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TMI Blog2013 (5) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... e National Highway Authority of India Ltd. The said JV company imported two units of dynapac paver finishers through Mumbai port vide bill of entry No. 344155, dated 26-3-2003 claiming benefit of duty exemption under serial No. 230 of Notification No. 21/2002-Cus., dated 1-3-2002. The goods were released on execution of bond for fulfilment of the terms and conditions of the exemption by the JV company. The work commenced in September, 2002 and as per the original schedule, it was to be completed by March, 2005. On request by the JV company, CHPRCL extended the time for completion till 14th February, 2007. However the JV company could not complete the work. Therefore the contract was terminated by CHPRCL vide letter dated 26-4-2007 who took over all materials, plants, machineries and equipment belonging to the JV company as per clause 60.1 of the said Contract. CHPRCL proceeded to sell the goods taken over by them through auction and the successful bidder was M/s. ARRS Infrastructure Projects Ltd., who quoted a bid of Rs. 11.25 crore and the said bid was accepted vide letter of acceptance dated 4-9-2009. However, before the paver finishers could be handed over, the Customs Officers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the individual constituents of the JV company. Penalty of Rs. 5 lakhs each was imposed on PA holder of JV company, Managing Director of HCIL, Representative of Chinese constituent of the JV company, Chairman and Project Director of CHPRCL. Proceedings against the others were dropped. Hence the appellants are before us. 3. The ld. Counsel for CHPRCL and its officials made the following submissions :- (a) CHPRCL are not the importers of the impugned goods. Therefore, they are not required to satisfy any terms and conditions imposed under Notification No. 21/2002-Cus. Therefore, they cannot be saddled with any duty liability for violation of the conditions of the said notification; (b) The alleged violation is sale or otherwise disposal of the imported goods within a period of 5 years from the date of importation by the importer. There is no sale or otherwise disposal during the 5 year period envisaged in the notification. Since the contractor could not adhere to the time limits stipulated in the contract, they had to terminate the contract. It is in pursuance to the terms of the contract, they have taken over the materials, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported for construction of road only as per the contract awarded to them by CHPRCL and the goods have not been misused or diverted; (b) They did not sell or otherwise dispose of the said goods within the 5 year period from the date of importation. The contract was terminated by CHPRCL and all the materials, plant and machinery including the imported equipment were taken over by CHPRCL. Thus they have not violated any terms and conditions of Notification No. 21/2002-Cus. Therefore, they are not liable for any penal consequences; (c) Imposition of penalties on the constituents of the JV company or their officials are totally uncalled for as they did not stand to gain in any manner whatsoever in the transaction involved. Accordingly he prays for setting aside the penalties imposed on his clients. 4. The ld. Addl. Commissioner (AR) appearing for the Revenue makes the following submissions :- (a) Condition No. 40(b) to Notification 21/2002 (S. No. 230) stipulated that the importer at the time of importation furnishes an undertaking that he shall use the imported goods exclusively for the construction of ro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the customs authorities seized the goods from the possession of CHPRCL. Their plea that as per clause 13(e) of the bid document, it is the buyer who has to discharge all the liabilities cannot be accepted because before claiming the ownership or deemed ownership, they were required to discharge all the liabilities attached with the offending goods. The buyer M/s. ARSS had also stated in their reply to the show cause notice that M/s. CHPRCL never intimated them about the outstanding customs dues and they participated in the auction in good faith. In view of the above factual position, the duty liability has been correctly fastened on CHPRCL. (e) There is no merit in the argument that since CHPRCL has not opted for redemption, they are not liable to pay duty. The Hon'ble High Court of Bombay in the case of Wockhardt Hospital and Heart Institute [2006 (200) E.L.T. 15 (Bom.)] had held that irrespective of the fact that fine in lieu of confiscation has become payable or not, on imposition of fine under Section 125(1), the duty and charges payable on such goods has to be paid as per Section 125(2). The said decision was based on the Hon'ble Apex Court's decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d). The importer M/s. CWHEC-HCIL