Custom, Excise & Service Tax Tribunal
Atlanta Limited vs Mumbai on 11 December, 2014
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
APPEALS NOS: C/967 & 968/2009
[Arising out of Order-in-Original No: 97/2009/CAC/CC(I)/SHS/ Gr.VA dated 22/06/2009 passed by the Commissioner of Customs (Imports), Mumbai.]
For approval and signature:
Honble Shri P.R. Chandrasekharan, Member (Technical)
Honble Shri Ramesh Nair, 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
Rajhoo Barot
Atlanta Limited
Appellants
Vs
Commissioner of Customs (Import)
Mumbai
Respondent
Appearance:
Shri B.R. Tripathi, Advocate for the appellants Shri Ahibaran, Additional Commissioner (AR) for the respondent CORAM:
Honble Shri P.R. Chandrasekharan, Member (Technical) Honble Shri Ramesh Nair, Member (Judicial) Date of hearing: 11/12/2014 Date of decision: 09/01/2015 ORDER NO: ____________________________ Per: P.R. Chandrasekharan:
The appeals are directed against Order-in-Original No: 97/2009/CAC/CC(I)/SHS/ Gr.VA dated 22/06/2009 passed by the Commissioner of Customs (Imports), New Customs House, Mumbai.
2. Vide the impugned order, the learned adjudicating authority has confirmed Customs duty demands of ` 1,44,11,453/- and ` 88,63,329/- on the road construction machinery imported by the appellant, along with interest thereon. He has also ordered confiscation of the said machinery valued at ` 3,56,93,400/- and ` 2,19,52,148/- under the provisions of Section 111(o) of the Customs Act, 1962 with an option to redeem the same on payment of fine of ` 54 lakhs and ` 33 lakhs respectively. He has imposed a penalty of ` 2,32,74,782/- on the importer M/s. Atlanta Infrastructure Ltd. under the provisions of Section 114A of the Customs Act, 1962 and a penalty of ` 15 lakhs on Shri Rajhoo Barot, Managing Director of the importer-firm. Aggrieved of the same, the appellants are before us.
3. Facts relevant to the case, briefly, are as follows:
3.1. The appellant M/s. Atlanta Infrastructure Ltd., (AIL for short) imported one unit of Metso Minerals (Nordberg) Stone Crushing (Cone type) Plant, Model No. LT1100 with accessories, having an assessable value of ` 3,56,93,400/- vide Bill of entry No. 512887 dated 16/11/2004 and one unit of Linnhoff Mobile Asphalt Batch Type Hot Mix Plant with pollution control system of 124 TPH capacity, Model TSD 1500 with accessories valued at ` 2,19,52,198/- under Bill of Entry No. 528443 dated 03/01/2005. The appellant claimed the benefit of Notification No. 21/2002 dated 01/03/2002 (serial No. 230, List No. 18 Condition No. 40). At the time of importation of the stone crushing plant the appellant furnished copies of work-orders from MMRDA for the widening and construction of Western Express Highway from Asha Nagar subway to Kulupwadi pedestrian subway and From Kulupwadi pedestrian subway to SN. Dubey Road junction and also from Times of India Flyover North end to Ashanagar subway. Similarly, for the hot mix plant they furnished a contract from the Government of Gujarat, Road and Building Department, for construction of Surat Dhulia road on NH6 KM 7/4 to /13/2. They executed a bond with the Customs authorities under Condition No. 40(b) of the said Notification to use the machines themselves exclusively for construction of roads and that they will not sell or dispose of the goods in any manner within a period of 5 years.
3.2. Intelligence gathered by the department revealed that M/s. AIL had wrongly availed the duty exemption on a contract given by an agency which is not specified in the Notification and by diverting the machines imported to different sites violating the conditions imposed under the Notification. Investigations also established that the stone crushing plant imported, after utilising the same for construction of road for contracts with MMRDA, was diverted to some other contractors work at Nagpur. Similarly, the hot mix plant imported was diverted to Jhansi for using for the work in some other contracts. The machines so diverted were seized by the department on 20/12/2007 at the site for construction at Nagpur and the hot mix plant was seized on 17/12/2007 at Kanpur Jhansi highway, Jhansi.
