Custom, Excise & Service Tax Tribunal
Air India Ltd vs Acc, Mumbai on 7 December, 2012
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEAL NO: C/729/2009
[Arising out of Order-in-Original No: CC-MJ/10/2009/Adj.ACC dated 31/03/2009 passed by the Commissioner of Customs (Import), ACC, Mumbai.]
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Anil Choudhary, Member (Judicial)
1.
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
:
No
2.
Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
:
Yes
3.
Whether Their Lordships wish to see the fair copy of the Order?
:
Seen
4.
Whether Order is to be circulated to the Departmental authorities?
:
Yes
Air India Ltd.
Appellant
Vs
Commissioner of Customs (Import)
ACC, Mumbai
Respondent
Appearance:
Shri Arthur Prem, Advocate for the appellant Shri Ahibaran, Addl. Commissioner (AR) for the respondent CORAM:
Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Anil Choudhary, Member (Judicial) Date of hearing: 07/12/2012 Date of decision: 20/12/2012 ORDER NO: ____________________________ Per: P.R. Chandrasekharan:
The appeal is directed against the Order-in-Original No: CC-MJ/10/2009/Adj.ACC dated 31/03/2009 passed by the Commissioner of Customs (Import), Air Cargo Complex, Mumbai
2. The issue is in respect of an aircraft engine imported by the appellant, M/s. Air India Ltd. in May, 2005 by claiming exemption under Notification No. 21/2002-Cus dated 01/03/2002 (serial No. 347). As per the relevant entry, parts of aeroplane, helicopter, etc. could be imported duty-free subject to condition that the parts should be used for manufacture or servicing of aeroplane, helicopter, etc. The explanation to the notification also defined parts to include engines and engine parts. The aircraft engine imported by the appellant was kept as such in their premises over a period of two years. The officers of the Special Investigation and Intelligence Branch visited the premises and found that the engine has not been used for manufacture or servicing of any aeroplane. The appellant explained that the engine was kept for repairs and subsequent re-export to the supplier. After completion of the investigation, the department issued a show cause notice under Section 28 of the Customs Act, 1962 for recovery of duty, confiscation and penalty invoking the extended period of time on the ground that the appellant had willfully mis-declared material facts with an intent to evade payment of customs duty. The proposals in the notice were contested. In adjudication of the dispute, the Commissioner passed the impugned order. The Commissioner observed that servicing of aeroplane stipulated in the Notification 21/2002 (serial No. 347) cannot include servicing of aircraft engine also. However, he observed that the notice would be eligible for benefit of Notification No. 153/1994-Cus which allowed exemption to goods imported for repairs and return subject to following the procedure prescribed therein and subject to certain time-limits. However, inasmuch as the appellant did not follow the procedure and time-limit had expired, he concluded that the appellant was not eligible for the said exemption. The Commissioner also observed that the allegation of mis-declaration against the appellant was not sustainable and the appellant had claimed the exemption under Notification 21/2002 on an erroneous understanding of the scope of this exemption and there was an alternate exemption available. Therefore, he held that the extended period of time under Section 28 cannot be invoked to confirm the duty demand. However, he held that the goods are liable for confiscation under Section 111(o) of the Customs Act, 1962 inasmuch as the appellant has not fulfilled the condition prescribed for availing the exemption under Notification 21/2002-Cus. Accordingly, he confiscated the goods under Section 111(o) and allowed redemption of the same on payment of ` 5 lakhs under Section 125 of the Customs Act and also imposed a penalty of ` 1 lakh on the appellant under Section 112(a). While passing the order on redemption, the Commissioner also held that the appellant is liable to pay appropriate duty. Hence the appellant is before us.
