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2015 (9) TMI 818 - CESTAT CHENNAI

2015 (9) TMI 818 - CESTAT CHENNAI - TMI - Violation of notification No.20/99-Cus and 16/2000 Goods not used in manner intended Appellants had shut down plant and disposed entire plant and machinery consisting of old as well as new machinery by e-auction Imported goods which were cleared under concessional rate of duty forming part of plant and machinery were also disposed Such disposal was alleged by Customs as violation of condition of notification No.20/99-Cus and 16/2000 on ground tha .....

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ore, disposal of imported goods did not serve intended purpose of notification In spite of being fully aware of fact that imported goods were to be used for intended purpose, appellants failed to fulfill undertaking given to Customs authorities as required by condition of notification That warranted appellant to pay duty in event of failure of not using goods for manufacture of fertilizer.

Members of successful bidder/awardee in their statements admitted that they have to bear all .....

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stoms duty from appellant who are owners and beneficiary of imports Decided against Appellant. - C/86/2012 - Final Order No.40966/2015 - Dated:- 10-8-2015 - Shri D.N. Panda, Judicial Member and Shri R. Periasami, Technical Member, JJ. For the Petitioner : Shri B.V. Kumar, Advocate For the Respondent : Shri M. Rammohan Rao, DC (AR) ORDER Per R. Periasami The appellant has filed the present appeal against the impugned order dated 28.3.2012 passed by Commissioner of Customs (Seaport-Import), Ch .....

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2.99 and Notification No.16/2000-Cus.dt. 1.3.2000. Appellants also imported plant and machinery directly for revamping of Urea Synthesis Plant and cleared the same at concessional rate of duty in terms of the above notification. 2.2 In the year 2002, the appellants had shut down the plant and disposed the entire plant and machinery consisting of old as well as new machinery by e-auction through their selling agents viz. M/s.MSTC Bangalore and M/s.Metro Machinery Traders, Delhi was successful bid .....

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ustoms notification. The DRI Chennai seized the imported machinery vide mahazar dt. 14.9.2006 and handed over the same to the appellant. But those were released provisionally on execution of bond for ₹ 23 crores and giving of bank guarantee of ₹ 3.0 crores executed by NLC. 3. After detailed investigation by Zonal DRI Chennai, the appellants were issued Show Cause Notice (SCN) dt. 2.3.2006, answerable to the Commissioner of Customs, Chennai. Differential customs duty was demanded as p .....

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ction 12 and 143 of the Customs Act and also appropriated an amount of ₹ 5,46,915/-. Adjudicating authority also ordered confiscation of the goods. But valued the same at ₹ 23 crores under Section 111 (o) of the Act and allowed redemption thereof on payment of fine of ₹ 2,30,00,000/-. He also imposed penalty of ₹ 10,02,42,538/- under Section 112(a) of Customs Act and dropped the proceedings against the co-noticees. The adjudicating authority also ordered for enforcement o .....

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vestment commission suggested disinvestment in the plant due to unviability thereof, to secure employment to several employees being concern of the appellant, Ammonia Plant was decided to be renovated. The appellant accordingly proceeded to make renovation thereof awarding the contract to Projects and Development (India) Ltd., Noida (PDIL in short). The said developer imported equipments through 22 Bills of Entry on behalf of the appellant for use in renovation of the plant availing duty concess .....

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acture of aforesaid items and their parts, required for renovation or modernization of a fertilizer plant; and (B) spare parts, other raw materials (including semifinished material) or consumables stores, essential for maintenance of the fertilizer plant mentioned above 5% 10% 24 4.3 The developer filed 22 Bills of Entry for import of the equipment, spare parts and installed the same in the factory of the appellant. Upon installation, the Ammonium Plant factory operated for 22 months. But therea .....

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ls of Entry and the goods so imported were used in the modernization and renovation of that plant availing service of a contractor namely, UREA Casale. Even this unit was found to be infeasible to operate as an integral part of the fertilizer plant. 4.5 In view of the aforesaid unviability reported by ICICI, e-auction of the appellant was done for the reason beyond control of the appellant. 4.6 Revenue came out with a show-cause notice dated 12.3.2007 to recover the differential duty in respect .....

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hority at the time of import stating that the goods imported shall be used for the purpose specified in Sl. No. 142 of the notification and in the event of failure to do so, the differential duty shall be recovered. Customs authority relying on this condition sought to recover differential duty on the goods imported and used in the plant for renovation and modernization. The duty so sought to be recovered was ₹ 10,02,48,538/- unreasonably. 4.8 Appellant submitted that so far as the urea pl .....

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of the differential duty. Therefore, adjudication is unsustainable. 4.9 Further submission of the appellant was that Tribunal has already in the decision reported in Nippon Audiotronix Ltd. Vs. Commissioner of Customs, New Delhi 2000 (120) ELT 736 held that the person who is liable to duty is the importer but not anybody else. Therefore, show-cause notice issued after a long time in 2007 for the import of a decade old shall not bring the appellant to the liability. Accordingly, neither duty nor .....

