2013 (10) TMI 1151 - AT - Customs

Tribunal reduces fine from Rs. 1 crore to Rs. 30 lakhs due to machinery depreciation

SUSHANT MINERALS (P) LTD Versus COMMISSIONER OF CUSTOMS (EXPORT PROMOTION)

The Tribunal upheld the confiscation of goods and duty demand, reducing the fine from Rs. 1 crore to Rs. 30 lakhs due to machinery depreciation. The ... Confiscation of goods - Violation of the conditions of Notification No. 97/2004-Cus - False declaration of registered office in Kolkata with the intention of obtaining an EPCG licence from Kolkata - Installation of the imported capital goods at the mines of M/s.KJS Ahluwaia on hire basis and not at their own mines or factory - Installation certificate not submitted in the case of one machine to Customs/DGFT as required under the conditions of the licence - Held that:- appellant has not used the machinery as a manufacturer-exporter but he has used the same in the mines of M/s. KJS Ahluwalia. The appellant is not a lessee of the said mines. What he has done is, he has rented out the machinery to M/s. KJS Ahluwalia for a consideration of ₹ 180/- per MT. In other words, the appellant has not utilised the machinery for his own purposes but merely rented out the machinery to somebody else. Secondly, the appellant could not be to the ‘actual user (non-industrial)' as defined under the EXIM Policy. Once the actual user condition is violated, condition No. 5 of Notification No. 97/2004 dated 19/07/2004 automatically comes into picture and the appellant would no longer be eligible for the benefit of the said Notification. Consequently, the goods imported is liable to confiscation under Section 111(o) of the Customs Act, 1962 inasmuch as the end-use condition stands violated and the appellant would be liable to penalty apart from losing the benefit of Notification NO. 97/2004. In view of deemed definition of manufacturer, the appellant is a ‘manufacturer-exporter' and an actual user (industrial). If that be so, the appellant has to utilize the goods for the manufacture of goods on his own account and not on account of somebody else whose name does not figure in the EPCG licence. It is also an admitted position that the name of the mine owner, M/s KJS Ahluwalia does not figure in the EPCG licence issued to the appellant. If that be so, violation of condition NO.5 of Notification NO. 97/2004-Cus stands clearly established and accordingly, the appellant would not be eligible for the benefit of the aforesaid exemption. A fine imposed should have nexus with the profit that could have been made on the sale of the goods. The fine imposed in the present case is approximately 16% of the value of the goods. Considering the fact that the goods have been imported more than 5 years back and the value would have depreciated substantially, a fine of ₹ 30 lakhs would suffice. As regards the penalty of ₹ 10 lakhs imposed on Shri Bidyadhar Palei, proprietor of Sushant Tradings under Section 112(a) of the Customs Act, Shri Bidyadhar Palei has admitted to violation of conditions of EPCG licence and the wrong availment of Notification No.197/2004. Therefore, he is liable to penalty under Section 112(a) and the fine imposed on the proprietor cannot be said to be harsh or unreasonable - Following decision of Surya Samudra Holiday Resorts (P) Ltd. vs. Commissioner of Customs (Export), Mumbai [2008 (11) TMI 407 - CESTAT, MUMBAI] - Decided against assessee. Issues Involved:1. Violation of EPCG Scheme and Customs Notification No. 97/2004-Cus conditions.2. Legitimacy of the declared office address.3. Non-submission of installation certificate.4. Usage of imported machinery by a third party.5. Imposition of penalties and fines.Detailed Analysis:1. Violation of EPCG Scheme and Customs Notification No. 97/2004-Cus conditions:The appellant, M/s. Sushant Tradings, imported machinery under the EPCG scheme but installed and used it in the mines of M/s. KJS Ahluwalia, violating the conditions of Notification No. 97/2004-Cus and the EPCG licence. The machinery was seized under Section 110 of the Customs Act. The investigation revealed that the appellant did not fulfill the 'actual user' condition, as the machinery was not used in their own industrial unit but was rented out to M/s. KJS Ahluwalia. This contravened the requirement that the imported capital goods be installed and used in the importer's factory or premises.2. Legitimacy of the declared office address:The appellant declared a Kolkata address for obtaining the EPCG licence, which was actually a residential address of Shri Gautam Das, an assistant to the appellant's consultant. The investigation confirmed that no office of the appellant functioned from this address, indicating fraudulent intent to obtain the EPCG licence.3. Non-submission of installation certificate:The appellant failed to submit the installation certificate for one of the imported machines to Customs/DGFT as required under the conditions of the EPCG licence. This non-compliance further violated the conditions of Notification No. 97/2004-Cus.4. Usage of imported machinery by a third party:The machinery was rented out to M/s. KJS Ahluwalia for a consideration, and not used by the appellant for their own manufacturing activities. The appellant did not mention any supporting manufacturer in the EPCG licence, violating the 'actual user' condition and the terms of the EPCG scheme.5. Imposition of penalties and fines:A show cause notice was issued proposing to seize the imported capital goods, demand differential duty of Rs. 1,52,39,903/- with interest, and impose penalties under Sections 112(a) and 114A of the Customs Act. The adjudicating authority confiscated the machinery under Section 111(o) of the Customs Act, with an option to redeem on payment of a fine of Rs. 1 crore, and imposed a penalty of Rs. 10 lakhs on Shri Bidhyadhar Palei, proprietor of Sushant Trading. The duty demand was confirmed by denying the benefit of Notification No. 97/2004-Cus.Conclusion:The appellant's arguments that the machinery was used in the premises indicated in the EPCG licence and that the 'actual user' condition was satisfied were rejected. The Tribunal upheld the confiscation of goods and the duty demand but reduced the fine from Rs. 1 crore to Rs. 30 lakhs, considering the depreciation in the value of the machinery. The penalty on Shri Bidhyadhar Palei was upheld, and the appellant was also liable to pay interest on the duty liability. The appeal was allowed only to the extent of the reduction in fine.