Customs, Excise and Gold Tribunal - Bangalore
Applicomp India Ltd. vs The Commissioner Of Customs on 2 February, 2007
Equivalent citations: 2007(117)ECC169, 2007ECR169(TRI.-BANGALORE), 2007(213)ELT317(TRI-BANG)
ORDER T.K. Jayaraman, Member (T)
1. This appeal has been filed against Order-in-Original No. 4/2006 dated 4.5.2006 passed by the Commissioner of Customs, Bangalore.
2. The appellant a 100% EOU were given permission to manufacture compressors, blocks and valve plates. During 2001-2002, the imported capital goods valued at Rs. 75,48,12,914/- without payment of duty. The goods were brought to the private bonded warehouse. The goods were installed in the premises. The appellants manufactured and exported certain goods. However, on 2.9.2004, they requested the Development Commissioner to debond the 100% EOU and avail EPCG scheme. When there application for debonding was pending, the Customs Department conducted certain investigations. Statements of several persons were obtained. On the basis of the investigations, Show Cause Notice dated 14.3.2005 was issued to demand the duty foregone on the imported machinery and to confiscate them under the Section 111(o) of the Customs Act 1962 on the ground that the capital goods have not been installed within the stipulated time. The duty demanded in the impugned is Rs. 8,79,40,937/-. The goods have been confiscated with an option to redeem them on payment of fine of Rs. 1,00,00,000/-. Penalty of Rs. 25,00,000/- has been imposed on the appellants under Section 112(a) of the Customs Act. The appellants strongly challenge the impugned order.
3. Shri G. Shivadass, learned advocate appearing for the appellants urged the following points.
(i) The goods are still lying in the warehouse, therefore, no duty can be demanded, even if they have not been installed as held by the Tribunal in various decisions. In the case of Arjun Industries v. CCE , the Tribunal has held that so long as there is no allegation of diversion of the machinery, no demand of duty for contravention of Notification No. 53/97-Cus. could be raised, even if few machinery were found to have not installed.
(ii) Reliance was placed on the following decisions.
a. Natural Stone Exports v. CC .
b. CC v. Infosys Technologies Ltd. .
(iii) The condition in the Notification that the goods have to be installed within a period of one year is procedural and not mandatory. The very same condition states that this period of one year can be extended up to 5 years by the authorities. Since such a discretion has been given, the time limit of one year becomes procedural.
(iv) The demand of duty in respect of the warehoused goods can be made only under Section 72 of the Customs Act and not in terms of any Notification. Even under the Notification, the duty if at all can be demanded only after the expiry of the period of 5 years indicated in the Notification.
(v) The appellants are entitled for the benefit of another Notification No. 21/2002-Cus. dated 1.3.2002. All the 21 items of the machinery imported by the appellants have been certified to be required for the implementation of the Non-ODS Technology by the Ministry of Environment and Forest. Therefore, assuming but not admitting that the appellants would not be entitled to exemption Notification under 53/97-Cus and 52/03-Cus, even then the capital goods would be entitled for the benefit of Notification 23/98 Cus and 21/2002-Cus in view of the certificate given by the Ministry of Environment and Forest. The above Notification grants exemption irrespective of whether the import is made by an EOU or a non-EOU.
(vi) The department has also accepted that the machinery imported by the appellants are eligible for exemption under Notification No. 21/2002-Cus. dated 1.3.2002 and has accordingly granted the exemption to 12 items of the machinery out of the total number of 21 items.
(vii) The Commissioner in Para 61 has denied the above mentioned exemption on the ground that the exemption was not claimed at the time of import. As long as the appellants can establish that the exemption was always available to them, the point at which such an exemption is claimed would be irrelevant. The following case laws were relied on:
a. CC v. Suvarna Florex Ltd. .
b. CCE v. Bombay Wire Ropes Ltd. .
(viii) The Department itself has allowed exemption in respect of 12 items of machinery, even though the same was not claimed at the time of import. This contradiction itself shows that the denial of exemption for disputed items of machinery is not sustainable.
(ix) The allegation of non-installation/non-use of capital goods is factually incorrect, as the appellants had exported two consignments of finished goods from their bonded premises. Moreover, out of 21 items of capital goods, 12 of them have been installed and the dispute is only with reference to the 9 machineries. In respect of the disputed 9 items, the learned advocate produced a tabular statement indicating that the disputed items had actually been installed.
(x) The cross examination of the Chartered Engineer has conclusively established that his report dated 18.10.2004 does not support the department's case. The Chartered Engineer during the cross examination has admitted that the machines could have been installed earlier and later on kept apart for maintenance and relocation.
(xi) The department requisitioned the service of another expert Shri Satheesh for obtaining his opinion on the status of the machinery installed. The Commissioner during personal hearing informed the appellants that Shri Satish has not given any report and therefore, the question of cross -examining him does not arise. This is the violation of Principles of natural Justice inasmuch as the appellants have been denied, a valuable opportunity during the original stage to bring on record the factual position through cross-examination of a material witness who is an expert and a party to the proceedings requisitioned by the department and not by the appellants.
(xii) Since the proposal to confiscate the goods is not sustainable, the penalty imposed under Section 112 (a) of the Customs Act, 1962 is not sustainable.
4. Shri K. Sambi Reddy, learned JDR appearing for the Revenue reiterated the impugned Order-in-Original.
5. We have gone through the records of the case carefully. Revenue has proceeded against the appellants on the ground that the appellant unit failed to install/use the imported goods within the time limit of one year and failed to comply with the conditions stipulated in Notification No. 53/97-Cus. as amended. The appellants imported all 21 items of machinery. Out of 21 items, the dispute revolves around 9 items of machinery. The learned advocate made the point that two consignments of goods had already been exported. Moreover, he produced a tabular statement indicating that even the disputed items were installed. The fact that some goods have been exported is in favour of the appellants because without using the imported goods, the appellants could not have manufactured the goods meant for export. Even though the department called for the services of another expert Shri Satish, the appellant's request for his cross examination was denied. It is also seen that when the Department conducted investigations, the appellant's request for debonding was pending with the Development Commissioner. The appellants also have made a strong case that they are entitled for the benefit of exemption under alternative Notification No. 23/98-Cus. dated 2.6.1998, as they fulfill all the conditions of the said Notification. The necessary certificate from the Ministry of Environment and Forest had also been obtained. The jurisdictional Asst. Commissioner has also assessed the Bills of Entry in terms of Notification No. 23/98-Cus. For the capital goods and in respect of the raw materials and consumables, a sum of Rs. 27,05,258/- has been paid towards the CED payable. There is no allegation that the imported goods have been diverted from the EOU premises. We agree with the contention of the appellant that the stipulation of installation within a year is only a procedural condition and for violation of the same, no duty can be demanded as the time can be extended up to five years. The goods continue to be still in bond. Even though, the Asst. Commissioner has accepted the granting of benefit under alternative Notifications, the Commissioner in his adjudication order has stated that the appellants should have requested for the Notification benefit at the time of import. We do not find much substance in the above view of the Commissioner. So long as the appellants fulfill the conditions of exemption Notification No. 23/98-Cus. as amended, they should be given the benefit even when they opt for the same at a latter date. The allegation of non-use and non-installation of the imported machinery is also not sustainable in the light of the facts on record brought out by the appellant. In these circumstances, the demand of duty on the imported goods is not sustainable. The penalty is also not warranted. Therefore, the impugned order has no merits. We set aside the same and allow the appeal with consequential relief.
(Operative portion of this Order was pronounced in open court on conclusion of hearing)