2023 (5) TMI 304 - AT - Customs

Tribunal sets aside duty demand and penalties, ruling in favor of appellants under Notification No. 21/2002-CUS.

M/s Villayati Ram Mittal Versus Commissioner of Customs Import-Mumbai And Shri Rohit Mittal Versus Commissioner of Customs Import-Mumbai

The Tribunal ruled in favor of the appellants, setting aside duty demand, penalties, and confiscation of piling rigs under Notification No. 21/2002-CUS. ... Benefit of exemption - import of machine for construction of roads - Violation of the condition of actual use - Serial No. 230 of Notification No. 21/2002-CUS dated 01.03.2002 - denial of benefit on the ground that the rigs were not even sent to NHAI site after importation and at the time of importation the appellant company had claimed that the appellant company was awarded with a road construction contract by NHAI and that the rigs were not found in the possession of the appellant company. Whether the imported goods were used for construction of roads? - Whether they were used for any other purpose than construction of roads? - Whether the imported goods were sold within a period of five years from the date of importation? - Whether the imported goods were otherwise disposed of? HELD THAT:- There is no dispute that the imported goods were used for construction of roads from March 2004 to October 2004. Though the goods were shifted to DMRC site there is no statement on record from any official of DMRC that the goods were utilize for any other purpose than construction of roads. Had the goods been used for any other purpose than construction of roads then it was possible for Revenue to lay their hands on such evidence. From the case records, such evidence is not forth coming. Therefore, it is not proved that the goods were used for any other purpose than construction of roads. Revenue has not established that the goods were sold by the appellants. The only issue remaining is whether the goods were otherwise disposed of by the appellants. From the case records, it appears that though at the time of seizure the goods were in custody of other person than the importer, however Revenue has not established that the goods were disposed off to other person forever and importer did not have any control over the goods. Further, the control was with the appellant that is why the installments were being paid for the finance raised by the appellant. Above discussion establishes that the importer company has not violated the specified conditions of exemption notification and therefore, the impugned order is not sustainable. Appeal allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the imported piling rigs were used exclusively for construction of roads as required by the exemption condition in the notification, or were used for another purpose (specifically for DMRC) thereby violating the condition. 2. Whether the imported piling rigs were sold or otherwise disposed of within five years of importation, contrary to the prohibition in the notification. 3. Whether statements relied upon by Revenue (recorded from the importer's representative) constitute admissible and sufficient evidence to establish breach of the notification conditions. 4. Whether confirmation of duty demand, confiscation, redemption fine and penalties can be sustained on the record in absence of independent or corroborative evidence. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Use of imported goods: legal framework The notification grants exemption subject to conditions that the imported machinery be used exclusively for construction of roads by the importer (awardee of specified road contracts). The core legal requirement is exclusive use for the permitted purpose; breach deprives the benefit. Issue 1 - Precedent Treatment No binding precedent was invoked or applied by the original authority in the impugned order; the Tribunal addresses the question on factual and evidentiary basis without overruling or following earlier decisions. Issue 1 - Interpretation and reasoning The Tribunal reviewed record evidence and submissions. It accepted that the rigs were used for piling for construction of a road/ROB from March 2004 to October 2004. Shift of rigs to a DMRC site was not supported by any statement or record from DMRC officials or other independent evidence establishing use for a purpose other than road construction. Revenue's contention that the rigs were commissioned at a DMRC site rested on the importer's statement alone; no corroborative evidence was produced. In absence of independent or direct evidence showing use for non-road purposes, the Tribunal held that Revenue failed to prove the alleged breach of exclusive-use requirement. Issue 1 - Ratio vs. Obiter Ratio: Where an exemption condition requires exclusive use and Revenue alleges diversion to another purpose, Revenue must prove such diversion by admissible and corroborative evidence; unsupported statements by the importer's representative, without independent corroboration, are insufficient. Issue 1 - Conclusion The Tribunal concluded the record does not establish that the imported rigs were used for any purpose other than construction of roads; therefore the exclusive-use condition was not shown to be violated. Issue 2 - Sale or other disposal within five years: legal framework The notification prohibits sale or other disposal of the imported goods within five years of importation. 