2019 (7) TMI 108 - AT - Customs

Benefit of exemption from payment of Custom Duties - violation of post import conditions - Sl No 230 of Notification No 21/2002-Cus 01.03.2002 - import of Paver Finisher - alleged evasion of customs duty diverting the imported goods to other entities much before the completion of five years from the date of import and not using the goods in terms of the conditions of the notifications and thereby not adhering to end use conditions. HELD THAT - It is admitted that Appellants had claimed the exemption in respect of the said pavers by producing the documents in respect of projects namely Major Maintenance works of State High way No 47 portion between Meerut and Bijnore of 65 kms under UP state Road Project and construction of rehabilitation of State Highway 47 of portion between Bijnore to Nazirabad of 53 kms length. The paver was permitted clearance under exemption 21/2002-Cus which allowed clearance under complete exemption subject to the condition that the goods were actually used by the importer himself in the projects for which said goods are cleared. Undisputedly these pavers were never used by Appellant 1 in any of the above two referred projects thereby contravening the conditions prescribed by the exemption notification. On the contra these were transferred by the Appellant 1 in first instance for use in Delhi Gurgaon Project of Jaypee DSC Infrastructure. It is now settled position in law that exemption notification needs to be construed strictly and it is for the person claiming the exemption to satisfy that all the conditions prescribed by the notification are fulfilled. Thus by transferring the imported goods cleared for use in particular projects to some other project Appellant 1 had at that instance itself contravened the conditions of exemption granted subject to actual user condition. For the contraventions done by transferring these pavers to Delhi Gurgaon Project with using them in the projects for which the goods have been cleared the goods had become liable for confiscation under Section 111(o). In view of the fact that Appellants had given an undertaking to use the goods cleared under exemption according to prescribed post importation conditions in our view demand of duty made under Section 12 of the Customs Act 1962 cannot be faulted with - It is also worthwhile to point Section 28 is a machinery provision for determination of the duty short paid/ not paid or erroneously refunded. When there is no such determination needed and duty as determined at time of assessment but for the exemption allowed subject to certain post importation conditions the quantum of duty short paid/ not paid is not to be determined again and Appellant 1 should have in terms of undertaking given deposited the duty amount immediately in case of violation of any post importation conditions. Requirement of demand notice - Appellants have contended that for demanding the duty under 125(2) a notice under Section 125 is a must - HELD THAT - When the duty has been demanded in terms of the undertaking given by the appellant 1 that they will in case of violation of post import conditions pay back the duty determined in respect of the said goods but for exemption the duty demand has to be made from them only in terms of their undertaking. It is fact that notice proposing confiscation of goods should also have been issued to owner of the goods/ person from whose possession the goods have been seized. But once seized and power to seize such goods can be shown to exist the notice will have to be issued to the person who had contravened the provisions of law which have made the goods liable for confiscation. It is settled law that without any notice no adverse order can be passed against the owner/ possessor of the goods from whose custody the goods have been seized. The goods become liable for confiscation on account of violations as prescribed by Section 111 of the Customs Act 1962. Once the goods are held liable for confiscation the physical availability of the goods or their presence is not mandatory for proceeding under section 125 or Section 112 and 114 of the Customs Act 1962 - In the present case Appellant 1 has by way of undertaking agreed to comply with the post import conditions in case of non compliance with the same he could have been proceeded against even in absence of the goods. Confiscation upheld - quantum of redemption fine reduced - penalties are rightly imposable on them in terms of Section 112 (1) of the Customs Act 1962. Appeal allowed in part.

Issues Involved:
1. Denial of Customs duty exemption.
2. Confiscation of imported goods.
3. Recovery of duty and imposition of penalties.
4. Appropriation of voluntarily paid amount.
5. Violation of post-importation conditions.
6. Validity of penalties on individuals.

Issue-wise Detailed Analysis:

1. Denial of Customs Duty Exemption:
The Commissioner denied the Customs duty exemption granted to the appellant under Notification No. 21/2002-Cus dated 01.03.2002, as the imported Paver Finisher was not used for the specified projects but was instead sold to another entity before the completion of five years from the date of importation. The Tribunal upheld the denial, stating that the exemption notification should be interpreted strictly, and the burden of proving applicability lies with the assessee. The appellants failed to fulfill the conditions specified in the exemption notification, rendering the goods liable for confiscation under Section 111(o) of the Customs Act, 1962.

2. Confiscation of Imported Goods:
The Commissioner ordered the confiscation of the Paver Finisher under Section 111(o) of the Customs Act, 1962, with an option for the appellant to redeem the same upon payment of a redemption fine. The Tribunal confirmed the confiscation and the imposition of a redemption fine, but reduced the fine from ?21,00,000 to ?2,50,000, considering the salvage value of the goods. The Tribunal emphasized that the liability for confiscation arises from the breach of conditions of the exemption notification, and physical availability of the goods is not mandatory for proceeding under Section 125 or Section 112 and 114 of the Customs Act, 1962.

3. Recovery of Duty and Imposition of Penalties:
The Commissioner ordered the recovery of duty amounting to ?55,52,528 under Section 12 read with Section 125(2) of the Customs Act, 1962, and imposed penalties on the appellant and its directors under Section 112 of the Customs Act, 1962. The Tribunal upheld the recovery of duty and the imposition of penalties, stating that the appellants had given an undertaking to use the imported goods for the specified projects and should have paid the duty in case of violation of any post-importation conditions. The Tribunal cited various judgments to support the view that duty can be recovered under Section 12 of the Customs Act, 1962, even in the absence of the goods.

4. Appropriation of Voluntarily Paid Amount:
The Commissioner appropriated the amount of ?55,52,528 voluntarily paid by the importer towards Customs duty against the liability of duty. The Tribunal upheld this appropriation, noting that the appellants had admitted to the breach of conditions and the duty was rightly demanded under the undertaking given by them.

5. Violation of Post-Importation Conditions:
The appellants violated the post-importation conditions by transferring the imported goods to another project and selling them before the stipulated period of five years. The Tribunal held that the exemption notification's conditions were not fulfilled, and the goods became liable for confiscation. The Tribunal emphasized the strict interpretation of exemption notifications and the continuing obligation to comply with the conditions.

6. Validity of Penalties on Individuals:
The Tribunal upheld the penalties imposed on the individuals (Appellant 2, Appellant 3, and Appellant 4) under Section 112 of the Customs Act, 1962. The Tribunal agreed with the Commissioner's findings that the individuals, being in responsible positions, had knowledge of the conditions of the exemption notification and abetted in the violation of these conditions. The penalties were deemed appropriate for their acts of omission and commission leading to the confiscation of goods.

Conclusion:
The Tribunal modified the order of the Commissioner by reducing the redemption fine from ?21,00,000 to ?2,50,000 but upheld the denial of exemption, confiscation of goods, recovery of duty, and imposition of penalties on the appellants. The appeals filed by the individuals were dismissed, and the appeal of the main appellant was disposed of accordingly.

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