3. The learned consultant for the appellant made the following submissions:
3.1. As per Notification No. 21/2002-Cus (serial No. 347) exemption is available to parts of aeroplanes, gliders, helicopters, etc. subject to the condition that the parts are required for manufacture or servicing of aeroplanes, gliders, helicopters, etc. and as per the explanation such parts include engines, engine parts, etc. By importing second-hand engine for repairs and returning thereafter the engine will be ultimately used in an aeroplane and, therefore, they satisfy the condition of servicing of aeroplanes stipulated in the Notification. There is no time-limit prescribed for satisfying this condition. The notification merely stipulates that the parts are required for manufacture or servicing. Even now, they are prepared to repair and re-export the goods thereby fulfilling the conditions prescribed. Accordingly, it is claimed that they are not liable to pay any customs duty inasmuch as there is no violation of the conditions prescribed in the Notification for availing the exemption. It is also submitted that the Commissioner has given a clear finding that there was no willful suppression on the part of the appellant to evade any customs duty. If that is so, question of imposing fine and penalty on the appellant does not arise at all. The learned consultant also submits that confiscation of the goods is also not warranted inasmuch as they have not violated the condition of exemption.
4. The learned AR appearing for the Revenue, on the other hand, contends that, as per the decision of the honble apex Court in the case of Commissioner of Customs (Import), Mumbai vs. Jagdish Cancer & Research Centre 2001 (132) ELT 257 (SC), confiscation of the goods can be independently done without attracting the provisions of Section 28(1) of the Customs Act. The order for payment of duty under Section 125(2) would be an integral part of the proceedings relating to confiscation and consequential orders thereon. He also relies on the decision of the Larger Bench of this Tribunal in the case of Bombay Hospital Trust vs. Commissioner of Customs, 2005 (188) ELT 374 (Tri.-LB) wherein it has been held that the department has power to recover escaped duty in terms of Section 12 of the Customs Act, 1962 when a post importation condition is not fulfilled and such demand notice will not be subject to any limitation of time. Accordingly, he prays for upholding the impugned order.
5. We have carefully considered the submissions made by both the sides.
5.1. It will be relevant to reproduce entry No. 347 of Notification No. 21/2002:
S. No. Chapter or Heading or sub - heading Description of goods Standard rate Additional duty rate Condition No.
347. 88 or any Chapter Parts of aeroplanes, gliders, helicopters or simulators of aircraft (excluding rubber tyres and tubes for aeroplanes or gliders) Nil Nil 67 Condition 67.
If the parts are required for manufacture or servicing of aeroplanes, gliders, helicopters or simulators of aircraft.
Explanation.- "Parts of aeroplanes, gliders, helicopters or simulators of aircraft" shall include engines, engine parts, wireless transmission apparatus, wireless receivers, iron and steel washers and screws, ball and roller bearings and other parts. 5.2. The exemption is in respect of parts of aeroplanes subject to the condition that such parts are required for manufacture or servicing of aeroplanes. In the present case neither manufacturing of aeroplane is involved nor servicing of any aeroplane. The goods imported are second-hand aeroplane engines which needs repair and thereafter the appellant has to re-export the said goods to the supplier. If that be so, we do not understand how the appellant can claim that they are satisfying these conditions. The condition has to be satisfied in India and not anywhere else because the goods are imported for the purpose of its specified use in India and not abroad. Therefore, by repairing the engine and re-exporting the same the appellant cannot said to have fulfilled the conditions stipulated in the Notification.
5.3. The honble apex Court in the case of Garden Silk Mills held that the purpose and objective of import is for its consumption within India and the import is complete when the good become part of the goods in India. Servicing of an aeroplane is different from servicing of an aeroplane engine. These are two different and distinct activities. It is a well settled position in law that a Notification has to be interpreted strictly based on the language used. The language used in the Notification is servicing of an aeroplane and unless this condition is satisfied the benefit of exemption cannot be availed by the appellant. In the present case, we find that this condition is not satisfied. It is also argued that there is no time-limit stipulated in the Notification for satisfaction of the condition and, therefore, the condition can be satisfied at any point of time. It has been held in a number of judicial pronouncements by the honble apex Court and other Courts that when a time-limit is not specified in law, then the law has to be interpreted in such a way that a reasonable time-limit is read into the law. Under the Customs Act, the normal time-limit prescribed for confirmation of a demand or filing a refund claim is six months or one year. Therefore, the time-limit for fulfilling the conditions in the Notification, which is part of law, in a case where no time-limit is prescribed, should also be considered as one year. Inasmuch as the appellant has failed to fulfill this condition within this period we hold that there is violation of the conditions stipulated in the Notification.