3.3. Statements of the officials of the appellant-firm revealed that after using the imported machinery for about 1= years, the same was diverted to Mumbai- Nagpur bypass work awarded by PWD, Government of Maharashtra and again to Nagpur for construction of road at Nagpur-Kondhali section for a project of NHAI awarded to M/s. Balaji Tollways Ltd. Similarly, the hot mix plant was used up to June/July 2006 for widening and construction of Western Express highway and thereafter, it was deposited with the Equipment Bank of Indian Infrastructure Equipment Ltd. in August 2006 for a monthly benefit of ` 4.75 lakhs per month. It is also admitted that the hot mix plant imported vide Bill of Entry dated 03/01/2005 was on the basis of a contract of the NHAI for Surat Dhulia road but the same was not actually used for that project but was used for some other purpose and thereafter, the same was given on rent of ` 4.75 lakhs per month to M/s. Indian Infrastructure Equipment Ltd.
3.4. Statement of Shri Rajhoo Barot, Managing Director of AIL also confirmed the above facts and it was revealed that after using the stone crushing plant up to November 2006, it was shifted to Nagpur for use in a contract awarded to M/s. Balaji Tollways Ltd. Similarly, the hot mix plant imported in January 2005 was not used for the project awarded by the Government of Gujarat but was used for some other projects up to May 2006 and thereafter, they were deposited in the Equipment Bank of Indian Infrastructure Equipment Ltd., New Delhi in June 2006 on a rental consideration of ` 4.75 lakhs effective from 20/08/2005.
3.5. In view of the diversion of the imported equipment for other purposes and also MMRDA was not one of the approved agencies for award of contracts for construction of roads, the department issued a show cause notice dated 13/06/2008 proposing to deny the benefit of Notification 21/2002-Cus dated 01/03/2002 and proposing to recover the differential duty of ` 1,44,11,453/- on the stone crushing plant and ` 88,63,329/- on the hot mix plant along with interest thereon under the provisions of Section 28 of the Customs Act, 1962, read with bonds/undertaking executed by the appellant at the time of import. It was also proposed to impose penalties on the appellant, M/s. AIL under Section 112/114A of the Customs Act, 1962 and on Shri Rajhoo Barot, Managing Director under Section 112 of the said Customs Act. The said notice was adjudicated vide the impugned order wherein the proposals in the show cause notice were confirmed. Hence the appeals.
4. The learned counsel for the appellant M/s. AIL and Shri Rajhoo Barot, fairly concedes that in view of the decision of this Tribunal in the case of Shreeji Construction vs. Commissioner of Customs, Mumbai [2013-TIOL-441-CESTAT-MUM] wherein it was held that MMRDA is not a road construction corporation as specified in Notification 21/2002-Cus and therefore, the benefit of the said Notification could not be extended to projects awarded by MMRDA prior to budget 2012 when MMDRA was specifically included as one of the organisation who could award contracts, the appellant was not eligible for the exemption under Notification 21/2002-Cus. The only plea taken is that the appellant had used the imported machinery for construction of roads in respect of projects awarded to others and, therefore, there is no mis-use of the imported machinery. Accordingly, he pleads that the confiscation of the machinery be set aside. It is also pleaded that the appellant had not disposed of or sold the machinery but only rented them out for consideration and, therefore, confiscation of the machinery and consequent imposition of fine is not warranted. It is also pleaded that there is no reason to impose penalties on the appellants under Section 114A and 112 of the Customs Act. He also pleads that, subsequently, the Notification has been amended providing for discharge of duty liability on the depreciated value after the goods have been put to use for a period of 5 years and, therefore, benefit of the depreciation be allowed to the appellant while determining the duty liability.
