2001 (4) TMI 308 - AT - Customs

Violation of Duty-Free Exemption Conditions Leads to Penalties and Appeal Reversal

The Tribunal found that the Respondents violated the duty-free exemption conditions by using imported equipments for commercial purposes instead of ... Confiscation and penalty Issues:Import of equipments for research purposes under duty-free exemption - Alleged commercial use of imported equipments - Violation of conditions of Notification 70/81 - Seizure of equipments - Confiscation and penalty under Customs Act, 1962.Analysis:Issue 1: Import of equipments for research purposes under duty-free exemptionThe Respondents imported photographic and recording equipments claiming duty-free exemption under Notification 70/81-Cus. The exemption required the imported goods to be essential for research purposes by a research institution not engaged in commercial activities. The Respondents claimed to import the equipments for making films on yoga for research and propagation purposes.Issue 2: Alleged commercial use of imported equipmentsCustoms Department conducted searches based on intelligence suggesting commercial use of the imported equipments. Investigations revealed agreements between the importers and a studio for making films on yoga, but further agreements with TV producers indicated commercial use of the studio facilities and imported equipments for shooting TV serials other than yoga-related films. Statements from TV producers confirmed the use of imported equipments at the studio for commercial purposes.Issue 3: Violation of conditions of Notification 70/81The agreements and statements indicated that the imported equipments were used for shooting commercial TV serials, contrary to the conditions of Notification 70/81, which required the equipments to be used solely for research purposes by a non-commercial research institution. The evidence suggested that the Respondents failed to comply with the essentiality certificate requirement and engaged in commercial activities using duty-free imported equipments.Issue 4: Seizure of equipments, confiscation, and penalty under Customs Act, 1962Based on the violations of the exemption conditions, a show cause notice was issued proposing confiscation of seized equipments and imposition of penalties under Sections 111(o) and 112 of the Customs Act, 1962. The Collector of Customs dropped the proceedings, but the appeal by the Revenue challenged this decision. The Tribunal found sufficient evidence to prove the violations, ordered the redemption of seized goods on payment of a fine, and imposed a penalty on the Respondents for contravening the conditions of the exemption notification.In conclusion, the Tribunal held that the Respondents had indeed violated the conditions of the duty-free exemption by using the imported equipments for commercial purposes instead of research activities as required. The judgment set aside the earlier decision, allowed the appeal by the Revenue, and imposed penalties on the Respondents for the contravention.