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2021 (1) TMI 152 - AT - Customs


Issues Involved:
1. Violation of Notification No. 52/2003-Cus and Notification No. 22/03-CE conditions.
2. Liability for customs duty on imported raw materials.
3. Eligibility for exemption on finished goods cleared to ISRO and BEL.
4. Confiscation of raw materials and imposition of redemption fine.
5. Imposition of penalty under Section 112(a) of the Customs Act, 1962.

Detailed Analysis:

1. Violation of Notification No. 52/2003-Cus and Notification No. 22/03-CE Conditions:
The primary issue was whether the appellants violated the conditions of Notification No. 52/2003-Cus dated 31.3.2003 and Notification No. 22/03-CE dated 31.03.2003. The appellants imported raw materials duty-free under these notifications and used them to manufacture finished goods, which were cleared to ISRO and BEL at nil rate of duty. The Revenue alleged that the appellants did not have permission for DTA clearances and thus violated the conditions of the notifications.

2. Liability for Customs Duty on Imported Raw Materials:
The appellants argued that they had achieved positive Net Foreign Exchange Earnings (NFE) and had obtained approval from the STPI, Bangalore, for making sales in DTA. They contended that the customs duty foregone on inputs should not be demanded as the finished goods were cleared under valid exemptions. However, the adjudicating authority and the appellate authority held that the customs duty foregone on inputs was payable because the finished goods, if imported, would attract nil customs duty under the relevant notifications.

3. Eligibility for Exemption on Finished Goods Cleared to ISRO and BEL:
The appellants claimed that the finished goods were not exempt from central excise duty unless certain conditions were met. They relied on various judgments and CBEC Circular No. 54/2004-Cus dated 13.10.2004 to argue that the exemption was conditional. However, the Tribunal found that the finished goods cleared to ISRO and BEL were indeed eligible for nil customs duty and additional duty, making the customs duty foregone on inputs payable.

4. Confiscation of Raw Materials and Imposition of Redemption Fine:
The appellants argued that the confiscation of raw materials was not sustainable as the goods were cleared by customs and were not available for seizure. The Tribunal agreed, citing previous judgments, and noted that the goods were imported with necessary approvals and were cleared before the issuance of the show-cause notice. Therefore, the confiscation and imposition of redemption fine were set aside.

5. Imposition of Penalty under Section 112(a) of the Customs Act, 1962:
The appellants contended that the penalty under Section 112(a) was not sustainable as the goods were not available for confiscation. The Tribunal held that since the goods were cleared with due approvals and the duty along with interest was paid upon being pointed out, the imposition of penalty was not warranted. The Tribunal referenced the case of Microsoft India (R & D) Pvt. Ltd., where it was held that confiscation and penalty are not sustainable when goods are imported after necessary approvals.

Conclusion:
The Tribunal partly allowed the appeal by setting aside the confiscation, redemption fine, and penalty. However, the demand for duty on the raw materials, which was paid along with interest, was upheld. The order emphasized that the customs duty foregone on inputs was payable due to the conditions of the relevant notifications being violated when the finished goods were cleared at nil duty. The order was pronounced in open court on 04.01.2021.

 

 

 

 

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