Cus - MMRDA is not Road Construction Corp, hence exemption not available - as appellant did not utilise goods for a period of five years there is clear violation of post-importation condition - penalty u/s 112 would suffice: CESTAT
By TIOL News Service
MUMBAI, FEB 03, 2015: THE Commissioner of Customs (Imports), NCH, Mumbai confirmed Customs duty demands of Rs. 1,44,11,453/- and Rs. 88,63,329/- on the road construction machinery imported by the appellant, along with interest thereon. He also ordered confiscation of the said machinery valued at Rs. 3.57 crores & Rs. 2.20 crores respectively with an option to redeem the same on payment of fine of Rs. 54 lakhs and Rs 33 lakhs respectively. Healso imposed a penalty of Rs. 2.33 crores on the importer u/s 114A of the Customs Act, 1962 and a penalty of Rs. 15 lakhs on the Managing Director of the importer-firm.
Aggrieved, the appellants are before the CESTAT.
Facts: The appellant claimed the benefit of Notification No. 21/2002-Cus dated 01/03/2002 (serial No. 230, List No. 18 Condition No. 40). At the time of importation,they furnished copies of work-orders from MMRDA & a contract from the Government of Gujarat, Road and Building Department. They executed a bond with the Customs authorities to use the machines themselves exclusively for construction of roads and that they will not sell or dispose of the goods in any manner within a period of 5 years.
Intelligence gathered by the department revealed that the importer had wrongly availed the duty exemption on a contract given by an agency (viz. MMRDA) which is not specified in the Notification and by diverting the machines imported to different sites violating the conditions imposed under the Notification. Investigations also established that the stone crushing plant imported, after utilising the same for construction of road for contracts with MMRDA, was diverted to some other contractor's work at Nagpur. Similarly, the hot mix plant imported was diverted to Jhansi for using for the work in some other contracts. The machines so diverted were seized by the department. Statements of the officials of the appellant -firm were also recorded.
Consequently, proceedings were initiated under the Customs Act and the order referred above came to be passed.
We reported the Stay order as 2011-TIOL-50-CESTAT-MUM.
Before the CESTAT,when the appeal was heard, the appellant conceded that in view of the decision of the Tribunal in Shreeji Construction - 2013-TIOL-441-CESTAT-MUM wherein it was held that MMRDA is not a road construction corporation as specified in Notification 21/2002-Cus, they are not entitled for the benefit of the said Notification in respect of the import under consideration.
The only plea taken is that the appellant had used the imported machinery for construction of roads in respect of projects awarded to others and, therefore, there is no misuse of the imported machinery and hence confiscation may be set aside. It is also pleaded that the appellant had not disposed of or sold the machinery but only rented them out for consideration. It is further mentioned that on the same grounds penalty should be waived. Lastly, since the Notification has been superceded & the new notification [12 of 2012, condition no.9] provides for discharge of duty liability on the depreciated value, they too may be allowed the same.
The AR inter alia submitted that as per the terms and conditions of the Notification 21/2002, the appellant was required to use the imported machinery for the contracts awarded to them at the time of importation of machinery and by themselves, for a period of five years. In the present case, the machinery after use for a period of 1 ½ years, were diverted elsewhere by renting out the same for monetary consideration. Similarly, in respect of the hot mix plant, the appellant at the time of importation had claimed that it will be used for construction of roads in respect of contracts awarded by Government of Gujarat but the hot mix plant was never used for the said contract and instead used to execute a contract awarded by MMRDA for sometime and later on rented out to Siddhardha Construction (P) Ltd. Similarly, the stone crushing plant was diverted to Nagpur for construction of roads in respect of a contract awarded to M/s Balaji Tollways Ltd. Thus, the diversion of the imported goods is a violation of the post-importation condition thereby attracting the provisions of Section 111(o) of the Customs Act, 1962. These diversions were never brought to the notice of the department and, therefore, intention of the appellant to violate the terms and conditions of the Notification is clearly established. In these circumstances, the order passed by the Commissioner of Customs (Imports) should be upheld.
The Bench observed -
++ The issue, whether MMRDA is a road construction corporation as envisaged in condition No. 40(a) of Notification No. 21/2002-Cus was examined at length by this Tribunal in the case of Shreeji Construction (supra) and it was held that MMRDA is not a road construction corporation within the scope and context of condition NO. 40(a). …Therefore, the appellant was not entitled ab initio for the benefit of the Notification 21/2002-Cus.
++ In the case of hot mix plant, the same was imported claiming that the same would be used in a contract awarded by the Government of Gujarat for construction of road in put to Surat. But the hot mix was never put to use in terms of the said contract and was used in respect of construction contract awarded by MMRDA which is not a specified organization. Both these machineries, after being put to use for about 1 ½ years, were diverted. The stone crushing plant was diverted for use in respect of contract awarded to M/s. Balaji Tollways Pvt. Ltd. for construction work in the Nagpur area. Similarly, the hot mix plant also was rented out to Indian Equipment Infrastructure Pvt. Ltd. for a monthly consideration of Rs. 4.75 lakhs per month. Notification No. 21/2002-Cus envisaged the importer undertake to use the imported goods exclusively for the construction of roads by himself and he shall not sell or otherwise dispose of the said goods in any manner for a period of five years from the date of importation. In the present case, it is an admitted position that after using the equipment for a period of 1 to 1 ½ years, the imported goods were diverted for use by others, namely M/s. Balaji Tollways Pvt. Ltd. and by Indian Equipment Infrastructure Ltd. In other words the appellant did not utilise the goods for a period of five years for the construction of roads by himself. Thus, there is a clear violation of the post-importation condition.
++ It is a settled position in law that an exemption Notification has to be construed strictly, the same being in the nature of an exception. Inasmuch as the conditions of the exemption Notification has been violated, the appellant is, obviously not eligible for the benefit of exemption and consequently the appellant becomes liable to pay the differential duty at the rate prevailing at the time of importation of the goods.
The Bench also held that the extended period of time is rightly invocable as the appellant had suppressed the facts of diversion; interest is also payable; the goods are rightly liable for confiscation, however, the redemption fine imposed is on the higher side & therefore reduced to Rs 35 lakhs and Rs 22 lakhs respectively.
In the matter of equivalent penalty imposed u/s 114A, the Bench observed that the same was quite harsh considering the fact that the goods were used for construction of roads even though by others and not by the appellant. Inasmuch penalty under Section 112 would suffice and, therefore, a penalty of Rs 58 lakhs was imposed. And because the appellant-importer has been imposed with a penalty, penalty on the Director is not warranted, the Bench added.
The appeals were disposed of.
Discretion in passing : Perhaps this is not the last that we hear of this case…
(See 2015-TIOL-244-CESTAT-MUM)
