2011 (3) TMI 593 - AT - Customs

Appellant's Customs Duty Appeal Allowed: Concessional Rate Denied

The tribunal found that the appellant, a 100% EOU, was not eligible for the concessional rate of duty under Notification No.21/2002-Cus as they did not ... 100% export-oriented unit (EOU) - Debonding - Whether the appellant is eligible for the benefit of concessional rate of duty under Notification No.21/2002-Cus. dated 1.3.2002 (Serial No.84) in respect of the imported raw materials found in stock at the stage of debonding of the EOU - Held that:- the appellant s claim for the benefit of concessional rate of duty under Notification 21/02-Cus. read with condition 5(b) of Notification 53/97-Cus. is ill-conceived and unsustainable. - At the time of payment of duty on the raw materials present in stock during the period of debonding (16.1.2003 10.7.2003), the appellant was still an EOU and, therefore, they were not entitled to claim such benefit at that time too.Collection of differential amount of customs duty - levy and collection of taxes except by authority of law - Requirment of payment of duty on raw material in stock at the time of debonding - The demand of duty raised in terms of the B-17 bond without invoking Section 28 of the Act - Held that:- A conjoint reading of condition No.2 and condition No.14(3) of the B-17 Bond would indicate that an amount of customs duty (with interest) leviable from the appellant could be demanded through a show-cause notice under Section 28 of the Customs Act and, in the event of default, could be recovered in the manner laid down in sub-section (1) of Section 142 of the Act. - What is fatal to the Revenue is not the non-mention of Section 28 in the show-cause notice but the absence of the essential ingredients of the said Section in the notice. The demand of duty without invoking Section 28 of the Act, i.e., without alleging the necessary ingredients thereof, is not sustainable. - Demand is also not maintainable beyond the normal period of limitation. Issues Involved:1. Eligibility for concessional rate of duty under Notification No.21/2002-Cus.2. Legality of the demand of customs duty without invoking Section 28 of the Customs Act.3. Time-barred status of the demand of duty.Detailed Analysis:Issue No. (i): Eligibility for Concessional Rate of Duty under Notification No.21/2002-Cus.The appellant, a 100% EOU, sought to debond and paid customs duty on raw materials in stock at a concessional rate of 5% under Notification 21/2002-Cus. The department later demanded differential duty, claiming the appellant was not entitled to the concessional rate and should have paid the normal rate of 25%. The appellant argued they complied with condition No.5(b) of Notification 53/97-Cus., which should be considered substantial compliance with condition No.5 of Notification 21/2002-Cus.The tribunal found that condition No.5(b) of Notification 53/97-Cus. was not applicable as it required physical clearance of raw materials to the DTA, which did not occur. The tribunal also held that condition No.5 of Notification 21/2002-Cus. was not met as it applied to import of raw materials and not to stock at the time of debonding. Therefore, the appellant's claim for the benefit of the concessional rate was deemed ill-conceived and unsustainable.Issue No. (ii): Legality of the Demand of Customs Duty without Invoking Section 28 of the Customs ActThe appellant contended that any demand of customs duty should be made under Section 28 of the Customs Act, which was not invoked by the department. The tribunal agreed, stating that Article 265 of the Constitution mandates that taxes be levied and collected by authority of law, and Section 28 is the statutory provision for recovering customs duty not levied or short-levied. The tribunal noted that the bond executed by the appellant (B-17 Bond) included provisions that implied the necessity of a show-cause notice under Section 28 for recovery of duty. The absence of such a notice rendered the demand unsustainable.Issue No. (iii): Time-barred Status of the Demand of DutyThe tribunal found that the demand of duty was time-barred. The duty was paid on 22.5.2003, and the show-cause notice was issued on 20.6.2005, beyond the normal period of limitation prescribed under Section 28(1) of the Customs Act. The notice did not invoke the extended period of limitation provided under the first proviso to Section 28(1), nor did it allege grounds such as collusion or willful misstatement to justify the extended period. Therefore, the demand was held to be time-barred.Penalty Imposed:The adjudicating authority imposed a penalty under Section 112(a) of the Customs Act, which was proposed on the grounds of misleading the department. The tribunal found no allegations or findings that the appellant rendered the goods liable to confiscation, and since the demand of duty was not sustainable, the penalty was also vacated.Conclusion:The appeal was allowed, and the demand of differential duty and the penalty imposed on the appellant were set aside.