2007 (1) TMI 16 - AT - Customs

Tribunal broadens 'required for textile industry' definition, rules in favor of appellants on duty demand limitation.

RAMSONS GARMENTS FINISHING EQUIP. P. LTD. Versus COMMR. OF CUS., BANGALORE

The Tribunal ruled in favor of the appellants, finding that the demand for duty was barred by limitation as there was no evidence of suppression of facts. ... Exemption – Revenue alleged that those machineries imported and sale by the appellant to hospitals/dry cleaners would not entitle for the benefit of notification and accordingly demand for differential duty and penalty – After considering the fact authority rejected the revenue allegation Issues Involved:1. Limitation and suppression of facts.2. Interpretation of the phrase 'required for textile industry'/'for use in textile industry'.3. Actual use versus capability of use in the textile industry.4. Conditions for concessional rate of duty under relevant Notifications.5. Imposition of penalty under Section 112(a) of the Customs Act, 1962.Detailed Analysis:1. Limitation and Suppression of Facts:The appellants argued that the Show Cause Notice was barred by limitation, as the demand for duty was made in April 2004 for imports from April 1999 to February 2003. They contended there was no evidence of suppression of facts or mis-declarations, and the description of goods and their classifications were correctly mentioned in the bills of entry and other documents. The Tribunal agreed, noting that the appellants had informed the Commissioner in letters dated 15-3-2003 and 20-6-2003 about the sale of some machines to dry-cleaners/laundries/hotels and hospitals. Thus, the invocation of the larger period was not justified, and the demand was barred by limitation. Consequently, no penalty was leviable.2. Interpretation of the Phrase 'Required for Textile Industry'/'For Use in Textile Industry':The appellants contended that the phrases 'required for textile industry' and 'for use in the textile industry' should not be narrowly interpreted to mean actual use in the textile industry. They argued that the imported goods should be capable of being used in the textile industry, as stipulated in the relevant Notifications. The Tribunal concurred, emphasizing that the Notifications did not stipulate an end-use condition. The words 'required for' or 'intended for use' do not imply that the goods should be actually used but should be capable of being used.3. Actual Use Versus Capability of Use in the Textile Industry:The Tribunal noted that the Notifications did not require proof of actual use in the textile industry. The machinery or equipment specified in the relevant lists appended to the Notifications were entitled to concessional rates of duty unconditionally, provided they conformed to the descriptions given. The Tribunal referenced several case laws, including the Apex Court's decision in the State of Haryana v. Dalmia Dadri Cement Ltd., which held that the expression 'for use' must mean 'intended for use' and not 'goods actually used.'4. Conditions for Concessional Rate of Duty Under Relevant Notifications:The Tribunal examined the relevant Notifications, particularly Notification No. 21/2002-Cus., dated 1-3-2002. The table appended to the Notification listed the goods entitled to concessional rates of duty and specified any conditions to be fulfilled. In this case, the machinery or equipment listed in List 30 were entitled to concessional rates of duty unconditionally, as no conditions were specified in the relevant column. The Tribunal emphasized that if any conditions were to be fulfilled, they would be listed in the last column of the table.5. Imposition of Penalty Under Section 112(a) of the Customs Act, 1962:The appellants argued that penalty could not be imposed when there was a bona fide dispute about the interpretation of an exemption Notification. The Tribunal agreed, citing various case laws that supported the view that penalty is not leviable in cases of bona fide disputes regarding the interpretation of Notifications. The Tribunal noted that the appellants had acted in good faith and had informed the authorities about the sale of some machines to non-textile entities, thus negating any allegations of suppression to evade duty.Conclusion:In summing up, the Tribunal held that in the absence of end-use conditions in the relevant Notifications, the benefit of concessional rates of duty could not be denied. The words 'for use in textile industry/required for textile industry' should not be narrowly interpreted to mean actual use in the textile industry. As long as the imported goods conformed to the descriptions given in the relevant lists, they were entitled to concessional rates of duty unconditionally. The appeal was allowed with consequential relief.