2023 (7) TMI 639 - AT - Customs

Demand of duty (CVD SAD) foregone at the time of import - The quantity of imported Sulphur, which was not used in manufacture of fertilizer - Confiscation - redemption fine - penalty - invocation of extended period of limitation, under Section 28 of the Customs Act, 1962 - contention of the department is that the Sulphur content in the said quantity of Sulphuric acid cleared in the domestic market are not eligible for exemption under N/N. 4/2006-CE dated 01.03.2006 and Notification No. 20/2006-CUS dated 01.03.2006 - HELD THAT - The Sulphur content in the total quantity of sulphuric acid removed for the purposes other than for manufacture of fertilizer works out to 8304.265 MT, which accounts for 0.66% of the total import of Sulphur made by the Appellant. Hence, this quantity of Sulphur which was not used in manufacture of fertilizers does not qualify for the exemption, under Sl. No. 3 of Notification No 4/2006-E dated. 01.02.2006 and chargeable to CVD SAD at applicable rates. A perusal of Notification No. 4/2006-CE dated 01.03.2006 and Notification No. 20/2006-CUS dated 01.03.2006, clearly indicates that the exemption from CVD and SAD are available to Sulphur, only when they are used in the manufacture of fertilizer. Admittedly, the Appellant have sold 25165.450 MT of Sulphuric Acid in the market and hence the Sulphur content in the total quantity of sulphuric acid removed for the purposes other than for manufacture of fertilizer are not eligible for the exemption. The quantity of Sulphur in the Sulphuric Acid cleared to open market works out to 8304.265 MT, which accounts for 0.66% of the total import of Sulphur made by the Appellant - the Appellant are not eligible for the exemption of CVD and SAD provided under the above said Notifications, for the above said quantity of Sulphur cleared to domestic market. Extended period of limitation - suppression of facts - HELD THAT - The Appellant has imported sulphur in bulk. At the time of importation of Sulphur they could not visualize how much quantity will be used in the manufacture of Sulphuric Acid and what quantity will be cleared in the domestic market. Therefore, the entire quantity of imported Sulphur was taken clearance at Nil rat of duty. Due to storage and other constraints, they were compelled to clear some quantity of Sulphuric Acid in the domestic market, which is beyond their control - the said clearances of Sulphuric Acid were made under the cover of excise invoices, on payment of appropriate central excise duty and duly mentioned in the ER-1 returns filed and other Central Excise records which have been audited by the department at periodical intervals. In such a situation, no charge of suppression or willful mis-statement and fraud etc., can be alleged against the Appellant - the extended period of limitation cannot be invoked in this case. Hence, the duty demand has to be limited only to the normal period of limitation. Interest is also chargeable for the demand of duty payable under the normal period. Penalty under Section 114A of Customs Act, 1962 - HELD THAT - The penalty under this section can be imposed only when duty has not been paid on account of suppression of fact, willful mis-statement, fraud, collusion etc. As discussed, no such ingredient was present in this case warranting imposition of penalty under this Section. Accordingly, we set aside the penalty imposed under the Section 114A of the Customs Act, 1962. Redemption fine - HELD THAT - The clearances of Sulphuric Acid were made by the Appellant under the cover of excise invoices, on payment of appropriate central excise duty and the same was duly mentioned in the ER-1 returns filed by them for the relevant periods. Hence, the goods cleared to open market are not liable for confiscation under Section 111(o) of the Customs Act, 1962. Accordingly, the redemption fine imposed on the Appellant is not sustainable. The demand for the normal period of limitation is upheld and the demands made in the impugned order set aside by invoking the extended period - the penalty imposed on the Appellant under Section 114A of the Customs Act, 1962 set aside - The redemption fine imposed on the Appellant is also set aside - appeal allowed in part.

Summary

Issues Involved:
1. Imposition of CVD & SAD on imported Sulphur not used in fertilizer manufacturing.
2. Invocation of extended period of limitation.
3. Imposition of penalty under Section 114A of the Customs Act.
4. Confiscation of goods and imposition of redemption fine under Section 125 of the Customs Act.

Summary:

1. Imposition of CVD & SAD on Imported Sulphur:
The Appellant challenged the imposition of CVD & SAD on imported Sulphur, which was not used in the manufacture of fertilizer. The Sulphur was used to produce Sulphuric Acid, a small quantity of which was sold domestically due to manufacturing disruptions. The department argued that only Sulphur used in fertilizer manufacturing qualifies for exemption under Notification No. 4/2006-CE and No. 20/2006-CUS. The Tribunal held that the Sulphur content in the Sulphuric Acid sold domestically (0.66% of total imports) does not qualify for the exemption and is chargeable to CVD & SAD.

2. Invocation of Extended Period of Limitation:
The Appellant contested the invocation of the extended period under Section 28(4) of the Customs Act, arguing there was no suppression, willful mis-statement, or fraud. The Tribunal observed that the Appellant could not predict the quantity of Sulphuric Acid to be sold domestically at the time of importation. The clearances were made under excise invoices and reflected in statutory returns, audited periodically. Thus, no suppression or fraud was found, and the extended period could not be invoked. The duty demand was limited to the normal period of limitation, with interest chargeable.

3. Imposition of Penalty under Section 114A:
The Tribunal noted that penalty under Section 114A requires suppression, willful mis-statement, or fraud. Since these elements were absent, the penalty imposed under Section 114A was set aside.

4. Confiscation of Goods and Imposition of Redemption Fine:
The Tribunal found that the clearances of Sulphuric Acid were made under excise invoices, with appropriate duty paid and properly recorded in ER-1 returns. Therefore, the goods were not liable for confiscation under Section 111(o) of the Customs Act, and the redemption fine was not sustainable.

Conclusion:
The Tribunal upheld the duty demand for the normal period, set aside the demands made by invoking the extended period, and annulled the penalty and redemption fine imposed on the Appellant. The appeal was disposed of accordingly.