2024 (3) TMI 994 - AT - Customs

Tribunal Overturns CVD Demand Due to Limitation Period; No Positive Act Found for Extended Duty Demand.

The Tribunal ruled in favor of the appellant, setting aside the demand for Countervailing Duty (CVD), interest, and penalties due to the limitation ... Levy / Demand of Countervailing Duty (CVD). - whether the appellant can be considered as an importer when the software has been imported by SAP India Pvt. Ltd. (subsidiary company) was contentious and reached before the Tribunal? - Validity of show cause notice - limitation - Interest - penalty - intent to evade customs duty or not - HELD THAT:- If the appellant pays CVD on the goods (software imported by them) they would be able to avail credit of such CVD paid by them. The entire situation is revenue neutral and there cannot be any intent to evade payment of duty. Further, the appellant was under bona fide belief that they have not imported the goods as they have only entered into an agreement with SAP India Pvt. Ltd. for purchase of the software. The issue as to whether they can be considered as the importer was contentious and had travelled upto to the Tribunal. Taking these aspects into consideration, the issue is also interpretational in nature. We find that by the Department has not established any positive act on the part of the appellant in regard to suppression of facts with intent to evade Customs duty. Thus, we find that there are no grounds for invocation of extended period. The demand of CVD along with the interest and the imposition of penalties cannot sustain. The issue on limitation is answered in favour of the appellant. The impugned order is set aside on the ground of limitation. The appeal is allowed with consequential relief, if any, as per law. ISSUES PRESENTED AND CONSIDERED 1. Whether the assessee/appellant is to be treated as the importer and therefore liable to pay Countervailing Duty (CVD) on SAP standard software imported by courier though procured through a local subsidiary. 2. Whether the extended period of limitation for demand of CVD could be validly invoked by the Department in the absence of positive suppression or intent to evade duty. 3. Whether interest and penalties in respect of the CVD demand are sustainable where the extended period of limitation is in issue and where the assessee alleges bona fide and interpretational dispute. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Liability as importer for courier-imported software Legal framework: Customs law principles determine who is the importer for purposes of levy of duties; import by courier and delivery to ultimate purchaser can raise questions of importer status where goods are procured through or supplied by a domestic subsidiary/agent. Precedent Treatment: The Tribunal has previously considered near-identical facts and held that the purchaser/recipient must be regarded as the importer for such courier imports. Interpretation and reasoning: The appellant conceded that the substantive question of whether they were the importer had been decided against them by the Tribunal in an earlier, directly analogous decision. The Court recited that the issue on merits stood decided in favour of the Revenue. Ratio vs. Obiter: The finding that the appellant is the importer follows directly from precedent and constitutes a binding point on the merits relevant to this appeal; it is treated as the operative factual-legal conclusion on import liability (ratio for the parallel fact pattern), though the present decision does not re-adjudicate that issue afresh. Conclusion: The appellant was to be treated as the importer for the courier-imported software; the merits of import liability are against the appellant as per settled Tribunal precedent (admitted by appellant). Issue 2 - Validity of invoking extended period of limitation Legal framework: Extended period of limitation for assessment/demand can be invoked where there is suppression of facts or intent to evade duty; limitation rules protect bona fide claimants where no positive suppression or fraudulent intent is shown. Questions of interpretation as to liability may affect whether invocation of extended period is justified. Precedent Treatment: The Court recognized that issues which are interpretational and have been the subject of contested litigation up to the Tribunal may negate a finding of deliberate suppression. No specific precedent was overruled; the Court applied established limitation principles in light of the facts. Interpretation and reasoning: The Court evaluated the Department's case for invoking the extended period and found no evidence of a positive act of suppression by the appellant or intent to evade duty. The appellant had acted under a bona fide belief, having entered into an agreement with the local supplier and litigated the importer issue. The question whether the purchaser constituted the importer had been contentious and the subject of Tribunal adjudication, indicating an interpretational dispute rather than clear concealment. The Court further noted that payment of CVD would permit CENVAT credit, making the outcome revenue-neutral and reducing inference of intent to evade. Ratio vs. Obiter: The conclusion that invocation of the extended period was not justified on these facts is a ratio of the judgment as it directly decides the core limitation question in this appeal. Conclusion: The Department failed to establish grounds for invoking the extended period of limitation; the demand was barred on limitation grounds and therefore unsustainable. Issue 3 - Sustainability of interest and penalties where limitation is held in appellant's favour; relevance of higher court decisions on interest Legal framework: Interest and penalties accompany a substantive duty demand when lawfully made; if the substantive demand is time-barred, ancillary consequences (interest and penalty) fall with it unless independently sustainable. Separate Supreme Court authority on interest may bear on whether interest can be levied in particular circumstances. Precedent Treatment: The appellant relied on a Supreme Court decision addressing interest on customs demands; the Court acknowledged the submission but did not base its decision solely on that authority. Interpretation and reasoning: Having found the substantive demand barred by limitation, the Court held that the related demand for interest and imposition of penalties could not be sustained. The Court did not need to resolve the broader applicability of the cited Supreme Court ruling to the facts because the limitation conclusion disposed of the appeal. Thus the relief extended to interest and penalties was consequential to the limitation ruling rather than founded on a standalone ruling about interest law. Ratio vs. Obiter: The declaration that interest and penalties cannot be sustained because the substantive demand is barred by limitation is part of the operative ratio. Any comments about the cited Supreme Court decision on interest are obiter to the extent they were not necessary to decide the appeal. Conclusion: Interest and penalties demanded along with the CVD were set aside as consequential to the finding that the extended period of limitation could not be invoked; the Court did not adjudicate the broader principle on interest beyond its necessity for disposing of this appeal. Overall Disposition The Court allowed the appeal on limitation grounds, setting aside the confirmed demand of CVD along with interest and penalties, while noting that the substantive question of importer liability had been decided against the appellant by prior Tribunal precedent and was conceded by the appellant.