Customs exemption on imported onions denied where sale occurred in a tax-free area; penalty under Section 114A was set aside.

Notification No. 56/98-Cus. exempting Special Additional Duty of Customs was unavailable where imported onions were sold from a place in which no sales tax was payable, because the notification required sale from an area where tax was chargeable on such goods; the exemption was therefore correctly denied and the duty demand sustained. Penalty under Section 114A of the Customs Act was not warranted on the facts applied by the Tribunal's ratio, so the penalty was set aside.

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Issues: (i) Whether the benefit of Notification No. 56/98-Cus. dated 1-8-98 was available for imported onion sold from a place where no sales tax was payable; (ii) whether penalty under Section 114A of the Customs Act was imposable.

Issue (i): Whether the benefit of Notification No. 56/98-Cus. dated 1-8-98 was available for imported onion sold from a place where no sales tax was payable.

Analysis: The notification exempted Special Additional Duty of Customs subject to the condition that the goods were not sold from a place located in an area where no tax was chargeable on sale or purchase of goods. As the imported onion had been sold from a place where no sales tax was payable, the condition for exemption was not satisfied.

Conclusion: The benefit of exemption under Notification No. 56/98-Cus. was correctly denied.

Issue (ii): Whether penalty under Section 114A of the Customs Act was imposable.

Analysis: Following the ratio applied by the Tribunal, penalty was not warranted in the circumstances of the case.

Conclusion: The penalty under Section 114A of the Customs Act was set aside.

Final Conclusion: The duty demand was sustained while the penalty was annulled, resulting in a partly allowed appeal.

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