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submitted that the appellant was beneficiary of the entire import for its own plant on the basis of duty concession certificate issued to it. Therefore, it was the owner of the goods for which it is liable to duty as well as interest and penalty. PDIL was only a bailee to act as intermediary who filed the Bills of Entry on behalf of the appellant while the ownership of the goods was all along with the appellant. Therefore, decision reported in Nippon Audiotronix Ltd. Vs Commissioner of Customs, .....

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t still then in the year 1999 it went for renovation for no good reason. That has caused prejudice to Revenue because Customs duty concession was availed at the cost of the exchequer. Such conduct of the appellant is established when it again became unviable by the report of ICICI. Therefore, appellant cannot plead that it was beyond its control to dispose the plant. 5.4 Reliance was placed by Revenue in the case of Mediwell Hospital and Health Care Pvt. Ltd. Vs. Union of India reported in 1997 .....

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est of Revenue by continuous use of the duty-free imports but not to make mere temporary use thereof and sell the same under the plea of unviability enriching itself by duty lost by Revenue. 5.5 Further, relying on the decision in the case of Union of India Vs. Wood Papers Ltd. reported in 1990 (47) ELT 500 (S.C.). Revenue submitted that duty exemption being given at public interest, legislature has freedom to impose any condition at public interest for use of the goods in the manner indicated i .....

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gly, appellant is liable to the consequence arose out of adjudication. 5.7 Relying on the decision in the case of CCE, New Delhi Vs. Hari Chand Shri Gopal reported in 2010 (260) ELT 3 (SC), Revenues prayer is that substantial compliance being necessity of law such a doctrine cannot be loosely interpreted to grant any relief to appellant since public interest has suffered huge duty demand. Further, relying on the decision in the case of Commissioner of Customs Vs. Virgo Steels reported in 2002 (1 .....

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Union of India reported in 1999 (112) ELT 749 (S.C.), Revenue submitted that the total burden is on the assessees to prove that it has used the imported goods till its economic life ended and no loss caused to Revenue by disposal thereof. Appellant having failed to discharge such burden, proper consequence of law has followed. 6. In the rejoinder, appellants submission was that entire action of appellant being based only on the technical feasibility it cannot be construed that the appellant has .....

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4.5.2004 which brought out the appellants good conduct and proper disclosure of material fact as to unviability of the plant calling for disposal thereof. Appellant also submitted that there was condition in the notification restraining the appellant to dispose the plant before certain period like the impediment/ conditions prescribed in other notifications such as : condition No. 42 and conditions 48 to 50 of the Notification No.120/99-Cus. dated 20.02.1999. Accordingly, the appellant should n .....

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t should be denied inasmuch as the imported goods were sold and not utilized for the intended purpose in their fertilizer plant as stipulated under the said Notifications and thereby violated the conditions of the said Notifications. (b) Whether the differential duty of ₹ 10,02,48,538/- (Rupees Ten Crores Two Lakhs Forty Eight Thousand Five Hundred and Thirty Eight Only) (as detailed in Annexure I and Annexure II of SCN) arising out of the above along with applicable interest is to be dema .....

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imported goods relating to the urea synthesis section which were dismantled and cleared prior to the initiation of investigation by DRI valued at ₹ 33,52,78,239/- are to be held liable for confiscation under section 111(o) of the Customs Act, 1962; (f) Whether Shri Sampath Kumar, Deputy General Manager, Fertilizer Plant, M/s. NLC and Shri A.R. Ansari, Director, Planning and Projects M/s. NLC Limited, Neyveli are liable for penal action under section 112(a) of the Customs Act, 1962 for the .....

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The main dispute is whether the concessional benefit is available to NLC under notification No.20/99-Cus. dated 28.2.1999 and 16/2000-Cus. dated 1.3.2000 as amended, on the goods imported under the Bill of Entry as per Annexure I & II of the SCN. The goods covered under the Bill of Entry were imported for revamping of fertilizer plant and not utilized for the intended purpose but the same were sold. As seen from the Notification No.20/99 at Sl.No.142 which is already reproduced in para 1.1 o .....

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retary to the Government of India in the Department of Fertilisers, - (i) certifies that the scheme for renovation or modernisation, as the case may be, of the fertilizer plant has been granted techno-economic clearance by the said Department; (ii) recommends, in each case, the grant of exemption under this notification to, - (a) Machinery, instruments, apparatus and appliances, as well as components (whether finished or not) or raw materials for the manufacture of aforesaid items and their comp .....

