2019 (2) TMI 1123 - AT - Customs

Appeal dismissed, abatement order upheld. Compliance with license conditions essential.

Tibco Software India Pvt. Ltd. Versus Commissioner of Central Excise, Pune-III

The Tribunal dismissed the appeal, affirming the Deputy Commissioner's order for abatement under Section 22(2) and rejecting the claim for remission under ... STPI unit - Remission of duty - Damage of warehoused goods - remission claimed denied for the reason that the goods have were cleared under N/N. 52/2003-Cus dated 31,03.2005 by filling a bill of Entry and were in use for period of 3 years and insurance claim has been settled so claim of remission is not acceptable. They should pay the duty on depreciated value - case of Revenue is that in the present case though appellants had claimed remission in terms of Section 23 of the Custom Act, 1962, lower Authorities, Deputy Commissioner has allowed abetment from duty under 22(2) of the Customs Act, 1962 - abatement u/s 22 is allowed to appellant. Held that:- Both sections 58 and 65 stipulate that person depositing the goods in terms of the above section in private bonded warehouse or undertaking operations as specified by the said section, is bound by the conditions specified in the said licenses and also by the Bond executed under Section 59. One of the conditions prescribed by the license is that the appellants shall insure the goods deposited in the warehouse against pilferage, theft, fire accident and other natural calamities - Thus by not executing the bond as required as condition for warehousing license, appellants have violated the conditions of license issued under Section 58. Insurance policy - though the fire incident happened in the premises of Appellant on 08.05.2006, the Insurance Policy has been issued to them on 09.05.2006 effective from 01.05.2006 - Held that:- Even this insurance policy is in the name of Appellants and not in the name of Commissioner Customs as per the condition of license. If such an insurance policy as required in terms of conditions of license was executed by the Appellant, then there would have been no requirement of any remission. Section 23 of the Customs Act, 1962 is a general provision seeking to provide a generalized remedy of remission in case of loss of goods. However section 58 and 65 are specific provisions in relation to the private bonded warehouse etc. By prescribing the condition of insurance coverage to the extent of Custom Duty deferred in respect of the warehoused goods, the Appellants have been insulated from the losses that may occur on this account. However by choosing not to do so Appellants have to be themselves held responsible for any loss that may occur on this account. It is settled position in law, that when a some manner is prescribed in law for performing a function in then that needs to be done in that manner only or not all. Thus appellants should have insured the goods to the extent of duty deferred in respect of the imported goods destroyed in fire. In terms of B-17 bonds executed by the Appellants, they have bond themselves in respect of the imported/ warehoused goods. The entire gamut of case law has evolved on the premise of remission under Section 23 without taking into consideration the provision of Section 22, which allow the abetment of value and duty to the extent of damage suffered. From the reading of both the sections, it is evident that in case of complete loss of goods before clearance of the goods for home consumption remission of duty under Section 23 needs to be considered, however in case of damage to the goods, the duty is abetted by the difference in value of the goods as imported and the damaged value. In case where the lower authorities have themselves allowed the abetment under Section 22(2) there can be no grievance. Appeal dismissed - decided against appellant. Issues Involved:1. Entitlement to remission of duty under Section 23 of the Customs Act, 1962.2. Applicability of Section 22(2) of the Customs Act, 1962 for abatement of duty.3. Compliance with conditions of the warehousing license under Sections 58 and 65 of the Customs Act, 1962.4. Validity of insurance coverage in relation to the warehousing license conditions.5. Distinction between complete destruction and damage of goods for duty remission purposes.Issue-wise Detailed Analysis:1. Entitlement to Remission of Duty under Section 23 of the Customs Act, 1962:The appellant claimed remission of duty under Section 23 of the Customs Act, 1962, for goods damaged in a fire. Section 23 allows remission of duty if imported goods are lost or destroyed before clearance for home consumption. The appellant argued that the goods were unusable due to fire, supported by certifications from various agencies. However, the Tribunal noted that Section 23 is applicable only if the goods are lost or destroyed before clearance for home consumption or warehousing, and not if the goods have been put to use. The Tribunal concluded that since the goods were already in use, Section 23 was not applicable.2. Applicability of Section 22(2) of the Customs Act, 1962 for Abatement of Duty:The Deputy Commissioner allowed abatement under Section 22(2), which provides for duty abatement on damaged goods based on their depreciated value. The Tribunal upheld this decision, stating that the goods were damaged, not destroyed, and thus Section 22(2) was applicable. The Tribunal emphasized that abatement reduces the duty demand to the value of the damaged goods, which aligns with the circumstances of this case.3. Compliance with Conditions of the Warehousing License under Sections 58 and 65 of the Customs Act, 1962:The appellant operated under the STPI scheme with a private bonded warehouse license under Sections 58 and 65 of the Customs Act, 1962. These sections require compliance with specific conditions, including executing a bond and insuring the goods against risks like fire. The Tribunal found that the appellant violated these conditions by not executing the required bond and not insuring the goods in favor of the Commissioner of Customs. This non-compliance invalidated their claim for remission under Section 23.4. Validity of Insurance Coverage in Relation to the Warehousing License Conditions:The insurance policy produced by the appellant was issued after the fire incident and was in the appellant's name, not in favor of the Commissioner of Customs as required by the warehousing license conditions. The Tribunal held that proper insurance coverage could have mitigated the need for remission. The failure to meet this requirement meant the appellant was responsible for the loss, further disqualifying them from remission under Section 23.5. Distinction Between Complete Destruction and Damage of Goods for Duty Remission Purposes:The Tribunal distinguished between complete destruction and damage of goods. In cases of complete destruction, remission under Section 23 might be considered. However, since the goods in this case were only damaged and had residual value, abatement under Section 22(2) was appropriate. The Tribunal noted that the Deputy Commissioner had already accounted for the damage by allowing abatement, and thus the appellant's claim for remission was not justified.Conclusion:The Tribunal dismissed the appeal, affirming the Deputy Commissioner's order for abatement under Section 22(2) and rejecting the claim for remission under Section 23. The decision emphasized compliance with warehousing license conditions and the proper application of abatement provisions for damaged goods.