Custom, Excise & Service Tax Tribunal
N.S.Narula vs Commissioner Of Customs (I) on 28 June, 2019
CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, MUMBAI
WEST ZONAL BENCH
COURT No.
Appeal No. C/317/2010
(Arising out of Order-in-Original No. 06/10 dated 12/14.01.2010
passed by Commissioner of Customs (Import), Mumbai)
DSC Ltd. Appellant
(D.S. Construction Ltd.)
E-9, South Extension,
Part II,
New Delhi 110 049.
Vs.
Commissioner of Customs (I), Mumbai Respondent
New Custom House, Ballard Estate, Mumbai 400 001.
WITH
(i) C/318/2010 (R.K. Agnihotri), (ii)
C/319/2010 (N.S. Narulla), (iii) C/320/2010 (M.S. Narulla) (Arising out of Order-in-Original No. 06/10 dated 12/14.01.2010 passed by Commissioner of Customs (Import), Mumbai) Appearance:
Shri V.K. Jain with Shri Roshil Nichani, Advocates for the Appellant Ms. P. Vinitha Sekhar, Authorised Representative for the Respondent CORAM:
Hon'ble Dr. D.M. Misra, Member (Judicial) Hon'ble Mr. Sanjiv Srivastava, Member (Technical) FINAL ORDER NO. A/86185-86188/2019 Date of Hearing: 14.01.2019 Date of Decision: 28.06.2019 PER: SANJIV SRIVASTAVA These appeals are directed against order in original No 06/10 dated 12/14.01.2010 of the Commissioner
2 C/317,318,319,320/2010 Customs (Import) Mumbai. By the said order Commissioner has held as follows:
(a) I deny the Customs duty exemption granted to M/s D S Construction Ltd under notification No 21/2002-
Cus dated 01.03.2002 at the time of import of Paver Finisher vide B/E No 369860 dated 02.07.2003.
b(i) I confiscate the Paver Finisher imported under B/E No 369860 dated 02.07.2003 having assessable value of Rs 1,06,45,634/- (Rupees One Crore Six Lakhs Forty Five Thousand Six Hundred and Thirty Four only) under Section 111(o) of The Customs Act, 1962. However, I give an option to M/s D S Construction Ltd to redeem the same upon payment of redemption fine of Rs 21,00,000/- (Rupees Twenty One Lakhs only) under Section 125(1) ibid.
b(ii) I order for recovery of duty amounting to Rs 55,52,528/- (Rupees Fifty Five Lakhs Fifty Two Thousand Five Hundred and Twenty Eight only) leviable on the Paver Finisher and evaded by the importer i.e. M/s D S Construction Ltd under Section 12 read with Section 125(2) of the Customs Act, 1962.
(c) I order for appropriation of the amount of Rs 55,52,528/- (Rupees Fifty Five Lakhs Fifty Two Thousand Five Hundred and Twenty Eight only) voluntarily paid by the importer towards Customs duty against liability of duty as in (b)(ii)
(d) I impose a penalty of Rs 10,00,000/- ( Rupees Ten Lakhs only) on M/s D S Construction Ltd under section 112 of the Customs Act 1962.
(e) I impose a penalty of Rs 1,00,000/- ( Rupees One Lakhs only) each on Shri M S Narulla, Shri N S Narulla and Shri R K Agnihotri under section 112 of the Customs Act 1962.
3 C/317,318,319,320/2010 2.1 M/s D S Construction Ltd (Appellant 1) having IEC No 0502000341 filed a B/E No 369860 dated 02.07.2003 for Custom Clearance of "Ashpalt Electronic Paver Finisher (with sensor device) Model Vogele Super 1800 with AB 575 TP2 Screed with working width upto 9 meters with standard accessories". Shri M S Narulla (Appellant 2), is Managing Director with the importer, Shri N S Narulla (Appellant 3) Director and Shri R K Agnihotri (Appellant 4) Executive Director.
2.2 On the Bill of Entry they claimed the benefit of exemption from payment of Custom Duties, in terms of Sl No 230 of Notification No 21/2002-Cus 01.03.2002. They produced the required documents as specified by the Condition 40 of the Notification.
2.3 After the clearance of the goods intelligence was developed that the importers claiming duty exemption from import of goods mentioned in list 18 as mentioned at Sr No 230 of Notification No 21/2002-Cus were evading the payment of Customs Duty by o diverting the imported goods to other entities much before the completion of five years from the date of import;
o not using the goods in terms of the conditions of the notifications and thereby not adhering to end use conditions.
2.4 After completion of investigations it was revealed that the importer, had sold the said imported goods to M/s Gawar Construction Co without intimating to the Customs, and much before the expiry of period of five years from the date of importation. Thus it was established that appellants had willfully violated the condition no 40(b) of the Notification rendering the Paver Finisher liable for confiscation under Section 111(o) of the Customs Act, 1962. Since the paver was liable for confiscation it was seized from the premises of buyer of the said goods i.e. 4 C/317,318,319,320/2010 M/s Gawar Construction Co. Statements of representatives of Appellant 1 and those of Gawar Construction Co (buyer) were recorded and also the sale and purchase documents in respect of the sale and purchase of the said paver finisher by the Appellant 1 to Buyer were also recovered.
2.5 A show cause notice dated 09.01.2009 was issued to the Appellant 1 asking him to show cause as to why the Custom Duty Exemption under Notification No 21/2002- Cus earlier granted at the time of clearance be not denied, the paver finisher imported under B?E No 369860 dated 02.07.2003 should not be confiscated under Section 111(o) of Customs Act, 1962, the custom duty amounting to Rs 55,52,528/- short paid by them should not be demanded under proviso to Section 28(1) read with Section 12 and Section 125(2) of the Customs Act, 1962 and interest under section 28AB ibid, the amount of Rs.55,52,528/- voluntarily deposited by them should not be appropriated against the duty demanded and penalty should not be imposed on them under section 112(a) & (b) and/ or 114A ibid.
2.6 Show cause Notice also called upon Appellant 2, Appellant 3 and Appellant 4, to show cause as to why for their act of omission and commission leading to confiscation of the imported goods, penalty should not be imposed on them under Section 112(a) & (b) and/ or Section 114A of the Customs Act, 1962.
2.7 The show cause notice has been adjudicated by the Commissioner as per the impugned order referred in para 1, supra.
2.8 Aggrieved by the order of Commissioner, appellants have filed these appeals to tribunal.
3.1 In their appeal appellant 1 have challenged the order of Commissioner stating that, 5 C/317,318,319,320/2010 i. Commissioner has mis directed himself by asking them to pay duty under Section 125(2) of the Customs Act, 1962. Since M/s Gawar Construction Co (Buyer) was the rightful owner of the said goods at the time of seizure of the goods, and the goods were seized from his custody and premises, option to redeem the goods should have been given to him and if he redeems the goods, then duty was to be paid by the buyer only.
ii. Commissioner cannot deny the benefit of exemption to the appellant at the time import after holding that section 28 of the Customs Act, 1962 is not applicable.
iii. They are eligible to the benefit of exemption under the notification even for Delhi Gurgaon Road Project since they fulfill the conditions specified. iv. Goods are not liable for confiscation under Section 111(o) of the Customs Act, 1962 as disposal of the salvage was by the Insurance Company and such disposal cannot be considered as sale. Even if it was considered as sale then the sale was by the insurance company and not by the appellant 1. v. Confiscation of the Paver Finisher under Section 111(o) of the Customs Act, 1962 cannot be adjudged without issue of Show Cause Notice under Section 124 of the Customs Act, 1962 to the owner of goods.
vi. Violation of post import conditions is not on account of any act of omission or commission on their part. vii. Penalty could not have been imposed without specifying the specific clause under which it is imposed 3.2 Appellant 2, Appellant 3 and Appellant 4 have contested the penalties imposed on them.
