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TMI Blog2023 (9) TMI 1553X X X X Extracts X X X X X X X X Extracts X X X X ..... T] analysed the very same issue as to the demand of interest and penalty in relation to amounts payable as duty other than Basic Customs Duty. The Hon ble High Court held ' Respondent No. 2 certainly cannot pass an order beyond the provisions of the Customs Act, 1962. The provisions relating to interest contained in Section 28AB of the Customs Act, 1962 are not borrowed in the legislation imposing levy of surcharge or CVD or SAD. Respondent No. 2 cannot include interest in the settlement arrived at by it on the ground that petitioner has derived financial benefits by not paying the correct rate of duty when it was due. Deriving financial benefits itself cannot be a ground to order payment of interest in the absence of any statutory provisions for payment of interest.' The above judgment of the Hon ble High Court was affirmed by the Hon ble Apex Court in UNION OF INDIA ORS. VERSUS MAHINDRA AND MAHINDRA LTD. [ 2023 (8) TMI 135 - SC ORDER ]. Applying the ratio laid in the above judgment, we are of the considered view that the demand of interest (on the total differential duty of Rs. 4,81,74,877/-) cannot sustain and requires to be set aside. For the same reason, the confiscati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oms Act. The notice alleged that the appellant had undertaken the activities of loading of software application and repacking of the goods in cartons which amounted to manufacture as defined under section 2f (i) and Section 2f (iii) read with Sl.No. 74A of the Third Schedule to the Central Excise Tariff Act, 1944. The show notice also observed that the goods ought to have been assessed on ad valorem on the transaction value. After due process of law, the original authority confirmed the proposals in the SCN including the proposal for confiscation, demand of interest and imposition of redemption fine and penalties. 2. Aggrieved by such order, the appellant is now before the Tribunal. 3. The learned counsel Sri Rohan Muralidharan appeared and argued for the appellant. 3.1 It is submitted by the learned counsel that the appellant is a private limited company engaged, inter alia, in the import and trading of laptops, personal computers, projectors, TFT monitors and various other computer peripherals. In the present case, in the year 2013, the appellant bid for a contract for supply of laptops, software and carry bags to M/s. Rajcomp Info Services Ltd. (Rajcomp, for short), an undertaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.4 On 10.07.2013 the Commissioner of Customs (Import) permitted provisional release of the laptops on execution of bank guarantee for an amount of Rs. 1,51,47,000/- being the differential duty between the transaction value and MRP of the 25,512 laptops. Intimation was served by appellant to the Superintendent of Central Excise, Pondicherry vide letter dt. 10.07.2013 regarding the provisional release of the laptops and their intention to bring the same to appellant s factory at Puducherry for loading of software and that the laptops would be cleared after payment of excise duty. It was also stated that appellant would be availing CENVAT credit of the duty paid. 3.5 On 12.07.2013, statement of Sri B.K. Prakash was recorded wherein, inter alia, he stated that due to time constraint in view of detention of the goods by the Customs and to ensure the timely delivery, the laptops were being planned to be supplied by loading the software at factory which is situated at Puducherry. It is stated that the company has communicated the details to the Central Excise Superintendent, Puducherry and the company would be paying the appropriate Central Excise duty at Puducherry. The laptops importe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Goel, Chief Officer, Customer Support deposed that for supply of laptops to Rajcomp, the software in the nature of MS Visio and Adobe were bought locally from authorized reseller. The software were then loaded in the laptops at their warehouse. 3.13 On 15.07.2014 Sri Vee. Ramesh, DGM-Floor Operations, M/s. Uniworld Logistics Sriperumbudur, stated that they provide third party logistics to various customers including the appellant; that he was not aware whether any application software has been loaded into laptops meant for Rajcom at their warehouse. 3.14 On 21.07.2014, Sri Chhatrapal Singh, Manager of Rajcomp stated that the software such as MS-Visio, Adobe Acrobat and MS office are preloaded in the laptops supplied to Rajcomp. 3.15 On 20.08.2014, Sri Alok Dubey stated that a small quantity of laptops meant for supply to Rajcomp was loaded with software at their warehouse before inspection was carried out. 3.16 On 16.09.2014, the appellant vide their letter intimated the Deputy Commissioner of Customs regarding computation and payment of differential duty of Rs. 4,81,74,877/- on account of CVD on transaction value and 4% SAD along with interest of Rs. 1,03,29,731/- vide challan dt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7. The Ld. Counsel argued that on a reading of the above provision, it is clear that Section 3 of CTA which levies duties other than Basic Customs Duty borrows the procedural provisions of Customs Act, however, the substantive provisions relating to penalty, confiscation, fine and interest has not been explicitly borrowed. The question that then arises is whether confiscation, redemption fine and penalty can be imposed on an assessee in the absence of substantive provisions in the statute creating or imposing such liability. 