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ondition (1) shall not exceed 10% of the value of imported goods specified in sub-clause (a) of the said clause; (3) if the importer furnishes an undertaking to the Assistant commissioner of Customs to the effect that the said imported goods shall be used for the purposes specified above and in the event of his failure to use the goods for such purposes, he shall pay an amount equal to the difference between the duty leviable on the said imported goods but for the exemption under this notificati .....

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ts main contention that the goods were imported for revamping of the fertilizer plant and the machineries were installed and commissioned therefore, they have complied with condition of the notification. Appellant also contended that as far as urea plant is concerned, plant and machinery was imported by M/s. PDIL, the differential duty if to be demanded, it is to be demanded from PDIL and not from the appellants. On perusal of the above notification and the impugned order, we find that the issue .....

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plant and machinery for renovation or modernization of Fertilizer Plant only if they fulfill all the 3 conditions stipulated in the Condition No.24 or Condition No.27 appended to the above two notifications respectively. Sl.No. (1) & (2) of the conditions relates to administrative approval and recommendations by the Competent Authority of the concerned Line Ministry and the value of limit of the imported goods. This was duly complied by the appellants at the time of clearance of the importe .....

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used for the purpose of Renovation/Modernization of fertilizer plant and in the event of failure to use the goods for such modernization/renovation of fertilizer plant the appellant shall pay an amount equal to differential Customs duty on the said goods. 12. On perusal of records, we find it is an admitted fact that appellants took decision to close down the Urea & Ammonia Synthesier Plant within 2 years of importation and commissioning of the plant and sold the plant to the third party M/s .....

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, Director, Planning, Project, Mr.Sampath, DGM, V. Mohan, DGM & Company Secretary, K. Viswanath, Company Secretary, it reveals beyond doubt that in spite of Disinvestment Commission report dated March 1998 recommending for closure of Fertilizer plant, the NLC in its 287 Board Meeting held on 5.5.97 took decision to revamp the fertilizer plant. When the revamping was under progress on 14.12.99 study was also conducted by M/s. ICICI for feasibility study/commercial viability of fertilizer plan .....

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re of Fertilizer plant which was not in operation since 31.1.2002 and also approved for sale of plant "as is where is basis". 15. It is pertinent to state that it is the appellant who took decision to go ahead for revamping the said plant in spite of the Disinvestment Commission's report which is against them and proceeded ahead and approached the Line Ministry for granting such approval and to issue necessary certificate for import of machineries at concessional rate under the sai .....

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Customs authorities as required by the condition of the notification.That warranted the appellant to pay the duty in the event of failure of not using the goods for manufacture of fertilizer. 16. Further, we find from the statements of V. Mohan DGM & Company Secretary dt. 20.9.2006 who is responsible for preparation and co-ordination of e-tender/e-auction that he admitted the fact that while floating the e-tender through MSTC they have included provisions for payment of following statutory .....

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y the successful bidder. 17. We find that the above facts has been confirmed by Shri Harish Durgon, Partner and Shri Ramkrishnan Gupta, Partner of M/s. Metro Machinery Traders, Delhi (successful bidder/awardee) in their statements dt.21.9.2006 and 10.10.2006. They have clearly admitted that they have to bear all duties and taxes as stipulated in the e-auction but there was no mention of any payment of customs duty on the imported machineries. Nothing was explained by the appellant for no provisi .....

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pellant in so far as recovery of differential duty is concerned. 18. It is pertinent to state that, when a fertilizer plant of large scale capacity was renovated/revamped using imported machinery the intention of legislature in granting exemption was to use the same continuously for manufacturer of fertilizer by the importer. The appellant cannot take shelter on the ground that mere installation of imported machinery and commissioning the plant for short period shall absolve it from liability. T .....

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and failed to discharge continuing obligations, Revenue has right to recover the customs duty forgone. This was again affirmed by the Apex Court in their subsequent decision in the case of CC Vs Jagdish Cancer & Research Centre (supra). It is held therein that the importer has a continuing obligation of the use of the goods imported under exemption notification. 20. In the case of Bombay Hospital Trust Vs CC (supra) the Larger Bench of Tribunal has relied on the Apex court's decision ref .....

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risen subsequently on account of failure to fulfil the post-importation conditions under the Notification No. 64/88, the said Section 28 has no application to a duty demand of this kind. We do not, therefore, wish to dwell further on the inapplicability of Section 28 to such demands. However, we note that since no specific time limit is prescribed under any other provision of the statute, the notice of demand in such cases cannot be subjected to any limitation of time. This view is supported by .....

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e exemption granted is conditional. The conditions relating to (i) free treatment of 40% outdoor patients and (ii) reservation of 10% of beds for free treatment of patients with family income less than ₹ 500 p.m. make it manifestly clear what the public interest behind the said exemption is. If these conditions are not fulfilled after importation and the public interest is not served, the exemption becomes unavailable and full duty as leviable under Section 12 becomes payable. 14. We note .....