6 C/317,318,319,320/2010 4.1 We have heard Shri V K Jain with Shri Roshil Nichani, Advocates for the Appellants and Ms P Vinitha Sekhar, Additional Commissioner, Authorized Representative for the revenue.
4.2 Arguing for the appellants learned counsels submitted-
i. Condition 40(b) of the Exemption Notification was not violated. The imported goods namely paver finisher was damaged in an accident and became totally unfit for use. So appellants lodged a claim with the insurance company. Thereafter insurance companies took over the salvaged goods and dispose them off, for settling the claim. The paver finisher was no longer the goods but only an salvage. The covenant in the insurance policy was not for transfer of goods but for transfer of salvage.
ii. The condition of the notification which required the importer not to sell or otherwise dispose of the goods for a period of five years only refers to the active or voluntary act on the part of the importer for sale or disposal of such goods and cannot include such acts which vest by operation of law rather than a product express agreement. In other words, since the goods vested in the insurance company by the doctrine of subrogation, such vesting of right and title in goods was by operation of law and not by express agreement. Reliance is place on the decision of Apex Court in case of Economic Transport Organization Delhi Vs Charan Spinning Mills Pvt Ltd [2011 (4) SCC 114].
iii. No duty could have been demanded by the appellant in terms of Section 125(2) of the Customs Act, 1962. Reliance is placed upon the decision of Apex Court in case of Fortis Hospital Ltd [2015 (318) ELT 551 (SC)] and Jagdish Cancer & Research Centre []. In 7 C/317,318,319,320/2010 view of these decisions the duty could have only been recovered from M/s Gawar Construction Co, in the event they chose to redeem the goods seized from them. In any case, even the question of payment of redemption fine, for recovering the duties does not arise in as much as the goods were not actually confiscated and had been released to M/s Gawar Construction Co in compliance with the order dated 29.09.2009 of Hon'ble Bombay High Court. Bombay High Court has in case of Finease Creation Inc [2009 (248) ELT 122 (Bom)] held that without actual confiscation of goods, redemption fine could not have been imposed.
iv. In case of Venus Enterprises relied upon by the revenue the issue was with regards to jurisdiction of the adjudicating authority to issue Notice under Section 28 of the Act, and not with the issue of payment of redemption fine and subsequent duty liability. This SLP filed against this decision of Madras High Court has been dismissed. In view of the Apex Court decision in case of Kunhayammed [2001 (129) ELT 11 (SC)] doctrine of merger will not apply and the decision will continue to remain the decision of Madras High Court.
4.3 Arguing for the revenue learned authorized representative submitted that-
i. Appellant 1 had cleared the goods claiming exemption under Sl No 230 of Notification No 21/2002-Cus. To satisfy the condition 40 of the appended to the Notification, they had submitted two contracts to the department i.e. a. copy of letter of acceptance dated 8.03.2002 from Chief Engineer Uttar Pradesh PWD awarding contract for construction of Major Maintenance works of State High way No 47 8 C/317,318,319,320/2010 portion between Meerut and Bijnore of 65 kms under UP state Road Project; and b. copy of letter of dated 16.03.2002 from Project Director State Road Projects (World Bank) UP, PWD, Lucknow addressed to them in regard to the contract for construction of rehabilitation of State Highway 47 of portion between Bijnore to Nazirabad of 53 kms length.
ii. However during the course of investigation it was found that the imported machinery was never used in the said projects, but was used elsewhere for execution of a contract of Delhi Gurgaon Road pertaining to a different company i.e. M/s Jaypee DSC Ventures Ltd awarded by NHAI vide concessionaire agreement dated 18.04.2002. M/s Jaypee DSC Ventures Ltd had sub contracted this project to the appellant by way of agreement dated 20.03.2003. Though this sub contract was available with the appellant 1 at time of clearance, they chose not to rely on the same at the time of clearance to circumvent the condition 40 of Notification 21/2002. As per condition 40(b) specifically for the sub contractors it has been mentioned that in such case the original contract with NHAI should include the name of sub contractor. Since the name of appellants was not in the original contract between the Jaypee DSC Venture and NHAI they misled the authorities by producing the contracts as referred in para I, supra.
iii. In similar cases as follows the appeals filed by the party have been dismissed by the tribunal:
a. Gammon India Ltd [2013 (298) ELT 740 (T-Mum)] b. Apco Infratech Ltd [Order No A/86750- 86753/2018 dtd 8.6.18] c. Patel Engineering Ltd [2013 (295) ELT 243 (T- Mum)] 9 C/317,318,319,320/2010 d. Patel Engineering Ltd [2016 (338) ELT A35 (SC)] e. Shreeji Construction [2014 (313) ELT 566 (T-
Mum)] f. RajhooBarot [2017 (348) ELT 562 (T-Mum)] g. Gammon India Ltd [2011 (269) ELT 289 (SC)] iv. Hon'ble Supreme Court has in case of Dilip Kumar & Co [2018 (361) ELT 577 (SC)] clearly laid down that exemption notification should be strictly interpreted. v. The appellants contention that the demand is barred by limitation and that there cannot be any demand from them as the goods have changed hands and has been disposed of by the insurance company is without any merits. The appellants have at the time of clearance of goods given a undertaking to effect that in case of non fulfillment of the conditions of notification they will pay the duty otherwise exempted. The goods were allowed clearance in terms of the said undertaking. Though Commissioner has held that demand could not have been made under section 28, however he holds that demand can be made under section 12 read with Section 125 of the Customs Act, 1962. Larger Bench of tribunal has in case of Bombay Hospital Trust [2005 (188) ELT 374 (T-LB)] held that in case of non fulfillment of post importation condition, department has power to recover the escaped duty in terms of Section 12 of the Customs Act, 1962, and such demand notices will not be subjected to limitation of time. This decision of Larger Bench has been upheld by the Bombay High Court as reported at [2006 (201) ELT 555 (Bom)] and further affirmed by the Supreme Court as reported at [2015 (315) ELT A26 (SC)]. Reliance is also placed on the decision of Apex Court in case of Mediwell Hospital & Health Care Pvt Ltd [1997 (*() ELT 425 (SC)].
10 C/317,318,319,320/2010 vi. In the following decisions it has been held that in case of conditional release of goods at the time of import under a bond, the goods are liable to confiscation even if they are not available:
a. Weston Components Ltd [2000 (115) ELT 278 (SC)] b. Bharat Bharad Ghanshyam [2017 (358) ELT 527 (T-Mum)] c. Shilpa Trading Company [2014 (309) ELT 641 (Kar)] d. Kay Bee Tax Spin Ltd [2017 (349) E.L.T. 451 (Guj.)] e. Viston Automotive Systems India Ltd [2018 (9) GST 142 (Mad)] 5.1 We have considered the impugned order along with the submissions made in appeal, during the course of arguments and in written submissions filed.