8. It is submitted by the counsel that as per sub-section (8) of Section 3 of the Customs Tariff Act as reproduced above, there is no mention that the provisions of the Customs Act would apply for recovery of interest on CVD, SAD and also for confiscation, imposition of redemption fine and penalties. Sub-section (8) of Section 3 merely states that the provisions of Customs Act and the Rules Regulations including those relating to drawbacks, refunds and exemption from duties, shall apply under this section in relation to duties leviable. Though section 28AA provides for levy of interest on delayed payment of Basic Customs Duty (BCD), there is no substantive prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement given by Sri B.K. Prakash on 25.09.2013. Further, the valuation of the goods is an interpretational issue. The Bills of Entry were filed by declaring RSP when the goods were assessed to CVD on the RSP so declared. There is nothing brought out from the conduct of the appellant that there is an intention to evade Customs duty. For this reason, the penalty under section 114A is not imposable. All the facts in the present case were well within the knowledge of the department and therefore there is no suppression or misstatement of facts. The classification adopted by the appellant was under heading 8471 and the transaction value and RSP of the imported laptops were declared in the Bills of Entry. Thus, if the department was of the view that the goods are not liable for RSP based assessment, they ought to have raised the objection at the time of import itself. After having accepted the self-assessment and being aware of all the facts as early in July 2013, the department cannot allege willful suppression of facts and impose penalty under Section 114A of the Customs Act, 1962. 13. With regard to the activity of loading of software, the learned counsel submitted that it is usual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so with delay. Therefore, the interest paid on such delayed payment of CVD and SAD is legal and proper. As there have been serious violations on the part of the appellant, the adjudicating authority has ordered for confiscation of the goods. The appellant was given an option to redeem the same on payment of redemption fine. As the appellant has rendered the goods liable for confiscation there are no grounds to set aside the imposition of redemption fine. Consequently, the redemption fine imposed is legal and proper and the same has to be paid by the appellant. 17. The argument put forward by the learned counsel relying upon the decision in the case of Mahindra Mahindra Ltd. (supra) was countered by the Ld. A.R by submitting that sub-section (8) of Section 3 of the Customs Tariff Act, 1975 uses the word including . The same has to be read to have wide ambit so as to include confiscation, interest and penalties. The Ld. A.R prayed that the appeal may be dismissed. 18. Heard both sides. 19. The operative portion of the impugned order reads as under: ORDER (a) I hold that the laptops imported under Bills of Entry as listed in Annexure -I to the Show Cause Notice, should be assessed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be, so determined: Provided further that the benefit of reduced penalty under the first proviso shall be available subject to the condition that the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso The SCN alleges that the appellant cleared laptops covered under 13 Bills of Entry by willfully assessing the goods under Section 4A of Central Excise Act, 1944 instead of Section 4, in order to avoid payment of higher duty and thus evaded duty to the tune of Rs. 4,81,74,877/-. The Ld. Counsel has submitted that the appellant is not contesting the classification, valuation or the confirmation of differential duty of Rs. 4,81,74,877/- (The amount of Rs. 3,31,02,277/- being CVD and Rs. 1,50,72,600/- being 4% Special Additional Duty (SAD) paid by them). The contest in the present appeal is limited to the demand of interest on the delayed payment of CVD, SAD as well as the order of confiscation of the goods, the redemption fine imposed in lieu of confiscation and the penalties. The appellant classified the goods under CTH 84713010 and declared the value of the goods as USD 277.48 Rs. 16,427/-) per piece. They claimed exemption f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial duty of CVD and SAD when calculated on transaction value. The order has also confirmed the demand of interest on the above duty under Section 28AA of the Customs Act, 1962. It is now argued by the learned counsel that the demand of interest on Additional Duty of Customs (CVD) and SAD cannot sustain as there is no substantive provision for levy of interest on delayed payment of CVD or SAD in sub-section (8) of section 3 of Customs Tariff Act, 1975. 22. The very same argument has been put forward by the Ld. Counsel in regard to the order of confiscation of goods and imposition of redemption fine of Rs. 1,50,00,000/- and regarding the penalty of Rs. 5,85,04,608/- as imposed under Section 114A. 23. Ld. Counsel has vehemently argued that when there is no substantive provision for levy of interest on belated payment of CVD and SAD, the demand of interest cannot sustain. Sub-section (8) of Section 3 does not speak that the provisions of Customs Act, 1962 relating to interest on belated payment of duty as applicable to the CVD and SAD levied under the Customs Tariff Act. Section 28AA deals with payment of interest on Basic Customs duty i.e, the duty levied under Customs Act, 1962. Unl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g penalty and interest upon petitioner and, therefore, respondent No. 2 cannot be faulted. Mr. Mishra submitted that there is nothing in the order to be concerned that the legality of procedure was not followed. Since there is nothing wrong with the validity of the order, the Court should not interfere and should dismiss the petition. 