2013 (5) TMI 808 - AT - Customs

Denial of exemption claim Notification No. 25/2005, dated 1st March, 2005 and Notification No. 21/2002, dated 1st March, 2002 and Notification No. 69/2004, dated 9th July, 2004 - Penalty u/s 114A and 114AA - Held that - RBI which is the statutory governing body for use of ATM has clarified that in addition of cash dispensing ATM may have many services/facilities enabled by the bank owning the ATM such as account information, cash deposit, regular bill payment, purchase of reload vouchers for mobiles, mini/short statement and loan account enquiry etc. Therefore, there is no room for any doubt on the proposition that a machine which functions as automatic cash dispenser/bank note dispenser would qualify to be an ATM if it provides the customer of bank the facility of assessing their account not only for dispensing cash but also to carry out any other financial and non-financial transaction. The said meaning given by RBI to an ATM machine has also been applied by RBI under its Master Circular dated 2-7-2007, which is applicable to all computerized machines having facility of accessing the bank account for dispensing cash and to carry out other financial and non-financial transactions as ATMs, irrespective of whether they do have the facility to accept cash/cheques deposit or not. Appellant has declared the impugned machine as ATM on the understanding as per Circular No. 41/2002 which clarified that the office equipments referred to above are understood separately and have distinct functions. Cash dispensers are basically machines which can only dispense cash at the valid request of the customers of the bank while ATMs are more sophisticated machines which not only dispense cash but also perform other banking transactions like depositing cash, collecting cheques, bill payments, fund transfers, etc. - mere absence of one faction such as deposit of cash/cheque would not be decisive to ascertain whether a machine is an ATM or a cash dispenser for the purpose of extending exemption. - Only to deny exemption under Notification which is available to ATM of Heading 8472.90, the HSN can t be restrictively interpreted to construe that apart from the main function of dispersing cash, all the functions, as listed therein shall also necessarily be present simultaneously to construe a machine as an ATM. If the machine Procash 1500Xe is having the facilities such as cash dispencing, fund transfer, bill payment, balance enquiry, mini statements, pin change, etc. but not having the facility of cash/cheque deposit shall be termed as ATM. - Impugned order is set aside - Matter remanded back - Decided in favour of assessee.

Issues Involved:
1. Classification of Procash 1500Xe automatic cash dispenser.
2. Denial of exemption under various notifications.
3. Demand of Rs. 10,31,78,856/- under Section 28(1) of the Customs Act, 1962 along with interest.
4. Confiscation of 1375 Nos. of Procash 1500Xe under Sections 111(d) and 111(m) of the Customs Act, 1962.
5. Imposition of penalty under Section 114A of the Customs Act, 1962.
6. Imposition of penalty under Section 114AA of the Customs Act, 1962.

Detailed Analysis:

1. Classification of Procash 1500Xe Automatic Cash Dispenser:
The primary issue revolves around whether the Procash 1500Xe should be classified as an ATM or merely a cash dispenser. The appellant argued that the machine qualifies as an ATM due to its capabilities of performing various banking transactions such as cash withdrawal, balance enquiry, cheque book request, statement request, pin change, fund transfer, and mini statement, as per Board's Circular No. 41/2002-Cus. The Tribunal noted that the definition of an ATM by RBI includes machines that provide access to financial and non-financial transactions, not just cash dispensing. The adjudicating authority is directed to verify if the machines possess additional features like fund transfer, bill payment, balance enquiry, and mini statements, which would qualify them as ATMs.

2. Denial of Exemption Under Various Notifications:
The appellant claimed exemptions under Notification No. 25/2005, Notification No. 21/2002, and Notification No. 69/2004. The Tribunal emphasized that the classification of the machine as an ATM or cash dispenser is crucial for determining the eligibility for exemption. The adjudicating authority must reassess the classification based on the additional features of the machine, as discussed.

3. Demand of Rs. 10,31,78,856/- Under Section 28(1) of the Customs Act, 1962:
The demand was raised based on the classification dispute. The Tribunal noted that if the machine is classified as an ATM, the demand would need to be reconsidered. The adjudicating authority is instructed to re-evaluate the demand after determining the correct classification of the machine.

4. Confiscation of 1375 Nos. of Procash 1500Xe Under Sections 111(d) and 111(m) of the Customs Act, 1962:
The machines were held liable for confiscation due to alleged mis-declaration. The Tribunal highlighted that the correct classification would impact the confiscation decision. The adjudicating authority is to reassess the confiscation based on the classification findings.

5. Imposition of Penalty Under Section 114A of the Customs Act, 1962:
A penalty equal to the duty demanded was imposed. The Tribunal pointed out that if the extended period of limitation is not invocable due to the classification issue being a matter of interpretation, the penalty may not be justified. The adjudicating authority must reconsider the penalty in light of the reclassification.

6. Imposition of Penalty Under Section 114AA of the Customs Act, 1962:
A penalty of Rs. 2,00,00,000/- was imposed for alleged mis-declaration. The Tribunal directed the adjudicating authority to re-evaluate this penalty after determining the correct classification and considering the nature of the alleged mis-declaration.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter back to the adjudicating authority for de novo consideration. The adjudicating authority is to verify the additional features of the Procash 1500Xe and reclassify the machine accordingly. The demand, confiscation, and penalties are to be reassessed based on the correct classification, following the principles of natural justice.

Disposition:
The appeal and stay application were disposed of with directions for re-evaluation by the adjudicating authority. The order was pronounced in open Court on 1-5-2013.

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