5.2 Appellants have in their submissions made stated that said imported machine after seizure was released to M/s Gawar Construction (Buyer) as per the direction contained in the order of Bombay High Court dated 29.09.2009. (Para 13 of the additional written submissions filed by the Appellant Counsel vide their letter dated 8th February 2019). This order is reported at Gawar Construction Ltd [2009 (243) ELT 484 (Bom)]. In this case the importer is marked as third respondent in the matter. The relevant paras of the order are reproduced below:
"Rule, by consent heard forthwith. The respondent no. 3 has not put any appearance though served.
2. By this petition, the petitioner seeks a mandamus or a direction or order directing the Union of India and the customs authorities to forthwith release the Hot Mix Paver Machine seized by them from the premises of the 11 C/317,318,319,320/2010 petitioner under the seizure memo dated 14th November, 2008.
3. The respondent no. 3 imported Hot Mix Paver Machine bearing model No. M/C-S-1800, Sl. No. 06681674 (for short "the machine") through WIRTGEN India Pvt. Ltd., Bangalore in the month of October, 2005 without payment of customs duty as an actual user in view of an exemption allowed to actual users. The machine was insured by it with ICICI Lombard General Insurance Co. for a sum of Rs. 9,29,89,400/-. The machine met with an accident in or about January, 2007. The respondent no. 3 reported the accident to the insurance company. After the inspection, the insurance company was of the view that the machine could not be repaired and brought back to its original condition and was required to be discarded. The insurance company settled the claim of the respondent no. 3 on a total loss basis and paid the settled amount to the respondent no. 3 after deducting its scrap/residual value with permission to respondent no. 3 to sell. The respondent no. 3 accordingly sold to the petitioner the machine for Rs. 24,00,000/-. According to the respondent nos. 1 and 2, the machine was allowed to be imported without payment of duty on condition that the importer- respondent no. 3 would use it for its own use for a period of 5 years. Since the machine, though met with an accident, was sold within a period of 5 years of the import, the condition for a duty free import was breached and was liable for confiscation under Section 111(o) of the Customs Act, 1962 (for short "the Act"). The respondent no. 2 accordingly seized the machine from the premises of the petitioner on 14th November, 2008 under a seizure panchanama. The petitioner has now approached this Court for release of the machine.
9. In view of the admitted position that the machine was transferred by the respondent no. 3 to the 12 C/317,318,319,320/2010 petitioner in breach of the condition against transfer for a period of 5 years from the date of import, undoubtedly it was liable for confiscation under Section 111(o) of the Act. Under Section 110 of the Act, the respondents had the power to seize the machine as they had reason to believe that it was liable for confiscation under Section 111(o) of the Act. They also had the power to seize the machine from the custody of any person who was found in possession as Section 110 does not put any restriction on the power of the respondent nos. 1 and 2 to seize goods where they are in custody of a person other than the importer of the goods. However, a safeguard has been inserted by sub-section (2) of Section 110 that where goods are seized under sub-section (1), show cause notice under Section 124(a) shall have to be issued within 6 months or the extended period of further 6 months. The short question for our consideration is whether issuing of a notice to the owner-original importer of the goods is enough or whether notice is also required to be issued to the person from whose custody the goods are seized."
5.3 Since Hon'ble Bombay High Court has already determined the issues in respect of breach of conditions of Exemption Notification and liability to confiscation of the imported goods, transferred/ sold by the Appellant 1, it is not prudent to dwell on this issue again. Since the decision of Bombay High Court has taken into account the transfer of the imported paver machine on account of damage and sale by the insurance company we do not dwell on the decision referred by the learned Counsel for the appellant in case of Economic Transport Organization Delhi Versus Charan Spinning Mills Private Ltd [(2010) 4 SCC 114]. Also the decision rendered by the Hon'ble Apex Court explaining the difference between "subrogation" and "assignment" [Para 24 relied upon by the counsel], in case of Consumer 13 C/317,318,319,320/2010 Protection Act, 1986, would not be applicable in the case of special statue as Customs Act, 1962.
5.4 From the facts as are available, it is admitted that Appellants had claimed the exemption in respect of the said pavers by producing the documents in respect of projects namely Major Maintenance works of State High way No 47 portion between Meerut and Bijnore of 65 kms under UP state Road Project and construction of rehabilitation of State Highway 47 of portion between Bijnore to Nazirabad of 53 kms length. The paver was permitted clearance under exemption 21/2002-Cus, which allowed clearance under complete exemption subject to the condition that the goods were actually used by the importer himself in the projects for which said goods are cleared. Undisputedly these pavers were never used by Appellant 1 in any of the above two referred projects thereby contravening the conditions prescribed by the exemption notification. On the contra these were transferred by the Appellant 1, in first instance for use in Delhi Gurgaon Project of Jaypee DSC Infrastructure. It is now settled position in law that exemption notification needs to be construed strictly and it is for the person claiming the exemption to satisfy that all the conditions prescribed by the notification are fulfilled. A five member bench of Hon'ble Supreme Court in case of Dilip Kumar & Co [2018 (361) ELT 577 (SC)] states the law as follows:
"52. To sum up, we answer the reference holding as under -
(1) Exemption notification should be interpreted strictly;
the burden of proving applicability would be on the assessee to show that his case comes within the parameters of the exemption clause or exemption notification.
(2) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such 14 C/317,318,319,320/2010 ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue.
(3) The ratio in Sun Export case (supra) is not correct and all the decisions which took similar view as in Sun Export case (supra) stands overruled."
5.5 Thus we are of the view by transferring the imported goods cleared for use in particular projects to some other project, Appellant 1 had at that instance itself contravened the conditions of exemption granted subject to actual user condition. For the contraventions done by transferring these pavers to Delhi Gurgaon Project with using them in the projects for which the goods have been cleared, the goods had become liable for confiscation under Section 111(o). In similar circumstances in case of Rajhoo Barot [2017 (348) ELT 562 (T-Mum)], tribunal has held as follows:
"6.1 As regards the imports of stone crushing plant, the same was used for a project awarded by MMRDA. The issue, whether MMRDA is a road construction corporation as envisaged in Condition No. 40(a) of Notification No. 21/2002-Cus. was examined at length by this Tribunal in the case of Shreeji Construction (supra) and it was held that MMRDA is not a road construction corporation within the scope and context of Condition No. 40(a). This conclusion was arrived at after careful and detailed analysis of the constitutional and organizational architecture of MMRDA and on a critical analysis of the constitutional and generic statutory functions entrusted to MMRDA. Therefore, the appellant was not entitled ab initio for the benefit of the Notification No. 21/2002-Cus.
