2017 (9) TMI 1017 - AT - Customs

Project import - concessional rate of duty - import of second hand capital goods without a license under the import policy only under Project Import Regulations on actual user basis - confiscation - penalty - Held that - it is evident that the second hand capital goods were used in the project, for which concessional rate of duty was availed - the provisional assessment which were ordered at the time of import were finalized denying the benefit of concessional rate of duty. Accordingly, differential duty has been demanded and the same has also been paid by the appellant. In the case of the appellant, the goods were allowed to be imported at concessional rate and relaxation of Import Trade Control Regulations, only subject to actual user condition and observance of the Project Import Regulations. Since the appellant has failed to satisfy the associated condition, it is to be considered that the goods are liable for confiscation under the provisions of Section 111(o) ibid - The appellant has claimed that second hand capital goods were allowed for import freely and further that actual user condition will no longer be applicable since five year period after import is already over. Since the goods were never used for the purpose for which it was imported, the actual user condition has been violated. Consequently, we are of the view that the confiscation of the goods ordered by the Adjudicating Authority under section 111(o) ibid is to be upheld - keeping in view the fact that the goods were imported a long time ago in the year 1998-1999, the redemption fine and penalty imposed u/s 125 and 112(a) ibid are on the higher side - redemption fine reduced to ₹ 1.00 Crore u/s 125 and the penalty to ₹ 50.00 lacs u/s 112(a). Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Differential duty liability confirmation.
2. Confiscation of imported capital goods.
3. Imposition of penalty and redemption fine.

Differential Duty Liability Confirmation:
The appellant imported second-hand capital goods under the project import scheme but failed to set up the intended manufacturing plant due to economic conditions. The customs authority finalized the provisional assessments, confirming a differential duty liability of INR 94,23,839. The appellant disputed the imposition of interest, redemption fine, and penalty, claiming that the duty liability was paid. The Tribunal noted that the goods were imported under concessional rates for a specific project, and as the goods were not used for the intended purpose, the differential duty was justified and already paid by the appellant.

Confiscation of Imported Capital Goods:
The imported second-hand capital goods were subject to actual user conditions under the Foreign Trade Policy, which the appellant violated by not setting up the manufacturing plant as agreed at the time of import. The goods were found unused in the appellant's possession during a verification in 2012, contrary to the conditions of import. The Tribunal upheld the confiscation under Section 111(o) of the Customs Act, as the goods were improperly imported due to non-compliance with the actual user condition. However, considering the circumstances and the time elapsed since import, the redemption fine and penalty were reduced to INR 1.00 Crore and INR 50.00 lacs, respectively.

Imposition of Penalty and Redemption Fine:
The appellant argued that the goods were freely importable and that the actual user condition was no longer applicable after five years. However, the Tribunal found that the goods were subject to the actual user condition at the time of import, and since they were not utilized for the intended purpose, the condition was violated. Consequently, the confiscation was upheld, but the redemption fine and penalty were reduced based on equity, justice, and good conscience. The Tribunal partly allowed the appeal, reducing the redemption fine to INR 1.00 Crore and the penalty to INR 50.00 lacs, considering the extended time since the import in 1998-1999.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT KOLKATA highlights the issues of differential duty liability confirmation, confiscation of imported capital goods, and imposition of penalty and redemption fine. The Tribunal upheld the differential duty liability due to non-utilization of the goods for the intended project, leading to the confirmation of the duty payment. Additionally, the Tribunal supported the confiscation of goods under Section 111(o) of the Customs Act for violating the actual user condition, while reducing the redemption fine and penalty based on the circumstances and time elapsed since the import.