Appeals allowed against duty demand on capital goods destroyed by villagers and cleared as scrap under Section 28

CESTAT Bangalore allowed appeals challenging show-cause notices for duty demand on capital goods destroyed by villagers and cleared as scrap. The tribunal held that since the appellant had properly intimated authorities about riots and obtained necessary permissions for de-bonding burnt goods per customs procedures, there was no suppression of facts warranting extended limitation period under Section 28(1)/28(4) of Customs Act, 1962. Commissioner (A) erred in confirming demand under Section 72(1) when original show-cause notice was under different sections, violating principle that orders cannot traverse beyond show-cause notice scope. Appeals allowed, impugned orders set aside.

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Issues:
1. Invocation of extended period under proviso to Section 28 (1) / 28 (4) of the Customs Act, 1962.
2. Demand of duty on original capital goods burnt by villagers.
3. Compliance with customs procedures and payment of duty on scrap value.
4. Upholding of penalty equivalent to duty and interest.

Analysis:

Issue 1: Invocation of extended period under proviso to Section 28 (1) / 28 (4) of the Customs Act, 1962
The appellant contested the sustainability of show-cause notices invoking the extended period under the proviso to Section 28 (1) / 28 (4) of the Customs Act, 1962. They argued that the demand confirmed under Section 72 of the Act exceeded the scope of the show-cause notice. The appellant relied on various decisions to support their position, emphasizing that the order could not traverse beyond the show-cause notice. The Commissioner (A) had already acknowledged the absence of suppression of facts, leading to the dropping of the penalty under Section 114A. The Tribunal agreed with the appellant's contentions and set aside the impugned orders.

Issue 2: Demand of duty on original capital goods burnt by villagers
The appellant's 100% Export Oriented Unit (EOU) faced a situation where their imported capital goods were burnt by a mob of villagers. Despite the destruction, the appellant had duly informed the authorities, sought permission for debonding the damaged goods, and paid the applicable duties on the scrap value. The Tribunal noted that the appellant had followed proper procedures, obtained necessary permissions, and discharged their duty liabilities promptly. Consequently, the demand for duty on the original capital goods, which were destroyed, was deemed unjustified.

Issue 3: Compliance with customs procedures and payment of duty on scrap value
The appellant had diligently informed the authorities about the damage to the capital goods and had taken steps to de-bond the burnt goods as per customs procedures. They had also paid duty on the scrap value in accordance with the permissions granted by the authorities. The Tribunal recognized the appellant's proactive approach in handling the situation and complying with all necessary formalities, thereby negating any allegations of suppression or misrepresentation of facts.

Issue 4: Upholding of penalty equivalent to duty and interest
The Revenue had sought to uphold penalties equivalent to duty and interest, which were confirmed by the Commissioner (A). However, the Tribunal, after considering the entire scenario and the appellant's compliance with customs regulations, found no grounds for imposing such penalties. The continuous correspondence between the appellant and the department, along with the absence of any suppression of facts, led to the dropping of the penalties under Section 114A. The Tribunal ultimately allowed the appeals and set aside the impugned orders, emphasizing the importance of adherence to procedural requirements and the absence of any deliberate wrongdoing on the appellant's part.

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