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es not (as the Government may have valid reasons not to burden hospitals doing genuine charitable work with bonds and bank guarantees), this cannot be a valid plea by the appellants not to pay the demanded duty when the conditions of free treatment are violated. We also do not think that it is necessary for an exemption notification issued under Section 25 to contain a recovery provision when the power to recover duty can be traced to Section 12, nor any mandate to provide such a recovery provis .....

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ould enable the appellant to import the equipment without payment of customs duty but at the same time we would like to observe that the very notification granting exemption must be construed to cast continuing obligation on the part of all those who have obtained the certificate from the appropriate authority and on the basis of that to have imported equipments without payment of customs duty to give free treatment at least to 40% of the outdoor patients as well as would give free treatment to .....

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open to the authority to ask the person who have availed of the benefit of exemption to pay the duty payable in respect of the equipments which have been imported without payment of customs duty. Needless to mention the Government has granted exemption from payment of customs duty with the sole object that 40% of all outdoor patients and entire indoor patients of the low income group whose income is less than ₹ 500/- p.m. would be able to receive free treatment in the Institute. That obje .....

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discharge that obligation, duty is demandable." The ratio of the Apex Court is squarely applicable to the present case as the appellants have not fulfilled the condition of the Notification. The Sl.No.3 of the condition (24) of the notification is specific, clear and unambiguous and as per the condition the appellants had given undertaking before Asst. Commissioner of Customs that the imported machineries shall be used for manufacturer of fertilizer. When there is a breach of the said cond .....

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quot;22. The law is well settled that a person who claims exemption or concession has to establish that he is entitled to that exemption or concession. A provision providing for an exemption, concession or exception, as the case may be, has to be construed strictly with certain exceptions depending upon the settings on which the provision has been placed in the Statute and the object and purpose to be achieved. If exemption is available on complying with certain conditions, the conditions have t .....

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clearly that he is covered by the said provisions and, in case of doubt or ambiguity, the benefit of it must go to the State. A Constitution Bench of this Court in Hansraj Gordhandas v. H.H. Dave - (1996) 2 SCR 253, held that such a notification has to be interpreted in the light of the words employed by it and not on any other basis. This was so held in the context of the principle that in a taxing statute, there is no room for any intendment, that regard must be had to the clear meaning of th .....

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ther, must be kept clearly distinguished. In Tata Iron and Steel Co. Ltd. (supra), this Court held that the principles as regard construction of an exemption notification are no longer res integra; whereas the eligibility clause in relation to an exemption notification is given strict meaning wherefor the notification has to be interpreted in terms of its language, once an assessee satisfies the eligibility clause, the exemption clause therein may be construed literally. An eligibility criteria, .....

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e substance of the requirements. Like the concept of reasonableness, the acceptance or otherwise of a plea of substantial compliance depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Cert .....

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objectives for which it was passed. Fiscal statute generally seeks to preserve the need to comply strictly with regulatory requirements that are important, especially when a party seeks the benefits of an exemption clause that are important. Substantial compliance of an enactment is insisted, where mandatory and directory requirements are lumped together, for in such a case, if mandatory requirements are complied with, it will be proper to say that the enactment has been substantially complied .....

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ncorrectly written that an earnest effort at compliance should be accepted. The test for determining the applicability of the substantial compliance doctrine has been the subject of a myriad of cases and quite often, the critical question to be examined is whether the requirements relate to the substance or essence of the statute, if so, strict adherence to those requirements is a precondition to give effect to that doctrine. On the other hand, if the requirements are procedural or directory in .....

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of Condition No. (24), No.(27). The wordings used in Sl.(3) of the condition is that the appellant shall use (emphasised) the imported machinery for manufacturer of fertilizer and if they failed to fulfill they shall pay the differential duty. The word shall (emphasized) used in the notification signifies that it is a mandatory condition. It is established that the appellants failed to comply to the said condition. Mere fact that the imported machineries were installed and temporarily put to use .....

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il to succeed on plea of limitation for the above reasons. 22. As regards the appellant's contention that they kept informed the Customs and Central Excise authorities on their closure and sale of the Fertilizer Plant, on perusal of correspondences of NLC with Superintendent of Central Excise vide their letters dt.30.6.2004, 1.6.2004 and 20.6.2004 and the Superintendent-Central Excise letters addressed to NLC dt.26.5.2004, 7.6.2004 we find the jurisdictional Superintendent-Central Excise had .....

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nowhere appellant disclosed availment of concessional duty benefit under notification 20/99 or 16/2000. Further there is no evidence of despatch of such letter or receipt of such letter by the Department. Therefore, all the citations and case laws relied by the appellant in support of their contentions on merit as well as on suppression of facts are not profitable to the appellant. 23. As regards appellant's another plea that differential Customs duty cannot be demanded from the appellant w .....

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