5. The learned Additional Commissioner (AR) appearing for the Revenue, on the other hand, submits that in view of the decisions of this Tribunal in the case of Shreeji Constructions (supra), the appellant is not eligible for the benefit of the duty exemption in respect of contracts awarded by MMRDA as the said agency is not one of the agencies specified in Notification 21/2002-Cus. He also points out that a reference was made by a coordinate bench for consideration of the matter by a Larger Bench and the Larger Bench, in Customs Appeal No. 967-968/2009 dated 12/09/2013 refused to answer the reference and rejected the same on the ground that there is no conflict between the decision of the Tribunal in the Patel Engineering Ltd. (2012) CESTAT 438 SCC ONLINE and Shreeji Constructions where it is concluded that the MMRDA is not a road construction corporation within the meaning of the said expression under condition No. 40(a) of the Notification 21/2002-Cus. He further submits that the decision in the case of Shreeji Constructions was followed in the case of Relcon Infraprojects Ltd. in final order No. A/157/14/CSTB/CI dated 06/02/2014 and, therefore, this decision has become final.
5.1. The learned Additional Commissioner (AR) further points out that as per the terms and conditions of the Notification 21/2002, the appellant was required to use the imported machinery for the contracts awarded to them at the time of importation of machinery and by themselves, for a period of five years. In the present case, the machinery after use for a period of 1= years, were diverted elsewhere by renting out the same for monetary consideration. Similarly, in respect of the hot mix plant, the appellant at the time of importation had claimed that it will be used for construction of roads in respect of contracts awarded by Government of Gujarat but the hot mix plant was never used for the said contract and instead used to execute a contract awarded by MMDRA for sometime and later on rented out to Siddhardha Construction (P) Ltd. Similarly, the stone crushing plant was diverted to Nagpur for construction of roads in respect of a contract awarded to M/s. Balaji Tollways Ltd. Thus, the diversion of the imported goods is a violation of the post-importation condition thereby attracting the provisions of Section 111(o) of the Customs Act, 192. These diversions were never brought to the notice of the department and therefore, intention of the appellant to violate the terms and conditions of the Notification is clearly established. In these circumstances, he pleads for upholding the confiscation of the goods along with option to redeem the same on payment of fine and consequent imposition of penalties under Section 114A of the Customs Act on the appellant importer-firm and on its Managing Director under Section 112(a).
6. We have carefully considered the submissions made by both the sides.
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 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 construction contract awarded by MMRDA which is not a specified organization. Both these machineries, after being put to use for about 1= 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 1= 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 plant imported vide Bill of Entry No. 528443 dated 03/01/2005 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 ` 35 lakhs and ` 22 lakhs respectively in respect of the two machineries mentioned above.
6.5. As regards the penalties imposed under Section 114A equal to the duty sought to be evaded, this is quite harsh considering the fact that the goods were used for construction of roads even though by others and not by the appellant. In the facts and circumstances of the case, therefore, penalty under Section 112 would suffice. Accordingly, we impose a penalty of ` 58 lakhs on the appellant M/s. AIL under the provisions of Section 112(a) of the Customs Act, 1962, instead of the mandatory penalty under Section 114A equal to the duty. Inasmuch as the appellant-importer has been imposed with a penalty, we are of the considered view that penalty on the Director is not warranted. Accordingly, we set aside the same.
7. To sum up:
(i) We uphold the confirmation of duty demand of ` 2,32,74,782/- along with interest thereon under the provisions of Section 28 and 28AB of the Customs Act read with the provisions of the bond/undertaking executed by the appellant at the time of importation.
(ii) We uphold the confiscation of the imported machinery under Section 111(o). However, we reduce the redemption fine from ` 54 lakhs to ` 36 lakhs and from ` 33 lakhs to ` 22 lakhs in respect of stone crushing plant and hot mix plant respectively.
(iii) We reduce the penalty on the appellant from ` 2,32,74,782/- to ` 58 lakhs under the provisions of Section 112(a) of the Customs Act, 1962.
(iv) Penalty on the Managing Director Shri Rajhoo Barot is set aside.
8. The appeals are disposed of in the above terms.
(Pronounced in Court on 09/01/2015) (Ramesh Nair) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) */as 13