Case Law Details
Larsen & Tourbo Limited Vs Commissioner of Customs (CESTAT Ahmedabad)
In this case before the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad, a customs duty demand and penalty were imposed on the appellant company on the ground that materials brought ashore had not suffered customs duty and were allegedly concealed. The department contended that duty had not been discharged on these materials and sought to recover customs duty along with penalties.
The appellant maintained that the materials in question were leftover materials from operations at Bombay High and were not freshly imported goods. It was asserted that these were either imported materials on which customs duty had already been paid at the time of importation or indigenous materials on which excise duty had been discharged. The appellant clarified that the fastening materials were scrap generated during fabrication and manufacturing of offshore platform structures. Such scrap arose from both imported and indigenous steel plates and pipes. Customs duty was paid on scrap generated from imported raw materials during in-bond manufacturing under Section 65 of the Customs Act, 1962, while excise duty was paid on scrap generated from indigenous materials. Due to the inability to segregate the nature of scrap, customs duty was paid on the scrap generated.
The department sought comments on the appellant’s explanation through a letter dated 07.08.2025. However, the comments received did not indicate why the appellant’s explanation was unacceptable. The Tribunal noted that the department’s own comments acknowledged that the materials had discharged duty and were either indigenous materials or duty-paid imported materials used at Bombay High.
Upon consideration, the Tribunal observed that the department failed to demonstrate why the materials should not be treated as already duty-paid. The materials were used by the appellant in performance of its contract at Bombay High and the leftover materials were later brought ashore. The Tribunal held that non-filing of an Import General Manifest (IGM) could amount to an irregularity only in the case of freshly imported goods. Since the materials were not freshly imported and had already suffered duty, no unpaid duty element remained.
The Tribunal found no material to conclude that the goods were not leftover materials from Bombay High or that they had not discharged duty. Consequently, the duty demand was not sustainable. In the absence of any evidence of malice, the penalty imposed on the appellant company was also set aside. The appeal was allowed with consequential relief. As no duty was payable, redemption fine was also held to be unsustainable.
Further, penalties imposed on two individual appellants were based on the primary charge against the company. Since the duty demand itself was set aside, the Tribunal held that the penalties against these individuals were also not sustainable. Their appeals were accordingly allowed.
FULL TEXT OF THE CESTAT AHMEDABAD ORDER
In the instant case, the duty demand was raised and penalty was imposed by the department on the ground that the materials brought on the shore had not suffered the duty and therefore, they had not discharged duty of customs, as per the department and the same having been concealed, the party is also liable to penalty there upon. Comments were sought from the department as the party had claimed that these materials were nothing but left over at the Bombay High and therefore, the same were not in any way fresh materials imported into India, but were either the materials which have discharged duty at the time of importation or were indigenous materials which had paid excise duty and were used for various purposes at Bombay High. Thus the materials, were nothing but left over of such material which had suffered duties. Comments were sought vide letter dated 07.08.2025. Comments have been provided, the following paragraphs has been pointed out by the Learned Advocate to indicate that the department has assessed the position that the material had duly discharged the duty and were in the nature of either indigenous materials or duty paid imported materials, which were used for various purposes at Bombay High. The following para of the letter has been relied upon by the Advocate:
“M/s L&T have claimed that these fastening material were infact the left pieces i.e. scarp generated during the course of fabricating/ manufacturing of various platform structures at the yard; that such scrapped material is generated out of both imported as well as indigenous steel plates/ pips that the appropriate duty is discharged at their yard ie Customs Duty on scrap generated from imported raw materials during in-bond manufacturing in terms Section 65 of the Customs Act. 1962 and excise duty on the scrap generated from indigenous materials and therefore they use much material for sea fastening the modules for safe transportation. Joint Manager of M/s L&T stated that reason for paying duty on Scrap is because they used imported as well as indigenous materials in the manufacturing activities and they are not in a position to ascertain the nature of scrap generated and therefore are paying the Customs Duty on the scrap generated.”
2. The comments obtained do not indicate as to why above explanation is not acceptable to the department. The matter has been considered and it is clear that the department has not been able to indicate in any manner as to why this material should not be treated as already having discharged the duty and the same was being used at the Bombay High by L&T in performance of their contract and the left over were eventually brought to the shore. Non-filing of I.G.M. can be an irregularity only when goods are freshly imported. If that be so, there is no element of duty which remains unpaid, as is emanating from the facts and from the evidences, which the department is relying upon. There is nothing that impresses this court to consider that the materials were not left over at Bombay High and therefore were not already duty paid. In view of the foregoing, this court is not inclined to sustain the demand and also the penalty cannot be sustained in view of nothing of malice having been shown by the department. Appeal is allowed with consequential relief. As there is no duty there cannot be any redemption fine also on the appellant. Appellant No. 2 (Ishwarlal Nimba Raghuvanshi) and Appellant No. 3 (Rajiv Newaskar) have suffered penalty because of the charge which is levied against L&T. In view of the duty having not been sustained, this court finds that no penalty against the appellants mentioned above as not sustainable. Their appeals are allowed accordingly.
(Dictated & Pronounced in the open court)
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