2015 (2) TMI 375 - AT - Customs

Appellant loses duty exemption for machinery diversion, penalties reduced in customs case.

The appellant, M/s Atlanta Infrastructure Ltd., was not entitled to duty exemption under Notification No. 21/2002-Cus for road construction machinery ... Import of construction machinery - Denial of benefit of the Notification 21/2002-Cus - violation of the post-importation condition - Held that:- As regards the imports of stone crushing plant, the same was used for a project awarded by MMRDA. The issue, whether MMRDA is a road construction corporation on envisaged in condition No. 40(a) of Notification No. 21/2002-Cus was examined at length by this Tribunal in the case of Shreeji Construction (2013 (4) TMI 654 - CESTAT MUMBAI) and it was held that MMRDA is not a road construction corporation within the scope and context of condition NO. 40(a). This conclusion was arrived at after careful and detailed analysis of the constitutional and organizational architecture of MMRDA and on a critical analysis of the constitutional and generic statutory functions entrusted to MMRDA. Therefore, the appellant was not entitled ab initio for the benefit of the Notification 21/2002-Cus. It is an admitted position that after using the equipment for a period of 1 to 1 ½ years, the imported goods were diverted for use by others, namely M/s. Balaji Tollways Pvt. Ltd. and by Indian Equipment Infrastructure Ltd. In other words the appellant did not utilise the goods for a period of five years for the construction of roads by himself. Thus, there is a clear violation of the post-importation condition. An exemption Notification has to be construed strictly, the same being in the nature of an exception. Inasmuch as the conditions of the exemption Notification has been violated, the appellant is, obviously not eligible for the benefit of exemption and consequently the appellant becomes liable to pay the differential duty at the rate prevailing at the time of importation of the goods. Appellant is liable to pay the differential duty of ₹ 1,44,11,453/- in respect of stone crushing plant imported vide Bill of Entry No. 512887 dated 16/11/2004 and differential duty of ₹ 88,63,329/- in respect of hot mix plant imported vide Bill of Entry No. 528443 dated 03/01/2005 under the proviso to Section 28(1) of the Customs Act, 1962 and also in terms of the bond/undertaking executed by the appellant at the time of importation. Inasmuch as the appellant had suppressed the fact of diversion, extended period of time is rightly invocable for demand of differential duty and we hold accordingly. Consequently, the appellant is also liable to pay interest under Section 28AB of the Customs Act, 1962. As regards the confiscation, inasmuch as the appellant had diverted the goods before the completion of five years, the same are liable to confiscation for violation of post-importation condition and, therefore, the provisions of Section 111(o) of the Customs Act are clearly attracted. Therefore, the confiscation of the goods cannot be faulted at all. However, redemption fine is reduced. Penalty on appellant is reduced and Penalty on the Managing Director Shri Rajhoo Barot is set aside. - Decided partly in favour of assessee. Issues Involved:1. Eligibility for duty exemption under Notification No. 21/2002-Cus.2. Violation of post-importation conditions.3. Confiscation and redemption fine.4. Imposition of penalties under Sections 112 and 114A of the Customs Act, 1962.Detailed Analysis:1. Eligibility for Duty Exemption under Notification No. 21/2002-Cus:The appellant, M/s Atlanta Infrastructure Ltd. (AIL), imported road construction machinery and claimed duty exemption under Notification No. 21/2002-Cus. The machinery was intended for projects awarded by MMRDA and the Government of Gujarat. However, the Tribunal referenced the case of Shreeji Construction vs. Commissioner of Customs, Mumbai, which established that MMRDA was not a specified agency under the Notification. Consequently, the appellant was not entitled to the exemption for MMRDA-awarded projects. The machinery imported for the Gujarat project was not used as claimed, further disqualifying the appellant from the exemption.2. Violation of Post-Importation Conditions:The appellant was required to use the imported machinery exclusively for their road construction projects for five years. Investigations revealed that after about 1.5 years, the machinery was diverted to other contractors and rented out for monetary consideration. This diversion violated the post-importation conditions stipulated in the Notification and the bond executed at the time of importation. The Tribunal confirmed that the appellant had not complied with the requirement to use the machinery exclusively for their projects, thus breaching the conditions of the exemption.3. Confiscation and Redemption Fine:Due to the violation of post-importation conditions, the machinery was liable for confiscation under Section 111(o) of the Customs Act, 1962. The adjudicating authority had imposed a redemption fine of Rs. 54 lakhs and Rs. 33 lakhs for the stone crushing plant and hot mix plant, respectively. The Tribunal found these amounts to be on the higher side and reduced the fines to Rs. 35 lakhs and Rs. 22 lakhs, respectively.4. Imposition of Penalties under Sections 112 and 114A of the Customs Act, 1962:The adjudicating authority had imposed penalties equal to the duty sought to be evaded under Section 114A, amounting to Rs. 2,32,74,782/- on the appellant and Rs. 15 lakhs on the Managing Director. The Tribunal considered these penalties harsh, given that the machinery was used for road construction, albeit by others. The penalty on the appellant was reduced to Rs. 58 lakhs under Section 112(a) of the Customs Act, 1962. The penalty on the Managing Director was set aside, as the penalty on the appellant-importer sufficed.Conclusion:(i) The duty demand of Rs. 2,32,74,782/- along with interest was upheld under Sections 28 and 28AB of the Customs Act.(ii) The confiscation of the machinery under Section 111(o) was upheld, with the redemption fine reduced to Rs. 36 lakhs and Rs. 22 lakhs for the stone crushing plant and hot mix plant, respectively.(iii) The penalty on the appellant was reduced to Rs. 58 lakhs under Section 112(a).(iv) The penalty on the Managing Director was set aside.Disposition:The appeals were disposed of in the above terms, with the judgment pronounced in court on 9.1.2015.