2021 (8) TMI 391 - AT - Customs

Import of capital goods availing the benefit of exemption notification No. 153/93-Cus dated 13.8.1993 - requirement of fulfilment of condition of import being goods are imported into India for being used for the export of software out of India under STP hundred percent export oriented scheme - both sides want the impugned order to be set aside. Revenue wants the matter to be remanded to the original authority after setting aside the impugned order. HELD THAT - ILPL has, admittedly, availed the benefit of the exemption notification which is available subject to some conditions. Condition (ii) as applicable during the relevant period mandates the goods shall only be used for the purpose of export of software by the STP units located in the premises of ISP . It is undisputed that ILPL used the goods for both STP and non-STP units. In the impugned order, partial exemption was given on proportionate basis in proportion to the land used for STP and non-STP units. There is no provision in the exemption notification to allow partial exemption - What the Commissioner has done is to convert the full exemption available under this notification into a proportionate partial exemption. The Commissioner has no power to modify an exemption notification while applying it. What the Commissioner has done is to convert the full exemption available under this notification into a proportionate partial exemption. The Commissioner has no power to modify an exemption notification while applying it. If the conditions of the exemption notification were not fulfilled, can the adjudicating authority still give the benefit of the exemption notification or will it amount to modifying the exemption notification? - HELD THAT - Section 111(o) of the Customs Act, 1962 states that any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under this Act or any other law for the time being in force, in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer. The matter is remanded to the Adjudicating Authority to pass an order citing specific provisions of the exemption notification under which the decisions are taken regarding the availability of the benefit of notification, benefit of depreciation in value. If the Adjudicating Authority decides to sanction non-fulfilment of any of the conditions of the exemption notification as per section 111(o), that must also be indicated. If any confiscation is ordered or penalty imposed, the relevant provisions must be cited. Appeal disposed off.

Issues Involved:
1. Fulfillment of condition (ii) of the exemption notification.
2. Proportionate exemption based on the usage of goods.
3. Applicability of depreciation benefits under the exemption notification.
4. Interpretation of exemption notifications and relevant legal principles.
5. Authority of the adjudicating officer to modify exemption notifications.

Detailed Analysis:

1. Fulfillment of Condition (ii) of the Exemption Notification:
The primary issue revolves around whether M/s. India Land and Properties Ltd (ILPL) fulfilled condition (ii) of the exemption notification 153/93-Cus, which mandates that "the goods shall only be used for the purpose of export of software by the STP units located in the premises of ISP." The Commissioner observed that ILPL used the imported goods for both STP and non-STP units, thus not strictly adhering to the condition. ILPL argued that despite using the goods for non-STP units, they met the Net Foreign Exchange requirement and did not use the goods outside the STP area.

2. Proportionate Exemption Based on the Usage of Goods:
The Commissioner had granted partial exemption on a proportionate basis, considering the area used by STP and non-STP units. However, the Tribunal noted that the exemption notification does not provide for partial exemptions. The Tribunal emphasized that the Commissioner does not have the authority to convert a full exemption into a proportionate partial exemption.

3. Applicability of Depreciation Benefits Under the Exemption Notification:
ILPL applied for de-bonding of the goods, invoking condition (v) of the exemption notification, which allows for the calculation of duty on a depreciated value. The Revenue contended that since ILPL did not fulfill the condition (ii), they should not be entitled to the depreciation benefits. The Tribunal highlighted that the benefit of depreciation is contingent upon the eligibility for the exemption notification.

4. Interpretation of Exemption Notifications and Relevant Legal Principles:
The Tribunal referred to the Supreme Court judgment in Commissioner of Customs, Mumbai vs Dilip Kumar, which clarified that exemption notifications must be interpreted strictly. The burden of proving eligibility for the exemption lies with the assessee, and any ambiguity must be resolved in favor of the Revenue. The Tribunal reiterated that once the threshold of applicability is crossed, the notification should be construed liberally.

5. Authority of the Adjudicating Officer to Modify Exemption Notifications:
The Tribunal concluded that the adjudicating authority does not have the power to modify the exemption notification. The role of the adjudicating authority is limited to determining whether the benefit of the exemption notification is available to the importer. If the conditions are not met, the authority cannot sanction non-fulfillment unless explicitly allowed under section 111(o) of the Customs Act, 1962.

Conclusion:
The Tribunal set aside the impugned order dated 03.03.2020 and remanded the matter to the Adjudicating Authority. The Authority is directed to pass an order citing specific provisions of the exemption notification regarding the availability of benefits and depreciation. If any conditions of the exemption notification are not fulfilled, the Authority must indicate whether non-fulfillment is sanctioned as per section 111(o). Any confiscation or penalties must be supported by relevant provisions. Both appeals were disposed of accordingly.

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