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

Tibco Software India Pvt. Ltd. Versus Commissioner of Central Excise, Pune-III - 2019 (370) E.L.T. 344 (Tri. - Mumbai) 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.