2015 (2) TMI 782 - AT - Customs

Customs duty dispute over destroyed imported goods under concessional rate exemption

Khanna Paper Mills Ltd Versus CC, Amritsar

The case involved a dispute over a customs duty demand and confiscation of imported waste paper intended for specific use under a concessional duty rate. ... Loss of imported waste paper in fire which were imported at concessional rate of duty - Benefit of Notification No.21/2002-CUS dated 01/3/2002 - condition of the exemption was that the waste paper was to be used in the manufacture of the paper/paperboards/newsprint - Imported Waste paper destroyed in fire in factory - Accident is an act of God - Held that:- In the present case we find that the Adjudicating authority has not expressed any doubt that is was an accidental fire beyond the control of the appellants. Indeed the Commissioner has clearly held that it is not in dispute that the impugned goods were imported and after their receipts in the factory and entry in the appellants records, got destroyed in a fire accident on 12.6.2012. This destruction of the impugned goods by fire was an act God on which the noticee had no control. Having thus observed, the Adjudicating authority held that it would not be fair to penalize the noticee. This clearly shows that the bonafides of the appellants are not in doubt. Thus we find that not only the jurisprudence cited on the issue but also the Judgment of CESTAT in case of Vamsadhara Paper Mills Ltd. [2009 (6) TMI 801 - CESTAT, BANGALORE] fully support the appellants case. Therefore we waive the requirement of pre-deposit and allow the appeal. - stay grated. Issues:1. Customs duty demand confirmation and confiscation of imported waste paper.2. Import of waste paper under concessional rate of duty for specific use.3. Destruction of imported goods in a fire accident.4. Applicability of redemption fine and extended period for duty demand.5. Interpretation of exemption conditions under notification No. 21/2002-CUS.6. Strict construction of exemption notifications and recovery of duty.7. Legal precedent regarding duty demand in case of goods destroyed due to unforeseen circumstances.Analysis:1. The judgment deals with a stay application and appeal against an order confirming a customs duty demand of Rs. 5,03,30,930 along with interest, and confiscating imported waste paper valued at Rs. 4,23,23,896. The impugned goods were to be used in the manufacture of paper, subject to exemption conditions under Notification No. 21/2002-CUS.2. The appellants imported waste paper at a concessional rate of duty under a specific notification, requiring the goods to be used for a designated purpose. However, due to a fire accident in their factory, the imported goods were destroyed, rendering them unusable for the intended purpose.3. The central issue revolved around the destruction of the imported goods in a fire accident, leading to the appellants' inability to utilize them as required by the exemption conditions. The appellants argued that the circumstances were beyond their control, justifying a waiver of the impugned liability.4. The appellants contended that as the goods were destroyed and not available for confiscation, the imposition of a redemption fine was unjustified. They also argued against the invocation of the extended period for duty demand, citing no willful misstatement or suppression of facts.5. The judgment analyzed the exemption conditions under Notification No. 21/2002-CUS, emphasizing the requirement for the importer to furnish an undertaking regarding the specific use of the imported goods and to provide a certificate confirming such utilization within a specified period.6. The strict construction of exemption notifications and the recoverability of duty when exemption conditions are not fulfilled were debated. Legal precedents were cited to support both sides, highlighting the importance of adhering to exemption conditions and the recoverability of duty in case of non-compliance.7. The judgment referred to various legal precedents, including CESTAT decisions and High Court judgments, to establish that when goods intended for use under an exemption notification are destroyed due to unforeseen circumstances beyond the importer's control, the duty demand may not be sustainable. The bonafides of the importer and the impossibility of fulfilling the exemption conditions due to external factors were crucial in determining the waiver of duty liability.This comprehensive analysis of the judgment highlights the key issues, arguments presented by both parties, legal interpretations of exemption conditions, and the application of legal precedents in deciding the case.