By TIOL News Service

CHENNAI, OCT 29, 2015: THE Appellant entered into agreement with M/s. Projects and Development (India) Ltd., Noida (PDIL) to revamp their Fertilizer plant at Neyveli. Various plant, machinery and parts imported on behalf of appellant under various Bills of Entry during the period March 99 to August 99 and May 2000 to August 2000 were allowed to be cleared at concessional rate of Customs duty under Notification No.20/99-dt. 28.2.99 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.

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. The imported goods which were cleared under the concessional rate of duty forming part of the plant and machinery were also disposed. Such disposal was alleged by Customs as violation of the condition of notification on the ground that imported goods have not been put to intended use but were sold. Hence differential duty was demanded and also the goods were confiscated.

The appellant inter alia contended that it has no intention to stop functioning of the plant suomotu but compelling reason dragged it to dispose the same on the basis of unviability recommended by ICICI. Secondly, the meaning of the term 'importer' under Section 2 of Customs Act, 1962 stating that who files bill of entry or owns the goods becomes importer, the appellant not being owner of the imported goods nor having filed the Bill of Entry cannot be fastened with any liability. There was no issuance of show-cause notice to PDIL to seek recovery of the differential duty. Therefore, adjudication is unsustainable.

After hearing both sides, the Tribunal held:

+ 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. The Sl.No.142 of the Notification 20/99 read with condition No.(24) casts a continuous obligation on the appellant and the benefit exemption was extended to the appellant only for manufacture of fertilizer but not to sell the plant to third party immediately availing duty exemption at the cost of the exchequer.

+ The wordings used in Sl.(3) of the condition is that the appellant shall use the imported machinery for manufacturer of fertilizer and if they failed to fulfill they shall pay the differential duty. The word shall 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 and thereafter sold does not amount to fulfillment of the mandatory condition. Therefore, we are of the considered view that the notification casts continuous obligation on the appellant for use of imported machineries for manufacture of fertilizer till the utility period and when that was sold prematurely to third party there is a breach of the condition of the notification and the adjudicating authority had rightly ordered recovery of the differential duty. That is upheld. Appellants fail to succeed on plea of limitation also.

+ As regards appellant's another plea that differential Customs duty cannot be demanded from the appellant when the goods were imported by M/s.PDIL on behalf of appellant, in respect of Ammonia Synthesis Plant, it is seen that the appellant, a PSU, is the beneficiary of the said exemption notification and availed Customs duty concession on the imported goods and the competent authority for Line Ministry had issued necessary certificate to the appellant-company allowing it exemption under the said notification. It is the appellants who executed Bond for 23 crores and gave Bank Guarantee for Rs.3.0 Crores before Customs authorities for provisional release of the seized goods. Therefore it is held that the adjudicating authority rightly demanded Customs duty from the appellant who are the owners and beneficiary of imports.

(See 2015-TIOL-2313-CESTAT-MAD)