6.2 In the case of hot mix plant, the same was imported claiming that the same would be used in a contract awarded by the Government of Gujarat for construction of road in Surat. But the hot mix was never put to use in terms of the said contract and was used in respect of 15 C/317,318,319,320/2010 construction contract awarded by MMRDA which is not a specified organization. Both these machineries, after being put to use for about 1½ years, were diverted. The stone crushing plant was diverted for use in respect of contract awarded to M/s. Balaji Tollways Pvt. Ltd. for construction work in the Nagpur area. Similarly, the hot mix plant also was rented out to Indian Equipment Infrastructure Pvt. Ltd. for a monthly consideration of ` 4.75 lakhs per month. Notification No. 21/2002-Cus. envisaged the importer undertake to use the imported goods exclusively for the construction of roads by himself and he shall not sell or otherwise dispose of the said goods in any manner for a period of five years from the date of importation. In the present case, it is an admitted position that after using the equipment for a period of 1 to 1½ years, the imported goods were diverted for use by others, namely, M/s. Balaji Tollways Pvt. Ltd., and by Indian Equipment Infrastructure Ltd. In other words, the appellant did not utilise the goods for a period of five years for the construction of roads by himself. Thus, there is a clear violation of the post- importation condition.
6.3 It is a settled position in law that an exemption notification has to be construed strictly, the same being in the nature of an exception. Inasmuch as the conditions of the exemption notification has been violated, the appellant is, obviously not eligible for the benefit of exemption and consequently the appellant becomes liable to pay the differential duty at the rate prevailing at the time of importation of the goods.
6.4 There is no dispute in the present case, about the quantum of duty computed. Therefore, we hold that the appellant is liable to pay the differential duty of ` 1,44,11,453/- in respect of stone crushing plant imported vide Bill of Entry No. 512887, dated 16-11-2004 and differential duty of ` 88,63,329/- in respect of hot mix 16 C/317,318,319,320/2010 plant imported vide Bill of Entry No. 528443, dated 3-1- 2005 under the proviso to Section 28(1) of the Customs Act, 1962 and also in terms of the bond/undertaking executed by the appellant at the time of importation. Inasmuch as the appellant had suppressed the fact of diversion, extended period of time is rightly invocable for demand of differential duty and we hold accordingly. Consequently the appellant is also liable to pay interest under Section 28AB of the Customs Act, 1962. As regards the confiscation, inasmuch as the appellant had diverted the goods before the completion of five years, the same are liable to confiscation for violation of post-importation condition and, therefore, the provisions of Section 111(o) of the Customs Act are clearly attracted. Therefore, the confiscation of the goods cannot be faulted at all. The adjudicating authority has imposed a redemption fine of ` 54 lakhs and ` 33 lakhs respectively in respect of the machinery imported which is appropriately 15% of the value of the goods. This appears to be on the higher side. Accordingly, we reduce the redemption fine imposed to Rs 35 lakhs and Rs 22 lakhs respectively in respect of the two machineries mentioned above."
5.6 At the time of clearance of the goods under exemption Appellant 1 have given an undertaking binding himself, that the subject goods namely Electronic Paver Finisher imported by them and cleared by them under exemption, shall be actually used by them for construction of National Highway by the said importer. The undertaking specifically states "We M/s D S CONSTRUCTIONS LTD. Shall use the imported goods for the construction of National Highway and this not be sold or otherwise dispose of the goods, in any manner for the period of 5 years from the date of importation." By selling the imported goods to M/s Gawar Construction Ltd., the Appellant have contravened the undertaking given by them and should have paid the duty as stated in the 17 C/317,318,319,320/2010 undertaking. For ease of reference the Undertaking given by the appellants is reproduced below:
18 C/317,318,319,320/2010 In terms of the above undertaking in case of transfer of the goods to some other project or to some other person by way of sale or otherwise, the appellants should have paid the duty themselves. Following has been held by 19 C/317,318,319,320/2010 larger bench of Tribunal in case of Bombay Hospital Trust [2005 (188) ELT 374 (T-LB)]:
"10. We have carefully considered all the arguments advanced from both sides as well as the case records, written submissions and the cited case laws. We briefly consider the legal provisions first in relation to the main argument by the appellants that duty cannot be demanded in the present case in the absence of any specific provision of law. We find that in Virgo Steel (supra), a Bench of three Judges of the Apex Court had dealt with this question. We quote from Paragraph 8 thereof :-
"While the absence of notice may invalidate the procedure adopted by the proper officer under the Act, it will not take away the jurisdiction of the Officer to initiate action for the recovery of duty escaped. This is because of the fact that the proper Officer does not derive his power to initiate proceedings for recovery of escaped duty from Section 28 of the Act. Such power is conferred on him by other provisions of the Act which mandate the proper Officer to collect the duty leviable................ A cumulative reading of these provisions found in the Act clearly shows that the jurisdiction of a proper Officer to initiate proceedings for recovery of duty which has escaped collection, is not traceable to Section 28. The power to recover duty which has escaped collection is a concomitant power arising out of the levy of customs duty under Section 12 of the Act."
This decision of the Apex Court clearly traces the power to recover duty which has escaped collection to Section 12 of the Customs Act, 1962.
11. Section 28 has two main ingredients : (i) issue of show cause notice, (ii) within the stipulated time period for recovery of duty, short levied, not levied and erroneously refunded. The first ingredient is merely a restatement of one of the Principles of natural justice. Even in the absence of such an explicit provision, a duty demand has to be 20 C/317,318,319,320/2010 proceeded by a notice. In the present case, such notices have been issued prior to issue of the impugned order.
12. As regards the time limits under Section 28, both sides have agreed that since the duty demand does not relate to short levy or non levy at the time of initial assessment on importation, but has arisen subsequently on account of failure to fulfil the post-importation conditions under the Notification No. 64/88, the said Section 28 has no application to a duty demand of this kind. We do not, therefore, wish to dwell further on the inapplicability of Section 28 to such demands. However, we note that since no specific time limit is prescribed under any other provision of the statute, the notice of demand in such cases cannot be subjected to any limitation of time. This view is supported by the ratio of the following two decisions of the Honourable Bombay High Court and the Apex Court :-
(i) Prakash Cotton Mills Pvt. Ltd. v. S.K. Bhardwaj, A.C.C.E. - 1987 (32) E.LT. 534 (Bombay)
(ii) Commissioner v. Raghuvar (India) Ltd. - 2000 (118) E.L.T. 311 (S.C.)
13. We find that while Section 12 gives the power to levy customs duty, Section 25 gives the power to grant exemption of duty in the public interest either absolutely or subject to conditions. In the case of Notification No. 64/88, the exemption granted is conditional. The conditions relating to (i) free treatment of 40% outdoor patients and (ii) reservation of 10% of beds for free treatment of patients with family income less than Rs. 500 p.m. make it manifestly clear what the public interest behind the said exemption is. If these conditions are not fulfilled after importation and the public interest is not served, the exemption becomes unavailable and full duty as leviable under Section 12 becomes payable.
21 C/317,318,319,320/2010
14. We note that the impugned notification has not provided for obtaining any bond or bank guarantee for recovery of duty in the event of failure to fulfil the conditions of free treatment. However, it is the prerogative of the Government to grant exemption, as has been held in Sri Sathya Sai Inst. (supra), and it is for the Government to incorporate appropriate provisions. Merely because some other exemption notifications incorporate provisions regarding bond etc. by way of extra precaution and this one does not (as the Government may have valid reasons not to burden hospitals doing genuine charitable work with bonds and bank guarantees), this cannot be a valid plea by the appellants not to pay the demanded duty when the conditions of free treatment are violated. We also do not think that it is necessary for an exemption notification issued under Section 25 to contain a recovery provision when the power to recover duty can be traced to Section 12, nor any mandate to provide such a recovery provision in an exemption notification is contained in the said Section 25.
