2023 (8) TMI 560 - AT - Customs

Demand of interest on differential duty - Appellant could not reexport the goods since the project work was not completed within the prescribed time and most of the equipments were damaged/broken/lost in the river belt when the project was being undertaken - N/N. 27/2008-Cus dated 01/03/2008 - HELD THAT - On going through the Notification No. 27/2008-Cus dated 01/03/2008, it is seen that the condition under (5) of Limitations and Condition s (Col.2) states that the importer is required to execute Bond with Bank Guarantee. This Notification does not specify that at the discretion of the Customs officials, instead of Bank Guarantee, they can insist on Security Deposit. Clearly violating this provision, the officials have insisted on Security Deposit in the present case. This means that the importer had to make arrangement for the full duty amount at the time of imports which completely nullifies the benefit sought to be extended under this Notification. It is clear that this is not a case where the Bank Guarantee has been encashed by the Department when the OIO was passed. The Security Deposit was available right on the day when the import has taken place. Therefore, when the entire amount was available in the form of Security Deposit of Rs.73,65,624/- on the day of import, the question of the Appellant paying any interest till the payment of duty will not arise. In this case, it is seen that entire amount has been paid on the date of import itself, partly by way of 15% payment through Bill of Entry and balance 85% by way of Security Deposit. The Bangalore Tribunal in the case of FEMCO FILTERS (P) LTD. VERSUS COMMISSIONER OF CUSTOMS, BANGALORE 2006 (5) TMI 317 - CESTAT, BANGALORE has held there was no provision under Notification No. 160/92 for demand of interest. Therefore, the demand of interest is not sustainable. As regards the confiscation, we find there was no deliberate violation of the conditions of the Notification. In the present case also in the Notification No. 27/2008-Cus dated 01/03/2008, it is seen that there is no provision to impose any interest when the differential duty is paid - the OIO demanding interest is required to be set aside. Accordingly, the interest confirmed under the impugned OIO is set aside - the Appellant is not required to pay the interest of Rs.20,71,220/- which they have paid on 26/08/2011. Redemption Fine and penalty - HELD THAT - Coming to the issue of confiscation, Redemption Fine and penalty, in the case of SUN KNITWEAR PVT. LTD. VERSUS COMMISSIONER OF CUSTOMS, BANGALORE 2006 (9) TMI 374 - CESTAT, BANGALORE , the Tribunal has held that Once the appellants pay the duty and interest, the goods will be out of the ambit of the said notification and they cannot be held liable for confiscation under Section 111(o) of the Customs Act. In the present case, as the Appellant has brought in proper explanation for non-export of the goods, following the ratio of the cited case law, we hold that the goods are not liable for confiscation and no penalty is to be imposed. Accordingly, the confiscation set aside, redemption fine and the penalty imposed by the Adjudicating Authority - since the appellant is not required to pay interest and penalty, the amounts paid by the Appellant under the heading of interest (Rs. 20,71,220) and penalty (Rs.6,00,000) would be eligible for consequential refund to him along with interest as per the statutory provisions. Appeal disposed off.

Summary

Issues involved:
The issues involved in the legal judgment are related to the import of goods under a specific Notification, failure to re-export within the stipulated time frame, imposition of differential duty, interest, penalty, confiscation, and redemption fine.

Details of the Judgment:

Issue 1: Failure to re-export within the prescribed time frame
The Appellant imported various Sand & Water pump Machineries and Accessories under a specific Notification, intending to re-export them within a specified period. However, due to project delays and equipment damage, re-export was not feasible within the prescribed time. The Department issued a Show Cause Notice demanding differential duty, interest, and proposing confiscation of goods and penalty.

Issue 2: Applicability of Notification No. 27/2008-Cus
The Appellant claimed the benefit of Notification No. 27/2008-Cus which required the importer to execute a bond with a bank guarantee for re-export. However, the Customs officials insisted on a security deposit instead of a bank guarantee, nullifying the concession intended by the Notification.

Issue 3: Imposition of interest, penalty, and confiscation
The Adjudicating Authority confirmed the demand for duty, imposed interest, penalty, and ordered confiscation with an option for redemption. The Appellant contested the imposition of interest, penalty, and confiscation based on legal precedents and the absence of provisions for interest in the relevant Notification.

Judgment Summary:
The Tribunal observed that the Customs officials' insistence on a security deposit instead of a bank guarantee violated the provisions of the Notification, negating the intended benefit. The Appellant provided a valid explanation for the failure to re-export within the stipulated time. Citing legal precedents, the Tribunal held that interest cannot be charged when the full duty amount is available as a security deposit at the time of import. Therefore, the interest demanded was set aside.

In line with legal precedents, the Tribunal ruled that when duty and interest are paid, goods are not liable for confiscation, and penalties cannot be imposed. Consequently, the Tribunal set aside the confiscation, redemption fine, and penalty imposed by the Adjudicating Authority. The amounts paid by the Appellant for interest and penalty were deemed eligible for refund along with statutory interest.

Overall, the Tribunal allowed the appeal, holding that the Appellant was not required to pay interest and penalty, and ordered the refund of the amounts paid under those headings.