2018 (10) TMI 43 - AT - Customs

Customs duty appeal success due to non-compliance with post-import conditions. Importance of adherence to exemption notification conditions stressed.

The appeal challenged the recovery of duty and penalty under sections 28 and 114A of the Customs Act, 1962. The confiscation and redemption fine were set ... Violation of import conditions - N/N. 93/2004-Cus dated 10th September 2004 - Import against ‘advance authorization’ as per the export promotion scheme - recovery on the ground that the said goods had been diverted to another manufacturer under the guise of job-work without receiving back the goods, as such or after processing. Held that:- Notification states that the goods should not have been sent to any other factory for any kind of process and that such conversion by a job-worker was permissible only after the redemption of the bond. Though Learned Counsel asserts that the some of the imports were effected after completion of the exports, it is not evident that these imports took place after the redemption of the bond and that the transfer to job-worker thereby permissible - A harmonious reading of the proviso introduced later and the main provision would lead to the inevitable conclusion that, even if utilised by a job-worker for conversion, transfer of the imported inputs is not permissible. Demand u/s 28 - Held that:- As there is no evidence on record of existence of the pre-requisite warranting invoking of the extended period, though the lower authorities have held that there was misdeclaration/ suppression of fact at the time of import and, therefore, the demand under section 28 was not warranted. Confiscation - redemption fine - Held that:- The failure to comply with the conditions of a notification which are to be fulfilled after the import is completed may be visited with confiscation under section 111(o) for failure to comply with the post-importation conditions - In the present instance, that is of no relevance because provisions of section 112 has not been invoked for imposition of penalty. The redemption fine has been set aside by the first appellate authority on the ground that the goods are not available for confiscation. Extended period of limitation - Held that:- Considering the failure on the part of the lower authorities to establish that the appellant had suppressed relevant facts at the time of import, the lower authorities has travelled beyond the normal period of limitation and is, therefore, not correct in law - In the absence of valid grounds for invoking the extended period, the recovery itself is jeopardized and for which reason we set aside the impugned order. Appeal allowed - decided in favor of appellant. Issues:1. Recovery of duty and imposition of penalty under Customs Act, 1962.2. Interpretation of conditions in the exemption notification related to import of goods for manufacturing and export.3. Compliance with post-importation conditions and movement of goods to job-worker.4. Allegations of diversion of imported goods in contravention of exemption notification.5. Validity of demand for duty recovery and penalty imposition.6. Application of limitation period for invoking extended recovery.Analysis:Issue 1: Recovery of duty and penalty under Customs Act, 1962The appeal challenged the order upholding the recovery of duty and penalty under sections 28 and 114A of the Customs Act, 1962. The confiscation and redemption fine imposed by the original authority were set aside.Issue 2: Interpretation of exemption notification conditionsThe dispute arose from the import of 'beta napthol' under an 'advance authorization' for the export promotion scheme. The lower authorities alleged diversion of goods to another manufacturer without complying with the conditions of the exemption notification, leading to duty recovery and penalty imposition.Issue 3: Compliance with post-importation conditions and movement of goodsThe appellant contended that the goods were sent to a job-worker for processing and received back against Central Excise invoices, reducing the consideration for the final export product. Reference was made to legal precedents and definitions to argue that the transfer to the job-worker did not contravene the exemption notification conditions.Issue 4: Allegations of diversion of imported goodsThe authorities found that the goods sent for job-work were not received back in the factory, indicating a diversion of imported goods in violation of exemption conditions. The movement of goods to a job-worker was deemed impermissible before redemption of the bond.Issue 5: Validity of duty recovery and penalty impositionThe Tribunal upheld the duty recovery and penalties, rejecting the appellant's claims of misinterpretation and invoking the extended period for demand. The failure to comply with post-importation conditions could lead to confiscation, but penalty imposition under section 112 was not justified.Issue 6: Application of limitation period for recoveryThe Tribunal found that the recovery was jeopardized due to the failure to establish grounds for invoking the extended period beyond the normal limitation. The impugned order was set aside, and the appeal was allowed based on the absence of valid grounds for recovery.In conclusion, the judgment addressed the complex issues of compliance with exemption notification conditions, movement of goods for processing, and the validity of duty recovery and penalties under the Customs Act, 1962. The interpretation of legal provisions, precedents, and the application of limitation periods played crucial roles in determining the outcome of the appeal.