15. We find that in Mediwell (supra), the Apex Court has interpreted the said Notification No. 64/88 in the context of allowing import of medical equipment without payment of duty and has observed in Paragraph 12 thereof as follows :-
"While, therefore, we accept the contentions of Mr. Jaitley, learned senior Counsel appearing for the appellant that the appellant was entitled to get the certificate from Respondent No. 2 which would enable the appellant to import the equipment without payment of customs duty but at the same time we would like to observe that the very notification granting exemption must be construed to cast continuing obligation on the part of all those who have obtained the certificate from the appropriate authority and on the basis of that to have imported equipments without 22 C/317,318,319,320/2010 payment of customs duty to give free treatment at least to 40% of the outdoor patients as well as would give free treatment to all the indoor patients belonging to the families with an income of less than Rs. 500/- p.m. The competent authority, therefore, should continue to be vigilant and check whether the undertakings given by the applicants are being duly compiled with after getting the benefit of the exemption notification and importing the equipment without payment of customs duty and if on such enquiry the authorities are satisfied that the continuing obligation are not being carried out then it would be fully open to the authority to ask the person who have availed of the benefit of exemption to pay the duty payable in respect of the equipments which have been imported without payment of customs duty. Needless to mention the Government has granted exemption from payment of customs duty with the sole object that 40% of all outdoor patients and entire indoor patients of the low income group whose income is less than Rs. 500/- p.m. would be able to receive free treatment in the Institute. That objective must be achieved at any cost, and the very authority who have granted such certificate of exemption would ensure that the obligation imposed on the persons availing of the exemption notification are being duly carried out and on being satisfied that the said obligations have not been discharged they can enforce realization of the customs duty from them."
The Apex Court has thus clearly held that the said Notification No. 65/88 casts a continuing obligation and that in the event of failure to discharge that obligation, duty is demandable.
16. The learned senior Advocate for the appellants has argued at length that Paragraphs 12 and 13 of Mediwell (supra) are not to be taken as ratio decidendi or obiter dicta as they are in the nature of casual observation. We 23 C/317,318,319,320/2010 do not find force in such argument. In the concluding sentence of Paragraph 14 of Mediwell (supra), the Apex Court has clearly stated that "availability of such concession by the appellant would be subject to the direction and conditions as stated earlier". As such, the earlier Paragraph 12 is an integral part of the Apex Court's order being directions for availing the duty concession under the impugned notification. Moreover, we note that the Larger Bench of three Judges of the Apex Court in Sri Sathya Sai Inst. (supra) has overruled the extra conditions imposed under Paragraph 13 of Mediwell (supra) but has left Paragraph 12 untouched. The fact that a Larger Bench of the Apex Court has overruled the Paragraph 13 goes to show that everything beyond Paragraph 11 in Mediwell (Supra) is not in the nature of casual observation contrary to the arguments by the learned senior Counsel. Moreover, since Paragraph 12 has not been overruled, the same, in our view, provides binding authority for recovery of duty. We also note that the Honourable Karnataka High Court has followed the same in Medical Relief Society (supra).
17. The ratio of Faridabad CT Scan Centre (supra) that benefit of exemption notification is not to be extended to someone on the ground that such benefit had wrongly been extended to others, in our view, does not nullify the interpretation of the impugned notification and direction for duty demand contained in Paragraph 12 of Mediwell (supra) as these are two different legal issues.
18. It has been argued by the ld. Senior Counsel that in Paragraph 12 of Mediwell (supra), the Apex Court has not directed the Customs authorities to demand duty. A distinction is sought to be made between the DGHS who issued the certificates and Customs authorities who granted the exemption at the time of importation. We are of the view that DGHS and the Customs authorities are two branches of the same Government that has issued the 24 C/317,318,319,320/2010 exemption notification and Lady Amphthil (supra) has correctly concluded that the Customs authorities have jurisdiction for demanding of duty for violation of post- importation conditions by placing a reliance on the decision of the Apex Court in Sheshank Sea Foods Pvt. Ltd. v. UOI - 1996 (88) E.L.T. 626 (S.C.). We also note that this part of the order of the Larger Bench in Lady Amphthil (supra) is not under reference to us for reconsideration.
19. The learned senior Counsel argues that by implication, Mediwell (supra) requires duty to be demanded in accordance with Section 125(2) only and no duty is demandable under that Section, if the appellants do not redeem the impugned goods after confiscation. In this regard we observe the following :-
(i) Mediwell (supra) and Medical Relief Society (supra) make no reference to Section 125(2) and allow recovery of duty to be made independent of the said Section.
(ii) Section 125(2) states that where any fine in lieu of confiscation of goods is imposed, the owner shall, in addition, be liable to any duty and charges payable on the goods. It merely clarifies that confiscated goods cannot be released on payment of fine alone. It, nowhere, says that if confiscated goods are not redeemed, the duty demand, if otherwise payable, gets extinguished. Jagadish Cancer (supra) also says that there is a mandatory requirement on the adjudicating officer before permitting the redemption of the goods to levy any duty. It also nowhere says that duty shall not be payable if the goods are not redeemed.
(iii) We find that the Department has merely placed the goods under seizure by issue of a seizure memo, but the appellants have been allowed to operate the impugned equipments at the places of installation in the premises of the appellants. Even after confiscation, the equipments remain with the appellants. As such, the appellants have 25 C/317,318,319,320/2010 had the use of the impugned equipments all along since the time of their importation and their contention that they do not wish to redeem the same has no meaning.
In view of the foregoing, we are of the view that the duty in respect the impugned goods imported by the appellants during 1988-94 and used by them in violation of the conditions of the impugned notification is payable irrespective of whether they redeem the same or not independently of Section 125(2) as the duty is recoverable under Section 12 and the impugned notification as well as in terms of the Apex Court decision in Paragraph 12 of Mediwell (supra).
20. We also find no merit in the argument of the ld. Senior Counsel that the adjudicating Commissioner could have imposed penalty equal to duty, but he has chosen to only impose a nominal penalty. We are of the view that the equal duty provision under Section 112 only provides a measure for the maximum penalty that can be imposed and it is not a provision for recovery of duty.
21. For the reasons staged above, we agree with the conclusion in Lady Amphthil (supra) that duty can be recovered by the Department when post importation conditions of an exemption notification are not fulfilled. We, however, do not agree with the observation in Lady Amphthil (supra) that the period of limitation in such cases will commence from the date of issue of notice. Since the time limit prescribed under Section 28 has been held to be not applicable to such cases, and since there is no other specific time-limit prescribed under the customs law to cover such cases, we are of the view that the notice of demand will not be subject to any limitation of time in such cases of non-fulfillment of post-importation conditions casting a continuing obligation as noted by us in Paragraph 12 above."
