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2025 (4) TMI 831 - AT - CustomsViolation of conditions of the Ad-hoc Exemption Order No. 336 dated 20.12.1995 - disposal of vehicles as scrap - time-limit for issuing a demand in respect of violation of conditions of a Notification - SCN issued almost 20 years after the duty payment - HELD THAT - The Appellant had been gifted two vehicles namely a Land Rover Range Rover (1993 Model) and a Land Rover Defender (1995 Model). The said vehicles were cleared without payment of duty as per the exemption provided under the Ad-hoc Exemption Order No. 336 dated 20.12.1995. The 1993 make Land Rover Range Rover was disposed of after eight years of use and the 1995 make Land Rover Defender was disposed of after twelve years of use. The Appellant had been using the vehicles in desert areas and the engine of the vehicles had become exhausted. The cars/vehicles had become junk and not motorable. It has been stated by the Appellants that the required spare parts of the vehicles were not available in the Indian market and importation of such spare parts from abroad is also not viable. In such circumstances the Appellant decided to dispose of the said vehicles. It is observed that the disposal of the vehicles as scrap in a non-usable condition cannot be equated with sale of vehicles. In the present case the Appellant has fulfilled the Condition Nos. (i) (ii) and (iv) and it is the Condition No. (iii) which is alleged to have been violated. As per the Condition No. (iii) (supra) the vehicle should not be sold disposed of gifted loaned exchanged. or parted away without prior permission of the Department of Revenue Ministry of Finance New Delhi . It is found that this condition is meant for restricting sale of vehicles which are in working condition. If the vehicle has become a scrap and is not in a motorable condition then this condition cannot be made applicable to demand Customs Duty. The Appellants have not violated the conditions of the Notification as they have not sold the vehicles. Disposing of the vehicles as scrap after they have outlived their utility cannot be considered as sale of vehicles . Accordingly the demand of Customs Duty from the Appellant is not sustainable and hence the same is set aside - As the demand of duty is not sustainable the demand of interest and imposition of penalties on the Appellants is also not sustainable. Time limitation - HELD THAT - It is found that only when there is a continuous obligation to be fulfilled by an importer as per exemption Notifications a demand can be issued for violation of conditions of the Notifications without any time limit. In this case the Ad-hoc exemption has not cast any continuous obligation on the part of the Appellant. As per the conditions of the Ad-hoc Exemption Order the vehicles cannot be sold without permission from the Ministry of Finance. This restriction is not applicable for disposal of the vehicles as scrap once they became non-motorable. If suppression of fact with intent to evade the duty is established then the demand must be issued within the maximum stipulated period of five years from the date of payment of duty - the Notice issued beyond the period of five years is not sustainable. Accordingly the demand of Customs Duty from the Appellant beyond the period of five years in the impugned order is not sustainable on the ground of limitation also. Conclusion - The Appellant did not violate the exemption conditions the demand for duty and penalties is unsustainable and the Show Cause Notice is time-barred. The impugned order set aside - appeal allowed.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include:
ISSUE-WISE DETAILED ANALYSIS 1. Disposal of Vehicles as Scrap and Violation of Exemption Conditions Relevant legal framework and precedents: The Ad-hoc Exemption Order No. 336 dated 20.12.1995 provided a duty exemption for the vehicles, subject to conditions including non-sale or disposal without permission from the Ministry of Finance. Court's interpretation and reasoning: The Court interpreted the condition of non-disposal to apply to vehicles in working condition. The vehicles in question were disposed of as scrap after they became non-motorable, which the Court did not equate with a sale of vehicles. Key evidence and findings: The Court found that the vehicles had been used extensively in desert areas, were in non-motorable condition, and were disposed of as scrap. Statements from purchasers confirmed the vehicles were acquired in a non-serviceable state. Application of law to facts: The Court applied the conditions of the exemption order to the facts, concluding that disposal as scrap did not constitute a breach of the condition restricting sale or disposal. Treatment of competing arguments: The Appellant argued that the vehicles were disposed of as scrap, not as usable cars, and thus did not violate the exemption conditions. The Revenue contended that any disposal without permission violated the conditions. The Court sided with the Appellant, emphasizing the non-motorable state of the vehicles. Conclusions: The Court concluded that the Appellant did not violate the conditions of the exemption order by disposing of the vehicles as scrap. 2. Demand for Customs Duty, Interest, and Penalties Relevant legal framework and precedents: The Customs Act, 1962, provides for the imposition of duty, interest, and penalties in case of violation of exemption conditions. Court's interpretation and reasoning: The Court reasoned that since the disposal as scrap did not violate the exemption conditions, the demand for Customs Duty, interest, and penalties was unsustainable. Key evidence and findings: The Court noted the lack of evidence of any commercial intent or mens rea on the part of the Appellant in disposing of the vehicles. Application of law to facts: The Court applied the principles of the Customs Act, finding no basis for the duty demand or penalties due to the non-violation of exemption conditions. Treatment of competing arguments: The Appellant argued against the sustainability of the duty demand and penalties, while the Revenue maintained their validity. The Court favored the Appellant, citing the non-violation of conditions. Conclusions: The Court set aside the demand for Customs Duty, interest, and penalties. 3. Validity of the Show Cause Notice Relevant legal framework and precedents: The Customs Act, 1962, outlines time limits for issuing demands for duty, typically up to five years in cases involving suppression of facts. Court's interpretation and reasoning: The Court found that there was no continuous obligation or suppression of facts by the Appellant that would justify a demand beyond the five-year limit. Key evidence and findings: The Court noted the absence of evidence indicating suppression of facts or intent to evade duty. Application of law to facts: The Court applied the statutory time limits and found the Show Cause Notice issued beyond five years to be unsustainable. Treatment of competing arguments: The Revenue argued for no time limit on demands for notification violations, while the Appellant contended the Notice was time-barred. The Court agreed with the Appellant. Conclusions: The Court held the Show Cause Notice to be unsustainable due to the time-bar. SIGNIFICANT HOLDINGS Preserve verbatim quotes of crucial legal reasoning: "Disposing of the vehicles as 'scrap' after they have outlived their utility cannot be considered as 'sale of vehicles'." Core principles established: The Court established that disposal of non-motorable vehicles as scrap does not violate conditions of exemption orders intended to prevent the sale of usable vehicles. Final determinations on each issue: The Court determined that the Appellant did not violate the exemption conditions, the demand for duty and penalties was unsustainable, and the Show Cause Notice was time-barred.
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