2006 (2) TMI 480 - AT - Customs

Summary

Issues:
1. Denial of exemption under Notification No. 56/98-Cus dated 1-8-1998 for the period from 1-8-1999 to 31-10-1999.
2. Mixing of imported LPG and indigenous LPG at the storage facility.
3. Permission for mixed bonding of LPG.
4. Eligibility for duty exemption under Notification No. 56/98-Cus dated 1-8-1998.
5. High Seas Sale transaction and duty exemption.
6. Applicability of Sales Tax and Special Additional Duty (SAD).
7. Omission of Section 3A of the Customs Tariff Act, 1975.

Analysis:
1. The case involved the denial of exemption under Notification No. 56/98-Cus dated 1-8-1998 for the period from 1-8-1999 to 31-10-1999. The Revenue contended that the imported LPG was sold on High Seas Sale basis and mixed with indigenous LPG before being sold in the domestic market, thus not meeting the criteria of being sold 'as such' as required by the notification. The Deputy Commissioner of Customs passed Orders-in-Original denying the exemption, which was appealed by the respondents. The Commissioner (Appeals) allowed the appeals, setting aside the demands.

2. The issue of mixing imported LPG and indigenous LPG at the storage facility was raised by the Revenue. They argued that the intentional mixing at the facility rendered the imported LPG not cleared 'as such.' The respondents, however, demonstrated that the LPGs were stored separately, and Sales Tax was paid on the transaction, making them eligible for the exemption. The Tribunal agreed with the respondents, emphasizing the separate storage and payment of Sales Tax.

3. The Revenue raised concerns about the permission granted for mixed bonding of LPG, indicating the intention to mix imported and indigenous LPG. However, the respondents clarified that the goods were stored separately, and Sales Tax was paid, meeting the criteria for duty exemption under the notification. The Tribunal upheld the respondents' position, emphasizing the payment of Sales Tax on the imported goods.

4. The eligibility for duty exemption under Notification No. 56/98-Cus dated 1-8-1998 was a key issue. The Revenue argued that since the imported LPG was not cleared 'as such,' the respondents were not eligible for the exemption. The respondents countered by demonstrating separate storage and payment of Sales Tax, which the Tribunal found sufficient to grant them the exemption.

5. The High Seas Sale transaction and its impact on duty exemption were debated. The Revenue contended that the sale on High Seas basis excluded the respondents from the exemption. However, the Tribunal considered the payment of Sales Tax on the imported goods as the crucial factor for exemption eligibility, ultimately ruling in favor of the respondents.

6. The applicability of Sales Tax and Special Additional Duty (SAD) was a significant aspect of the case. The respondents argued that since Sales Tax was paid on the imported LPG, they were exempt from SAD. Citing relevant case law and circulars, the Tribunal agreed that SAD was not leviable when goods were sold as such and Sales Tax was paid, supporting the respondents' position.

7. The omission of Section 3A of the Customs Tariff Act, 1975, raised questions about the validity of the proceedings initiated for levy of SAD. The Tribunal held that proceedings under the omitted section could not be continued, as clarified by relevant case law. The Tribunal rejected the Revenue's appeals, emphasizing the payment of Sales Tax and the inapplicability of SAD in the given circumstances.