26 C/317,318,319,320/2010 This decision of Larger Bench has been affirmed by the Bombay High Court as reported in [2006 (201) ELT 555 (Bom)] "6. On appeal filed by the assessee, a Division Bench of the CESTAT by its order dated 1st July, 2003 referred the matter to the President for constituting a Larger Bench. Thereafter, a Larger Bench, of CESTAT heard the matter and by its judgment and order dated 8th April, 2005 directed that the matter be placed before the President to constitute a five member Bench. Accordingly, the matter was heard by a five member Bench constituted by the President of the CESTAT. By its decision dated 3rd October, 2005 [2005 (188) E.L.T. 374 (Tri.-LB)], the five member Bench of CESTAT held that when post importation conditions in an exemption notification are not fulfilled, the department has the power to recover the escaped duty in terms of Section 12 of the Customs Act, 1962. Challenging the aforesaid decision of the Tribunal, the assessee has filed the present appeal.
13. Thus, we do not find any merit in the argument of the petitioner that the judgment delivered in the case of Wockhardt Hospital needs reconsideration. Since the issues raised in this appeal are squarely covered by the judgment delivered in the case of Wockhardt Hospital (Customs Appeal No. 22 of 2004) dated 28th April, 2006, we answer the questions raised in this appeal by holding that in the facts and circumstances of the customs authorities are justified in seeking to recover duty from the assessee under Section 125 of the Customs Act even though the assessee has not opted to redeem the goods by paying fine in lieu of confiscation."
5.7 In view of the above decisions and the fact that Appellants had given an undertaking to use the goods cleared under exemption according to prescribed post importation conditions in our view demand of duty made 27 C/317,318,319,320/2010 under Section 12 of the Customs Act, 1962 cannot be faulted with. It is also worthwhile to point Section 28 is a machinery provision for determination of the duty short paid/ not paid or erroneously refunded. When there is no such determination needed and duty as determined at time of assessment but for the exemption allowed subject to certain post importation conditions, the quantum of duty short paid/ not paid is not to be determined again and Appellant 1 should have in terms of undertaking given deposited the duty amount immediately in case of violation of any post importation conditions.
5.8 Appellants have contended that for demanding the duty under 125(2) a notice under Section 125 is a must. We have no dispute in this regard. The opening page of Show Cause Notice dated 12.01.2009 is reproduced and it clearly show under which provisions the notice has been issued. Appellants have pleaded that this notice should have been issued to the owner of the goods and duty could have been only demanded from him in terms of Section 125(2) of the Customs Act, 1962. The preposition advanced needs to be considered in light of the facts in present case. When the duty has been demanded in terms of the undertaking given by the appellant 1, that they will in case of violation of post import conditions pay back the duty determined in respect of the said goods but for exemption, the duty demand has to be made from them only in terms of their undertaking. It is fact that notice proposing confiscation of goods should also have been issued to owner of the goods/ person from whose possession the goods have been seized. But once seized and power to seize such goods can be shown to exist the notice will have to be issued to the person who had contravened the provisions of law which have made the goods liable for confiscation. It is settled law that without any notice, no adverse order can be passed against the owner/ possessor of the goods from whose custody the 28 C/317,318,319,320/2010 goods have been seized.
29 C/317,318,319,320/2010 5.9 In case of Kay Bee Spin Tex [2017 (349) ELT 451 (Guj)], Hon'ble Gujarat High Court has held as follows:
5.1 In the said form, the respondent-Unit had also declared that the said written bond shall continue to be in force, notwithstanding the transfer of goods to any other person or removal of goods from one warehouse to another. The said bond was also backed by an undertaking. On execution of such bond and the conditions mentioned in the bond, the respondent-Unit was permitted to warehouse the goods without payment of any duty.
5.2 It is an admitted position that thereafter, the respondent-Unit clandestinely removed the goods and thereby committed breach of condition by diverting the goods illicitly into the open market and the raw materials which were procured by foregoing Customs duty have not been used for the purpose for which they were imported, and therefore, the goods were liable to be confiscated.
5.3 Section 125 of the Customs Act, 1962 provides that whenever confiscation of any goods is authorized by the Act, the Officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under the Customs Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods, an option to pay in lieu of confiscation such fine, as the said officer thinks fit.
5.4 As observed hereinabove, on the respondent-Unit diverting the goods illicitly into the open market and the raw materials which were procured by foregoing the Customs duty were not used for the purpose for which they were imported, the Customs authorities were authorized to confiscate such goods which are illicitly diverted. It is required to be noted that the respondent-
Unit was permitted to deposit the goods in a bonded warehouse without making payment of the Customs duty, on certain terms and conditions and one of the condition 30 C/317,318,319,320/2010 was that the finished product was required to be exported, meaning thereby the goods which were permitted to be imported and thereafter deposited in a warehouse without payment of Customs duty, were not required to be sold in the open market in India. Thus, once the confiscation of such goods was authorized, Section 125 of the Customs Act shall be applicable. However, as the goods were not available for confiscation at the time of adjudication, as the same were already released on bond and/or permitted to be warehoused without payment of duty on furnishing the bond and undertaking, redemption fine in lieu of confiscation was imposable.
5.5 Under the circumstances, considering the decision of Apex Court rendered in case of Weston Components Limited (supra) and the decision of Karnataka High Court in the case of Shilpa Trading Company (supra), the Tribunal ought to have held that the Adjudicating Authority ought to have imposed redemption fine in lieu of confiscation of the goods which were illicitly diverted in the open market, which were permitted to be warehoused on certain terms and conditions; including without making payment of Customs duty.
5.6 Now, so far as reliance placed upon a decision of Bombay High Court rendered in case of Finesse Creation Inc. (supra) and the subsequent decision of the said High Court in the case of National Leather Cloth Mfg. Company (supra) are concerned, on facts, the same shall not be applicable to the facts of the case on hand, since in the matters before the Bombay High Court, there was no bond/legal undertaking executed. The submission made on behalf of the respondent-Unit that unless and until the goods are first seized, there is no question of confiscation and consequently, there is no question of imposing the redemption fine in lieu of confiscation is concerned, considering the language used in Section 125 of the 31 C/317,318,319,320/2010 Customs Act, we do not agree with the same. As observed hereinabove, Section 125 of the Act shall be applicable in a case where confiscation of any goods is authorized by the Customs Act. If it is found that there is breach of any of the provisions of the Customs Act and/or even the Export/Import Policy, and/or there is a breach of any of the terms and conditions on which goods were permitted to be imported without payment of duty and permitted to be deposited in the warehouse, confiscation of such goods can be said to be authorized thereafter, when it is found that the goods are not available for confiscation as the same were illicitly diverted to the open market, and the purpose for which the goods were permitted to be imported without payment of duty is frustrated, in lieu of such goods, redemption fine is imposable.
6. For the reasons stated above, as the goods were not available for confiscation, as the goods were already diverted/permitted to be warehoused without payment of duty, on furnishing the bond and the undertaking and thereafter, the respondent-Unit clandestinely and illicitly diverted the goods to the open market, the goods which otherwise were liable to be confiscated, in lieu of confiscation, redemption fine was imposable.
