2012 (8) TMI 445 - AT - Customs

Denial of benefit of Project Import Regulations, 1986 - increase of more than 25% in the installed capacity is not achieved - Held that - The appellant filed the memorandum with the Secretariat of Industrial Approval, Ministry of Industry for substantial expansion of the Project Import from 8.63 lacs tons per annum to 11.29 lacs tons per annum on 18.9.1992 as per Project Import Regulations, 1986, they have started substantial expansion of their project in the first phase by procuring indigenous components and later on when they need for imported components they registered themselves with the Customs department as per Regulation 5 of the Project Import Regulations, 1986. In that view the date of installed capacity is to be taken as the date when the appellant filed the memorandum with the Secretariat of Industrial Approval in the Ministry of Industry. If the appellant filed the contract for import of the imported components at the first stage expansion then the appellants are entitled for the benefit of the Project Import Regulations, 1986 under the Customs Tariff Heading 98.01, but if they filed the contract in second phase they are not entitled this is not acceptable, thus the appellants are entitled for the benefit of the Project Import in the second phase also. As appellant has complied with the condition of the Project Import Regulations, 1986 therefore the appellants have not violated the provisions of Section 111 (o) of the Customs Act, 1962. Therefore, the 170 computers against which the duty has been confirmed are not liable for confiscation. When the goods are not liable for confiscation, penalty under Section 112 ibid is not leviable. Accordingly, redemption fine and penalty are also set aside. As the appellant has conceded to the demand of 170 computers which were installed in their factory, therefore the demand against those computers which are in their office is confirmed.

Issues Involved:
1. Eligibility for exemption under Notification No. 90/94-Cus dated 1.3.1994 read with Project Import Regulations, 1986.
2. Addition of technical service charges to the assessable value for duty.
3. Finalization of provisional assessments and confirmation of differential duty.
4. Interest on the differential duty.
5. Confiscation of 170 computer items under Section 111 (o) of the Customs Act, 1962 and imposition of fine.
6. Imposition of penalty under Section 112 (a) of the Customs Act, 1962.

Issue-wise Detailed Analysis:

1. Eligibility for Exemption under Notification No. 90/94-Cus and Project Import Regulations, 1986:
The appellant, engaged in cement manufacturing, aimed to expand its capacity from 8.63 lac tons per annum to 11.29 lac tons per annum, a 31% increase. They applied for essentiality certificates and registered contracts under the Project Import Regulations, 1986. The Customs authorities initially denied the benefit of Project Import for computers, arguing they were not directly used in manufacturing and some were installed in branch offices. The appellant contended that these computers controlled the manufacturing process and were interlinked with factory systems. The Tribunal held that the substantial expansion of the project should be viewed as a whole, not in phases, and the installed capacity should be considered from the date the memorandum was filed with the Secretariat of Industrial Approval. The Tribunal concluded that the appellant met the 25% increase requirement and was entitled to the benefit of Project Import Regulations, 1986.

2. Addition of Technical Service Charges to the Assessable Value:
The appellant accepted the demand for adding technical service charges to the assessable value for duty on imports covered by three Bills of Entry. This issue was not contested further.

3. Finalization of Provisional Assessments and Confirmation of Differential Duty:
The Customs authorities finalized the provisional assessments, confirming a differential duty of Rs. 5,39,99,069/- and appropriating the security deposit of Rs. 50,00,000/- towards this liability. The balance amount was to be paid by the importers. The Tribunal upheld this finalization.

4. Interest on the Differential Duty:
The Customs authorities ruled that no interest was payable on the differential duty under sections 28AA or 28AB of the Customs Act, 1962. This point was not contested further in the appeal.

5. Confiscation of 170 Computer Items and Imposition of Fine:
The Customs authorities confiscated 170 computer items under Section 111 (o) of the Customs Act, 1962, imposing a fine of Rs. 25,00,000/- in lieu of confiscation. The appellant conceded to the demand for duty on these computers but requested the waiver of the fine and penalty. The Tribunal found that the computers were integrated with the manufacturing process and thus not liable for confiscation. Consequently, the fine was set aside.

6. Imposition of Penalty under Section 112 (a) of the Customs Act, 1962:
A penalty of Rs. 50,00,000/- was imposed on the importers under Section 112 (a) of the Customs Act, 1962. The Tribunal, considering the appellant's compliance with the Project Import Regulations, set aside the penalty.

Conclusion:
The Tribunal concluded that the appellant was entitled to the benefit of concessional/nil duty under Chapter 98.01 of the Customs Tariff Act, 1975, as they complied with the Project Import Regulations, 1986. The duty on 170 computers installed in the office was confirmed, but the confiscation, fine, and penalty were set aside. The appeal was disposed of accordingly.

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