2011 (8) TMI 717 - AT - Customs

Tribunal upholds customs duty demand, penalties imposed, interest liability confirmed

Mahindra & Mahindra Ltd. & Others Versus Commissioner of Customs (Import), Mumbai

Mahindra & Mahindra Ltd. & Others Versus Commissioner of Customs (Import), Mumbai - 2014 (312) E.L.T. 545 (Tri. - Mumbai) Issues Involved:1. Demand of differential customs duty under Section 28 of the Customs Act, 1962.2. Jurisdiction of Additional Director General, DGCEI to issue show-cause notice.3. Inclusion of payments made to HW, UK and Nichimen, Japan in the assessable value of imported goods.4. Applicability of extended period for demand of duty.5. Confiscation of goods and imposition of redemption fine.6. Imposition of penalty on the appellant and its employee under Section 112 (a) of the Customs Act, 1962.7. Liability to pay interest under Section 28AB of the Customs Act, 1962.Detailed Analysis:1. Demand of Differential Customs Duty:The Tribunal upheld the demand of differential customs duty amounting to Rs. 7,78,67,696/- under Section 28 of the Customs Act, 1962. It was held that the department did not need to review the assessments made in the bills of entry under Section 129D before issuing a show-cause notice under Section 28. The Tribunal cited the Supreme Court's decision in UOI Vs. Jain Shudh Vanaspati Ltd., which clarified that a show-cause notice under Section 28 can be issued subsequent to the clearance of goods under Section 47.2. Jurisdiction of ADG, DGCEI:The Tribunal rejected the appellant's contention that the ADG, DGCEI lacked jurisdiction to issue the show-cause notice. It was noted that the DGCEI officers had been appointed as Customs Officers with all India jurisdiction under Notification No.31/2000-Cus (NT) dated 09/05/2000. The Tribunal referred to the case of OMI Textile Vs. CC&CE, Nashik, where it was held that DGCEI officers could issue show-cause notices once appointed as Customs officers.3. Inclusion of Payments in Assessable Value:The Tribunal held that the payments made to HW, UK, and Nichimen, Japan, for design and engineering services were necessary for the production of the imported goods and should be included in the assessable value under Rule 9 (1) (b) (ii) and (iv) of the Customs Valuation Rules, 1988. The Tribunal noted that the designs and engineering services provided by HW and Nichimen were used in the production of the imported BIWs and panels and had a proximate nexus to the production process.4. Applicability of Extended Period:The Tribunal upheld the invocation of the extended period for demand of duty, noting that the appellant had willfully misdeclared the value of the imported goods by not disclosing the payments made to HW and Nichimen. The Tribunal emphasized that the appellant was required to declare all costs and services not included in the invoice value as per Rule 9 of the Customs Valuation Rules, 1988.5. Confiscation and Redemption Fine:The Tribunal held that the imported goods were liable for confiscation under Section 111 (m) of the Customs Act, 1962, due to misdeclaration of value. However, since the goods were not available for confiscation, the Tribunal set aside the imposition of a redemption fine of Rs. 3.00 crore.6. Imposition of Penalty:The Tribunal upheld the imposition of a penalty of Rs. 1.5 crore on the appellant under Section 112 (a) of the Customs Act, 1962, for willful misdeclaration of value and evasion of customs duty. The Tribunal rejected the appellant's contention that the penalty could not exceed 25% of the duty demanded, noting that the penalty imposed was less than 25% of the duty confirmed. However, the Tribunal set aside the penalty imposed on Shri R.U. Prabhu, Dy. General Manager of the appellant company, as he was only an employee acting on behalf of the company.7. Liability to Pay Interest:The Tribunal allowed the department's appeal regarding the liability to pay interest under Section 28AB of the Customs Act, 1962. It was held that interest was leviable on the differential duty demanded under Section 28 in cases involving suppression, fraud, collusion, etc., even if the clearances took place prior to 11/05/2001.Conclusion:The Tribunal confirmed the demand of differential duty and interest, upheld the liability to confiscation of goods, set aside the redemption fine, upheld the penalty on the appellant, and set aside the penalty on the appellant's employee. The appeals were disposed of accordingly.