2024 (2) TMI 1141 - AT - Customs

Imposition of penalty and confiscation/redemption fine - repairing works for risers and pipes - repair activity done at DTA location instead of designated EOU location - violation of TSA bond furnished by ONGC - Validity of show cause notice issued to the parties - severally and jointly for confiscation - HELD THAT - Show cause notice was not maintainable as per the provisions quoted and same has been confirmed by both lower authorities under wrong provisions. Firstly, we find that Section 54 of the Customs Act is applicable where any goods imported in a Customs station are intended for transshipment. It is by no way forthcoming that the goods were coming from any Customs station and meant for transshipment as envisaged in Section 54. It is clear from the provisions of Manufacture and Other Operations in Warehouse Regulation, 1966 that, the regulations require that the persons removing the goods from warehouse has obligation to pay duty in case goods are not received within three months or such extended period as a proper officer may extend and in case the proof of receipt is not received then the permission is required to be cancelled and duty bond enforced. Coming to the Clause 111(J), it is clear that the same can be thus enforced against the person who attempts to remove or actually removes goods from Customs area or warehouse without the permission of the proper officer or contrary to the terms of such conditions. The Clause comes into operation only when goods are removed from the customs area or warehouse without permission or contrary to the permission already granted. It does not deal with the warehouse goods in transit with which the above regulations i.e. Warehoused Goods (Removable) Regulations, 1963 have been provided and which make the goods dutiable in the hands of persons executing bond for any violation of conditions of bond. Thus, the liability under the bond is of the person executing it. As far as appellants are concerned, if intention was to evade service-tax, then show cause notice should have been issued under relevant provisions including penal provisions of Finance Act, 1994. Thus, giving show cause to the party and same having been sustained without proper legal construction by the authorities below, we are inclined to set aside the proceeding of imposition of penalty etc. for violation of Section 111(J) against alleged recipients of the goods at this belated stage and particularly when duty of Service Tax has also been discharged and accepted by the department reckoning in the invoice that work has been done by E.O.U, even though E.O.U may not have normally paid service tax. Also the party executing the bond and its intermediary responsible for executed bond have neither been investigated, nor show caused in the matter. The forensic evidence regarding rebuttal of two statements not having been considered by lower authorities, we are not commenting either way on the same, nor are inclined to rely on testimonial evidence in the absence of proper defense examination including forensic having been afforded in such old matter and service tax penal provisions not having been invoked. Appeals are allowed with consequential relief.

Issues Involved:
1. Imposition of penalty and confiscation/redemption fine on risers and pipes.
2. Alleged violation of TSA bond and Manufacture and Other Operations in Warehouse Regulations, 1966.
3. Alleged forgery of delivery certificates and use of fake stamps.
4. Liability for confiscation and penalties under Sections 111(b), (j), (n), 112(a), and 117 of the Customs Act, 1962.

Summary of Judgment:

Issue 1: Imposition of Penalty and Confiscation/Redemption Fine
The department contended that the impugned goods were transported by ONGC to the EOU for repair but were instead repaired at the DTA location, violating the TSA bond. The appellants argued that the repair location discrepancy was a bona fide error by ONGC and its intermediary, and that the goods were cleared under bond without any import transaction, thus not attracting Customs Act provisions.

Issue 2: Alleged Violation of TSA Bond and Regulations
The department alleged that transferring goods from the EOU Unit to the DTA Unit without proper permission violated the Manufacture and Other Operations in Warehouse Regulations, 1966, and Sections 54, 62, and 71 of the Customs Act, 1962. The appellants maintained that the goods were meant to be repaired at the DTA location, and the service tax was duly paid, negating any tax evasion allegations.

Issue 3: Alleged Forgery of Delivery Certificates
The department accused the appellants of forging delivery certificates and using fake stamps to divert goods. The appellants rebutted this with forensic evidence and claimed that testimonial evidence was obtained under duress. The adjudicating authority did not consider the forensic evidence, citing pending criminal proceedings.

Issue 4: Liability for Confiscation and Penalties
The appellants argued that the goods were not liable for confiscation under Sections 111(b), (j), and (n) as they were neither imported nor dutiable or prohibited. They contended that penalties under Sections 112(a) and 117 were unjustified. The tribunal found that the department's case was based on circumstantial evidence without proper investigation from ONGC and its intermediary. The tribunal noted that the show cause notice and penalties were based on irrelevant provisions and set aside the proceedings.

Conclusion:
The tribunal concluded that the penalties and confiscation/redemption fines were improperly imposed due to irrelevant provisions being cited and lack of proper investigation. The appeals were allowed with consequential relief, and the tribunal emphasized that the forensic evidence and proper legal construction were not adequately considered by the lower authorities.

Pronouncement:
The judgment was pronounced in the open court on 22.02.2024.

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