2017 (7) TMI 472 - AT - Customs

Benefit of N/N. 13/81-Cus dt. 09/02/1981 - recovery of amount of duty from loanee - Held that - the appellant herein had made a commitment before their lordships, that if any amount determined in an adjudication proceedings against the loanee i.e. KTL, it shall, out of the sale proceeds, pay the same. In our considered view, the undertaking given by APSFC the appellant herein, to the Hon ble High Court has to be honoured by them and since the impugned order confirms the demand of duty on KTL who is the loanee originally, it was the bounden duty of the APSFC to discharge the duty liability to the customs authorities - merits in the appeal filed by the appellant in contesting the duty liability i.e. confirmed against KTL and sought to be recovered from them. Penalty u/s 112 of CA - Held that - the adjudicating authority has erred in imposing the penalty under Section 112 of the Customs Act on the appellant inasmuch appellant has never engaged themselves in an import of goods which are liable for confiscation under the provisions of Section 111 of the Customs Act - penalty set aside. Appeal disposed off. - decided partly in favor of appellant

Summary

Issues:
1. Duty liability on imported machinery
2. Commitment made by State Financial Corporation
3. Penalty imposed under Section 112 of the Customs Act

Analysis:

1. Duty liability on imported machinery:
The case involved a dispute regarding duty liability on imported machinery by M/s. Koratla Textiles India Ltd. (KTL) stored in a customs bonded warehouse. KTL failed to fulfill export obligations, leading to a show-cause notice for penal action. The machinery was seized by Andhra Pradesh State Financial Corporation (APSFC) under the State Financial Corporation Act. The jurisdictional authorities demanded duty payment as the machinery was considered abroad. The High Court ruled that the machinery purchaser, Vijayalaxmi Enterprises, could take possession without restraint. APSFC committed to pay any duty determined against KTL. The tribunal upheld the duty liability on APSFC as per their commitment, dismissing the appeal against duty recovery.

2. Commitment made by State Financial Corporation:
APSFC committed before the High Court to pay any duty determined against KTL from the sale proceeds of the machinery. The tribunal emphasized honoring this commitment, holding APSFC accountable for the duty liability confirmed against KTL. The commitment made by APSFC in the writ petition was considered binding, leading to the dismissal of the appeal challenging the duty recovery from them.

3. Penalty imposed under Section 112 of the Customs Act:
The adjudicating authority imposed a penalty on APSFC under Section 112 of the Customs Act. However, the tribunal found this penalty unjust as APSFC was not involved in importing goods liable for confiscation. Additionally, the machinery sold by APSFC could not be confiscated as per the High Court's ruling. Therefore, the tribunal set aside the penalty imposed on APSFC under Section 112, allowing the appeal on this aspect.

In conclusion, the tribunal upheld the duty liability on APSFC based on their commitment before the High Court, while setting aside the penalty imposed under Section 112 of the Customs Act. The judgment clarified the obligations of APSFC regarding duty payment and highlighted the importance of honoring commitments made before the court.