5.10 Similarly in case of Visteon Automotive Systems India Ltd [2018 (9) GST 142 (Mad)] following has been held:
9.The power of seizure of goods which are otherwise liable for confiscation, has been conferred under Section 110 of the Act on the proper officer. Under Section 111, the goods specified therein, which are brought from a place outside India, are liable to be confiscated and the following are some of the instances which are specifically mentioned under Section 111, which could cause confiscation of such goods :-
32 C/317,318,319,320/2010
(i) Any dutiable or prohibited goods required to be mentioned under the regulations in an import manifest or import report which are not so mentioned (clause f);
(ii) Any dutiable or prohibited goods removed from a Custom area or a warehouse, without the permission of the proper officer or contrary to the terms of such permission (clause j);
(iii) any dutiable or prohibited goods which are not included or are in excess of that those which are included in Entry made under the Act, or in case of baggage in the declaration made under Section 77 of the Act (clause l);
(iv) Any goods exempted, subject to any condition, from duty or any prohibition in respect of the import thereof under the Act, in respect of which condition is not observed, unless the non-observance of the condition was sanctioned by the proper officer (clause o).
10.Thus, Section 111 of the Act has provided for a far- reaching consequence of confiscation of the goods imported into India. Analysis of the various clauses contained under Section 111 of the Act, clearly brings out that the prohibited goods which are imported, are one such class of goods which are liable to be confiscated. Similarly, the goods which have been imported in excess of those mentioned in the import manifest, or not mentioned in the import manifest, are also liable to be confiscated. Similarly, any imported goods, which have been exempted from payment of duty, subject to any condition in respect of which the condition so imposed, was found to have been not observed, are also liable to be confiscated. Thus, in a variety of circumstances and contingencies, the goods which have been improperly imported into India, are liable to suffer confiscation under this Section.
11.The provisions contained in Section 111 are clearly directed against the goods. In juxtaposition to this, under Section 112(a) of the Act, any person, who in relation to 33 C/317,318,319,320/2010 any goods, does or omits to do any act, which act or omission, would render such goods liable for confiscation under Section 111 of the Act, shall be liable to a penalty, in respect of which any prohibition is in force under the Act, not exceeding the value of the goods or Rs. 5,000/-, whichever is greater. Under Section 112(b), any person who acquires possession or is in any way concerned in carrying, removing, depositing, harbouring, keeping, concealing, selling or purchasing or in any other manner dealing with any goods which he knows or has reason to believe, are liable to confiscation under Section 111 of the Act, in case of dutiable goods other than prohibited goods, and a penalty is liable to be imposed not exceeding the duty sought to be evaded on such goods or Rs. 5,000/-, whichever is greater. Thus, it is the importer or the person who acquires possession or sells, etc., the goods that are liable to confiscation under Section 111, is liable to be dealt with for imposition of penalty.
12.Section 114A of the Act deals with penalty for short- levy or non-levy of duty in certain cases. Where the duty has not been levied or has been short-levied, or the interest has not been charged or paid, or has been part- paid, or the duty or interest has been erroneously refunded by reason of collusion or any wilful misstatement or the suppression of facts, a person who is liable to pay duty or interest, shall also be liable to pay the penalty equal to the duty or interest so determined. Section 114A can be invoked only where the duty has not been levied due to misstatement of fact or such similar event.
13...........
14...........
15.............
16..............
34 C/317,318,319,320/2010
17.Section 125 of the Act has provided for an option to pay fine in lieu of confiscation and since it has certain bearing upon the controversy raised at the Bar, it is only appropriate to re-produce Section 125 hereunder :
"Section 125 : Option to pay fine in lieu of confiscation. Whenever confiscation of any goods is authorised by this - (1) Act, the officer adjudging it may, in the case of any goods, the importation or exportation whereof is prohibited under this Act or under any other law for the time being in force, and shall, in the case of any other goods, give to the owner of the goods or where such owner is not known, the person from whose possession or custody, such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit :
Provided that, without prejudice to the provisions of the proviso to sub-section (2) of Section 115, such fine shall not exceed the market price of the goods confiscated, less in the case of imported goods the duty chargeable thereon.
Where any fine in lieu of confiscation of (2) goods is imposed under sub-section (1), the owner of such goods or the person referred to in sub-section (1), shall, in addition, be liable to any duty and charges, payable in respect of such goods."
18.The principal contention that is canvassed before us is that the fine contemplated under Section 125 is a redemption fine and hence, the goods which are improperly imported, are liable to be cleared. In other words, Section 125 is considered as providing for a redemption fine, and therefore, the availability of goods is a pre-requisite for offering the redemption fine. The argument proceeds that when once the goods imported improperly are not available for redemption, the question of payment of fine would not arise. Where the goods are not physically available, the Department could not have imposed the redemption fine. On that score, the penalty 35 C/317,318,319,320/2010 imposed under Section 125 of the Act is sought to be faulted.
19. Per contra, learned Senior Standing Counsel appearing for the Revenue placed reliance upon the meaning of the noun "redemption" as found in "Compact Oxford Dictionary, Thesaurus and Wordpower Guide", (Ninth impression - 2004) (Dictionary Editor : Catherine Soanes), which means, "the action of redeeming or the state of being redeemed". He therefore contended that any redemption is not necessarily confined to the goods in question, but the redemption is with regard to the conduct as well.
20.The question which is now required to be addressed has to be looked at from proper perspective. As we have already noticed supra, the pre-requisite for making an offer of fine under Section 125 of the Act is pursuant to the finding that the goods are liable to be confiscated. In other words, if there is no authorisation for confiscation of such goods, the question of making an offer by the proper officer to pay the "redemption fine", would not arise. Therefore, the basic premise upon which the citadel of Section 125 of the Act rests is that the goods in question are liable to be confiscated under the Act. It, therefore, follows that what is sought to be offered to be redeemed, are the goods, but not the improper conduct of the importer or exporter to atone the improper conduct of the person concerned. The conduct of the importer or possessor of goods which are liable for confiscation was already dealt with under Section 112 of the Act. At the same time, the reliance placed by the learned counsel for the appellant upon the Bombay High Court decision rendered in the case of Commissioner of Customs (Import), Mumbai v. Finesse Creation Inc., reported in 2009 (248) E.L.T. 122 (Bom.) is of not much help to their case. As we have noticed supra, certain classes of goods 36 C/317,318,319,320/2010 can be prohibited from being imported by the Central Government by a Notification. If an importer, in contravention thereof, imports any such goods, the only option that is available to a proper officer in such cases, is not to clear such goods for home consumption. When once importation of goods is prohibited, there is no way that they can be cleared for home consumption, otherwise, the very object of prohibiting their import by way of the Notification by the Central Government, gets completely frustrated or neutralised. Further, without levying the duty under the Customs Act, no clearance thereof can be granted under the Act, and when once certain goods are prohibited from being imported, the question of levy of duty thereon would not simply arise and hence, such goods cannot be cleared for home consumption."
5.11 In case of Bharat Bharad Ghanshyam [2017 (338) ELT (T-Mum)] following has been held:
"2.Learned AR appearing for the Revenue has relied on various case laws cited in the Revenue's appeal. He especially highlighted the decision of the Tribunal in the case of Vibhuti Exports - 2006 (194) E.L.T. 195 (Tri.-Del.) and the decision of Hon'ble Apex Court in the case of Harbans Lal - 1993 (67) E.L.T. 20 (S.C.). Learned AR further pointed out that in this case the appellant had executed a Bond and Bank Guarantee in respect of imports made and the DEEC licence was subject to actual use and condition. He also relied on the decision of the Hon'ble Apex Court in the case of Weston Components Ltd. - 2000 (115) E.L.T. 278 (S.C.).
3.None appeared for the respondents despite notice.
