgo Steel had waived the issue of a written show cause notice and agreed to pay the duty. However, Section 28 mandates the service of a written notice, and there is no provision for waiving this requirement. The Tribunal referenced the Supreme Court's decision in C.C.E. v. Tinplate Co. of India Ltd., which emphasized the necessity of a detailed show cause notice. Consequently, the Tribunal concluded that the order confirming the duty could not be sustained due to the lack of a written notice as required by Section 28.

3. Imposition of Penalties:

Penalty on Virgo Steel:

The Tribunal upheld the penalty of Rs. 5.00 lacs imposed on Virgo Steel under Section 112(a) of the Customs Act. The goods imported by Virgo Steel were not supplied to an IBRD project or used as replenishment for such supply, thus failing to meet the conditions for duty exemption. Consequently, the goods were liable to confiscation under Section 111(o) of the Act, justifying the penalty.

Penalty on ACC:

The Tribunal found no basis for the penalty imposed on ACC. The Collector's finding of abetment was based on ACC's failure to inform the licensing authority and Customs department about the abandonment of the project. However, the Tribunal noted that there was no legal obligation on ACC to provide such information. The act of abetment requires a conscious act or omission of a legally required duty, which was not established in this case. Therefore, the penalty on ACC was not justified, and the appeal was allowed in favor of ACC.

Conclusion:

The appeals resulted in a partial allowance for Virgo Steel by setting aside the duty demand due to the lack of a written notice, while upholding the penalty. The appeal by ACC was fully allowed, setting aside the penalty imposed on it.