'Disposal' includes sale or transfer of title; factual determination depends on whether ownership or control was relinquished. Issue 2 - Precedent Treatment No direct precedent was addressed by the original authority or the Tribunal; the matter was decided on evidentiary findings and interpretation of 'sale'/'disposal' versus mere change in physical custody for finance arrangements. Issue 2 - Interpretation and reasoning Revenue alleged disposal on the basis of statements that rigs were in possession of third parties at seizure. The Tribunal examined documents and facts showing: (a) no documentary proof of transfer of title; (b) installments for finance were being paid by the importer indicating ongoing control; (c) possession by third parties arose in context of finance arrangements and not demonstrated to be permanent transfer of ownership. Revenue failed to adduce evidence establishing that the importer relinquished title or control such that a 'sale' or permanent disposal occurred within five years. Issue 2 - Ratio vs. Obiter Ratio: Mere physical custody by a financier or third party, absent proof of transfer of title or extinguishment of importer's control (e.g., sale documents, title transfer deeds), does not constitute sale or disposal for purposes of an exemption condition prohibiting sale within a specified period. Issue 2 - Conclusion The Tribunal found no proof of sale or permanent disposal within five years and hence held that the prohibition was not contravened on the proven facts. Issue 3 - Admissibility and sufficiency of the importer's statement as evidence Legal framework Admissibility and probative value of statements depend on compliance with evidentiary principles; untested statements that have not been subjected to examination-in-chief or cross-examination have limited evidentiary value. Precedent Treatment No precedent was cited or applied; Tribunal relied on basic evidentiary principles in assessing weight of the statement relied upon by Revenue. Interpretation and reasoning The Tribunal noted that Revenue's case heavily relied on a statement attributed to the importer's representative. That statement was not the subject of examination-in-chief by Revenue nor was the maker cross-examined. In absence of formal examination and corroborative evidence, the statement could not be treated as conclusive proof of breach. The Tribunal emphasized the need for independent evidence (e.g., statements from the alleged user, sale documents, title transfer) to establish contravention of notification conditions. Ratio vs. Obiter Ratio: Statements alone, untested by proper evidentiary procedure and uncorroborated by independent evidence, are insufficient to establish violation of conditional exemptions; Revenue bears the burden of proof. Issue 3 - Conclusion The Tribunal held that the importer's statement, unsupported by proper evidentiary process or corroboration, did not suffice to prove diversion or disposal. Issue 4 - Validity of duty demand, confiscation, redemption fine and penalties Legal framework Confiscation, duty demands, and penalties under customs law require proof of contravention of notification conditions and justification for imposition of penalties and confiscatory measures. Wrongful imposition in absence of proof renders such measures unsustainable. Precedent Treatment No binding precedent was applied; the Tribunal decided based on statutory and evidentiary requirements for sustaining punitive and confiscatory orders. Interpretation and reasoning Given the Tribunal's findings that Revenue did not establish (a) use for non-road purposes, (b) sale or permanent disposal within five years, and (c) reliable evidence beyond an untested statement, the consequential duty demand, confiscation order, redemption fine and penalties lacked evidentiary foundation. The Tribunal held that imposition of those measures was not sustainable on the record. Ratio vs. Obiter Ratio: Where Revenue fails to prove breach of conditional exemption, consequential duty, confiscation and penalties cannot be sustained; such measures must be predicated on proven contraventions supported by admissible and corroborative evidence. Issue 4 - Conclusion The Tribunal set aside the order confirming duty, confiscation, redemption fine and penalties, concluding that the impugned orders were not sustainable on the record of proof. Cross-reference Issues 1-4 are interlinked: the insufficiency of evidence (Issue 3) undermines findings on use (Issue 1) and disposal (Issue 2), which in turn defeats the basis for duty, confiscation and penalties (Issue 4). Final Disposition (Ratio) The Tribunal allowed the appeals and set aside the impugned orders because Revenue failed to establish, by admissible and corroborative evidence, any breach of the notification conditions (exclusive use for road construction and prohibition on sale/disposal within five years); accordingly the consequential duties, confiscation, redemption and penalties could not be sustained.