4.I have gone through the submissions made by the learned AR and the records. I find that the Notification No. 30/97 prescribes as follows :-
that the importer at the time of clearance (ii) of the imported materials executes a bond with such surety or 37 C/317,318,319,320/2010 security and in such form and for such sum as may be specified by the Assistant Commissioner of Customs binding himself to pay on demand an amount equal to the duty leviable, but for the exemption, on the imported materials in respect of which the conditions specified in this notification have not been complied with, together with interest at the rate of twenty-four percent per annum from the date of clearance of the said materials :
Provided that the bond shall not be necessary in respect of imports made after the discharge of export obligation in full."
It is seen that the imported goods are released to the respondent on the condition that the same will be used for the specified purpose and a Bond is executed by the appellant. In these circumstances, it cannot be said that the goods are unconditionally released to the respondent. Hon'ble Apex Court in the case of Weston Components (supra) has observed as follows :-
"It is contended by the learned Counsel for the appellant that redemption fine could not be imposed because the goods were no longer in the custody of the respondent- authority. It is an admitted fact that the goods were released to the appellant on an application made by it and on the appellant executing a bond. Under these circumstances if subsequently it is found that the import was not valid or that there was any other irregularity which would entitle the customs authorities to confiscate the said goods, then the mere fact that the goods were released on the bond being executed, would not take away the power of the customs authorities to levy redemption fine."
5.In view of the above, it cannot be said that the goods could not be confiscated. Accordingly, the impugned order is set aside and the matter is remanded to the adjudicating authority for determination of redemption fine in lieu of confiscation of the goods."
38 C/317,318,319,320/2010 5.12 In view of the law laid down by the following decisions, it is quite evident that goods become liable for confiscation on account of violations as prescribed by Section 111 of the Customs Act, 1962. Once the goods are held liable for confiscation, the physical availability of the goods or their presence is not mandatory for proceeding under section 125 or Section 112 and 114 of the Customs Act, 1962. In the present case Appellant 1 has by way of undertaking agreed to comply with the post import conditions, in case of non compliance with the same he could have been proceeded against even in absence of the goods.
5.13. Accordingly we uphold the order of Commissioner, demanding duty from appellant 1 and also the penalties imposed on Appellant 1. We also uphold the order of Commissioner, confiscating the goods and for imposition of redemption fine. But since the confiscation of goods and redemption are action in rem on the goods and not on the person, we are not in agreement with that part of order whereby commissioner states that option of redemption is given to Appellant 1. Also we find that the redemption fine imposed by the Commissioner is Rs 21 lakhs, which is about 20 percent of the declared value of the goods. In our view since the salvage value of the goods was determined around Rs 24 lakhs, in our view ends of justice will be met if the redemption fine is reduced to Rs 2.5 lakhs.
5.14 Now coming to the penalties imposed on Appellant 1, Appellant 2, Appellant 3 and Appellant 4. Commissioner has in para 36.1 to 36.4 of his order discussed the role each of appellant. The said paras are reproduced below:
"36.1. M/s. D.S. Construction Ltd., as held in the foregoing paras, had imported the Paver Finisher in complete breach of the conditions of the Notification No.21/2002 and rendered the said Pavar Finisher liable to confiscation under Section 111(o) of the Customs Act, 39 C/317,318,319,320/2010 1962. Their act of commission and omission, therefore, have rendered them liable to penal action under Section 112 of the Customs Act, 1962.
36.2. Shri M.S. Narulla, Managing Director of the notice- company in his submissions has stated that apart from the legal position that the paver finisher in question had been imported by claiming the exemption benefit correctly and also that in the disposal of the salvage after accident by the insurance company, there was no contravention of condition of the notification; that he had nothing to do for rendering the foods liable to confiscation under Section 111(0) of the Customs Act, 1962; that therefore, no penalty can be imposed on him as Managing Director of the company under Section 112(a) ibid; since Section 112(a) is invoked, Section 112(b) cannot be invoked simultaneously; that likewise Section 114A and Section 112(a) are also mutually exclusive and since no duty has been demanded under Section 28, there is no question of invoking Section 114A against him. I feel that holding a responsible chair of the company, the Managing Director should have been diligent enough in handling matters which involved procurement of goods by way of duty free importation and should not have consented for disposal of such goods in contravention of the laws and regulations in force. Being a Managing Director, Shri M.S. Narula, cannot just shirk away his responsibilities and turn a blind eye towards such blatant violations of undertaking given before the Central Government. Thus, I hold that Shri M.S. Narula, is liable to penal action under Section 112 of the Customs Act, 1962.
36.3. Shri N.S. Narulla, Director of the notice-company has submitted that being the Director of the importing company, he had signed the undertaking submitted to the department as required under Notification No. 21/2002; that he had signed the undertaking which was the requirement at the time of import of the goods and 40 C/317,318,319,320/2010 accepted by the Customs authorities while permitting clearance of the goods with exemption for and on behalf of the company and this will not make him liable to penalty as alleged in the show-cause notice. I find that not only has Shri N.S. Narulla abetted in claiming improper duty exemption, the condition 40 (b) of the Notification under which the undertaking was submitted itself has been violated with his firm knowledge who had undertaken to be bound by it. Thus, he is also liable to penal action under Section 112 of the Customs Act, 1962. 36.4. Finally, I come to the penal liability of Shri R.K. Agnihotri, Executive Dirctor of the notice-company. He has submitted that all his actions in the context of clearance of the goods and subsequent thereto are in the capacity as Executive Director of the notice-company. He has submitted that all his actions in the context of clearance of the goods and subsequent thereto are in the capacity as Executive Director of the notice-company; that none of his actions are distinguishable from the actions of the importing firm; that he has not done anything in his personal capacity to render the goods in question liable to consfication by his individual acts of omission or commission as contemplated under Section 112(a) of the Customs Act, 1962; that he had not dealt with the goods for his personal benefit in any manner as contemplated under Section 112(b) of the Customs Act so as to render himself liable to penalty thereunder. However, Shri R.K. Agnihotri in the position of Executive Director of M/s D.S. Constructions Ltd. had complete knowledge about the conditions of the Notification and that being the case abetted in usage of the goods at an ineligible contract other than that declared to the department and in disposal of the same before the stipulated period as set out in Condition 40 (b) of the Notification. Thus, I hold him liable to penal action under Section 112 of the Customs Act, 1962."
41 C/317,318,319,320/2010 5.15 We do not find any reason to differ with the findings of the Commissioner in respect of each of appellant, for their acts of omission and commission leading to confiscation of goods. Hence we are of the view that penalties are rightly imposable on them in terms of Section 112 (1) of the Customs Act, 1962.
6.1 In view of discussions as above we modify the order of Commissioner in respect of Appellant 1 to:
reduce the redemption fine imposed on the goods from Rs 21 Lakhs to Rs 2.5 lakhs; and the option of redemption given to Appellant 1 is modified stating that goods may be redeemed on payment of redemption fine imposed.
Appeal of Appellant is disposed accordingly.
6.2 Appeals filed by Appellant 2, Appellant 3 and Appellant 4 are dismissed.
(Order pronounced in the open court on 28.06.2019) (Dr. D.M. Misra) Member (Judicial) (Sanjiv Srivastava) Member (Technical) tvu