13. Therefore, the issue that requires to be decided by this Court in this petition is limited to leviability of interest and penalty in relation to amounts payable as duty other than basic customs duty. 14. Having considered the judgment of the Apex Court in Jyotendrasinhji (Supra), the law is very clear that though the order of the Commission is in the nature of a package deal and it may not be possible always, to dissect its order and the assessee should not be permitted to accept what is favourable to him and reject what is not, if the Court is satisfied that the order of the Commission is contrary to the provisions of the Act, the Court should interfere. Did respondent No. 2 act contrary to the provisions of law by holding that interest at 10% was payable on the differential duty and imposing penalty as mentioned in the impugned order? Let us exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35. Further, Section 12 of the Customs Act, 1962 levies duty on goods imported into India at such rates as may be specified in the Customs Tariff Act, 1975. In Customs Tariff Act, 1975, Section 2 provides the rates at which duties of customs are to be levied under the Customs Act, 1962 are as specified in the first and second schedules of the Customs Tariff Act, 1975. In Section 12 of the Customs Act, 1962 there is no reference to any specific provision of Customs Tariff Act, 1975. On the other hand levy of CVD or SAD under Section 3 or Section 3A of the Customs Tariff Act, 1975 or surcharge under Section 90 of the Finance Act, 2000 is not relatable to the first or second schedule but the rate is prescribed in those three sections itself. This itself shows the charging section for surcharge or CVD and SAD is not Section 12 of the Customs Act, 1962 but Section 90 of the Finance Act, 2000 and Section 3 and Section 3A of the Customs Tariff Act, 1975, respectively. 36. We find support for our view in Hyderabad Industries Ltd. V/s. Union of India12 relied upon by Mr. Sridharan. The Apex Court considered Section 12 of the Customs Act, 1962 and went on to hold that the charging section t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es on the import of the articles into India it does not necessarily mean that the Customs Tariff Act cannot provide for the charging of a duty which is independent of the customs duty leviable under the Customs Act. 37. In view of the above, imposing interest and penalty on the portion of demand pertaining to surcharge or additional duty of customs or special additional duty of customs is incorrect and without jurisdiction. 38. We have to note that in the present case, it is not disputed that petitioner has paid a sum of Rs. 11.84 Crores much prior to the issuance of show cause notice. There is no determination of duty under Section 28(2) of the Customs Act, 1962 and, therefore, Section 28AB of the Customs Act, 1962 is also not applicable. Petitioner has also paid the difference between the admitted duty liability and the amount settled by respondent No. 2. We do not agree with respondent No. 2 that CVD, SAD and surcharge are being recovered under Section 28 of the Customs Act, 1962. Consequently Section 28AB of the Customs Act, 1962 also will also not be applicable. In the absence of specific provision relating to levy of interest in the respective legislation, interest cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . For the same reason, the confiscation of the goods and the imposition of redemption fine are set aside. 26. The penalty of Rs. 5,85,04,608/- has been imposed under Section 114A of the Customs Act, 1962. The said section reads as under : SECTION 114A. Penalty for short-levy or non-levy of duty in certain cases. - Where the duty has not been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section (8) of section 28 shall also be liable to pay a penalty equal to the duty or interest so determined : Provided that where such duty or interest, as the case may be, as determined under sub-section (8) of section 28, and the interest payable thereon under section 28AA, is paid within thirty days from the date of the communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the duty or interest, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use notice issued to the appellant on the issue whether the activity of labelling/re-labelling or putting stickers on the imported goods amounts to manufacture or not. In the case of L Oreal India Pvt. Ltd. (supra) we find that this Tribunal has observed that as the activity of fixing MRP stickers took place in Customs bonded warehouse therefore, the same does not amount to manufacture but in this case the MRP stickers have been fixed after clearance of the goods from the Customs. Therefore, as per Chapter note and Section 2(f)(iii) of the Central Excise Act, 1944, the activity undertaken by the appellant amounts to manufacture. In these circumstances, we hold that the activity undertaken by the appellant is amounts to manufacture. 8.1 As we held that the activity undertaken by the appellant amounts to manufacture, the appellant is entitled to take Cenvat Credit of CVD paid by them at the time of importation of the goods. 8.2 We also find that the MRP declared before the Customs or before the Central Excise is the same therefore, the duty payable on the said goods is equal to the CVD paid by the appellant. Therefore, the situation is of Revenue neutrality as held by this Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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