J.V. had executed an undertaking/bond in the sum of Rs. 95,12,503/- in terms of Notification No. 21/2002-Cus. (Sr. No. 230) to the effect that he shall use the imported goods exclusively for the construction of National Highway and the imported equipment would not be sold or otherwise disposed of, in any manner, for the period of 5 years from the date of importation. The question to be decided is whether this condition stood violated or not? 5.2 It is an undisputed fact that the contract awarded to the importer JV company was terminated by the employer CHPRCL vide letter No. 11011/5/2002-CHPRCL, dated 26th April, 2007 under clause 59.1 of the Condition of Contract because of fundamental breach of the contract. From the termination letter it is seen that the work envisaged in the contract commenced on 10-9-2002 with the original scheduled completion as 9-3-2005. After several extensions, time was granted until 14-2-2007 for completion. In the meanwhile the JV was asked to show cause as to why the JV's continued poor progress and failure to meet its obligations stipulated under the Contract should not be considered as a fundamental breach of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the imported equipment became the property of CHPRCL due to default of contract by the importer JV. Thus the condition of exemption stood violated and consequently, the goods became liable to confiscation under Section 111(o) of the Customs Act. Therefore, the confiscation of the imported equipment by the adjudicating authority under Section 111(o) cannot be faulted as the same is sustainable in law and we hold accordingly. 5.5 Once the goods are confiscated under Section 111, the question of option to redeem the same on payment of fine automatically arises, if the goods are not prohibited. In the present case, the goods are not prohibited and hence, option of redemption on payment of fine has to be necessarily given. Once the option to redeem the goods on payment of fine is given, then duty liability on the goods have to be discharged, whether or not the goods are actually redeemed. In the Jagdish Cancer & Research Centre, the Hon'ble Apex Court held as follows :- '11. Whenever an order confiscating the imported goods is passed, an option, as provided under sub-section (1) of Section 125 of the Customs Act, is to be given to the person to pay fine in lieu of the conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PRCL. Though the goods had been sold by auction to M/s. ARSS Infrastructure Projects Ltd., the handing over the goods had not been completed awaiting compliance on the part of M/s. ARSS with regard to payment of sales tax on the goods sold. This is evident from letters No. PIU/Haldia/PC-1031/09-10/483, dated 17-10-2009 addressed to the Customs authorities and PIU/Haldia/PC-1031/09-10/586, dated 14th November, 2009 written to M/s. ARSS, by the Project Director, CHPRCL. It is also evident that handing over possession would take another 2 months approx. Sale is complete only when consideration is paid and delivery is effected. Inasmuch delivery was not effected, the goods were still under the control and custody of CHPRCL and therefore, it is very clear that the goods were seized from their possession. In other words, M/s. ARSS had not become the owners of the goods at the time of seizure. 5.7 In view of the above factual position, whether the goods are redeemed or not, the liability to pay duty rests with M/s. CHPRCL from whose possession the goods were seized and who were the deemed owners. Since there is no dispute regarding the quantum of duty, we uphold the duty demand of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering the fact CHPRCL is a Government company. Accordingly we reduce the penalty on CHPRCL to Rs. one lakh and set aside the penalty imposed on the Chairman and Project Director of CHPRCL. 5.10 As regards the penalty imposed on the importer JV company and its constituents and their officials, penalties have been imposed under Section 112(a). For imposition of penalty under Section 112(a), no mens rea is required. Any act or omission to do any act in relation to any goods, which act or omission would render such goods liable to confiscation under Section 111 would suffice. In the instant case a penalty equal to duty has been imposed on the importer JV company apart from a penalty of Rs. 10 lakhs each on the constituent units and Rs. 5 lakhs each on their officials. The penalty on the importer JV is justified since it is on account of their negligence/incompetence, the contract was terminated by the employer, in spite of several opportunities given to them, before the completion of five years. Nevertheless, the fact remains that they had used the impugned goods for the purpose of road construction which was the intended use. This should act as a mitigating factor while conside ..... X X X X Extracts X X X X X X X X Extracts X X X X
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