5.4. It is also relevant to observe herein that there is a separate Notification available under Notification 153/94-Cus which provides for import of goods for repairs and re-exports thereafter. Inasmuch as a separate exemption is available, the appellant should have claimed the benefit under that Notification and not under the present Notification which is intended to cater to a different need altogether. Thus, viewed from this angle also, the benefit of exemption would not be available to the assessee.
5.5. The question for decision is whether the duty demand can be confirmed against the appellant, especially in the light of the observation of the .Commissioner that there has been no willful mis-declaration or suppression of facts with an intent to evade payment of customs duty on the part of the appellant and, therefore, the extended period of time-limit would not be available. The Commissioner has confiscated the goods under Section 111(o) of the Act with an option to redeem the same on payment of duty. Thus, there appears to be contradiction in the order of the Commissioner. However, if one looks at the provision of Section 125(2), it clearly says that where any fine in lieu of confiscation 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 or charges payable in respect of such goods. Thus, the demand for duty arises under sub-section (2) of Section 125 and not under Section 28 and there is no time-limit prescribed for demand of duty under this section.
5.6. The honble apex Court in the case of Jagdish Cancer & Research Centre (cited supra) held as follows:
A reading of Sub-section (1) and (2) of Section 125 together makes it clear that liability to pay duty arises under Sub-section (2) in addition to the fine under Sub-section(1). Therefore, where an order is passed for payment of customs duty along with an order of imposition of fine in lieu of confiscation of goods, it shall only be referable to Sub-section (2) of Section 125 of the Customs Act. It would not attract Section 28(1) of the Customs Act which covers the cases of duty not levied, short levied or erroneously refunded etc.. The order for payment of duty under Section 125 (2) would be an integral part of proceedings relating to confiscation and consequential orders thereon, on the ground as in this case that the importer had violated the conditions of notification subject to which exemption of goods was granted, without attracting the provisions of Section 28(1) of the Customs Act. 5.7. The ratio of the said decision was followed by this Tribunal in the case of Bombay Hospital Trust (cited supra) wherein it was held as follows:
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 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). In view of the above, the order of the Commissioner directing payment of duty at the time of redemption cannot be faulted at all and it is in accordance with the provisions of Section 125 of the Customs Act.
5.8. The ld. Commissioner has confiscated the goods for non-fulfillment of the conditions imposed in the Notification under Section 111(o). From the records available it is clear that the appellant has failed to fulfill the conditions stipulated for availing the exemption and, therefore, the order of the Commissioner upholding the confiscation of the goods has to be upheld and the consequential imposition of fine also needs to be upheld.
5.9. The quantum of fine imposed is only ` 5 lakhs and considering the value of the goods imported, of ` 4.19 crores, the fine cannot be said to be excessive at all. As regards the penalty imposed under Section 112(a) of ` 1 lakh, the penalty is very nominal and liability to penalty is attracted once the goods are held liable to confiscation, whether there is any mens rea on the part of the appellant or not. The honble High Court of Madras in the case of Commissioner of Customs vs. Bansal Industries [2007 (207) ELT 346 (Mad.)] held that the element of mens rea is not required for imposition of penalty under Section 112 of the Customs Act. This decision was based on the honble apex Courts decision in the case of Chairman, SEBI vs. Shriram Mutual Fund [2006 (5) SCC 361].
6. In view of the foregoing, we do not find any infirmity in the order passed by the ld. Commissioner. Accordingly, we uphold the said order and dismiss the appeal as devoid of merits.
(Pronounced in Court on 20/12/2012) (Anil Choudhary) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) */as 12