2002 (1) TMI 821 - AT - Central Excise

Issues Involved:

1. Cancellation of Customs Private Bonded Warehouse (CPBW) Licence.
2. Demand of customs duty on imported capital goods warehoused in the Customs Private Bonded Warehouse.
3. Alleged contravention of Regulation 7 of the Manufacture and Other Operations in Warehouse Regulations (MOOWR), 1966.
4. Penalty and interest imposed on the appellant.

Issue-wise Detailed Analysis:

1. Cancellation of Customs Private Bonded Warehouse (CPBW) Licence:

The Commissioner (Appeals) upheld the cancellation of the CPBW licence, stating that the appellants did not obtain an EPCG licence for the imported goods nor complied with Regulation 7 of MOOWR, 1966. However, the Tribunal found that Regulation 7, which required duty-paid capital goods, was repealed by Notification No. 44/98 on 2-7-98. Therefore, the reasoning for cancellation based on non-compliance with Regulation 7 was incorrect. The Tribunal noted that machinery imports could be made without an import licence and warehoused pending obtaining an EPCG licence. The appellant was granted permission to manufacture in Bond, and the capital goods used were not required to be duty-paid post the repeal of Regulation 7. Consequently, the Tribunal set aside the orders of the lower authorities and allowed the appeal, reinstating the CPBW licence.

2. Demand of Customs Duty on Imported Capital Goods:

The Commissioner adjudicated 16 Show Cause Notices demanding customs duty on the grounds that the bond period had expired. The Tribunal found that the Commissioner's order suffered from a denial of natural justice as the notices were answerable to the Jurisdictional Deputy Commissioner, and no communication was issued regarding the change in adjudicating authority. Additionally, the Tribunal noted that the Commissioner failed to consider the repeal of Regulation 7 and the fact that the appellant had permission to assemble and install the machinery. The Tribunal concluded that the assembly and installation did not amount to illicit clearance for home consumption and set aside the duty demands.

3. Alleged Contravention of Regulation 7 of MOOWR, 1966:

The Commissioner concluded that the installation of imported machinery without payment of customs duty amounted to ex-bonding without filing an Ex-Bond Bill of Entry. The Tribunal disagreed, stating that Regulation 7 was rescinded before the alleged contravention. The Tribunal also found that the appellant had permission to manufacture finished goods in Bond and that no stipulation of duty-paid capital goods was required post the repeal of Regulation 7. The Tribunal held that no duty could be charged as no manufacture took place before the repeal date, and the duty demands on capital goods were not justified.

4. Penalty and Interest Imposed on the Appellant:

The Tribunal found that the appellant had sought necessary permissions for assembly and installation, and the operations were conducted under the supervision of the Bond Officers. The Tribunal did not accept the findings that the Bond Officers were unaware of the assembly. Even if operations were conducted without permission, only a penalty under Section 117 could be imposed, not duty demands. The Tribunal also noted that the appellant had filed 16 Ex-Bond Bills of Entry for assessment under Notification No. 53/97, which were pending due to delays and incorrect appreciation of provisions by the Revenue. The Tribunal concluded that there was no contravention of warehousing conditions or the bond, and the demands of duty, interest, and penalty were not sustainable.

Conclusion:

The Tribunal set aside the impugned orders, allowed both appeals, and directed that the pending Ex-Bond Bills of Entry be assessed as per law without further delay.

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