No Customs Duty Without Proof of Fresh Import: CESTAT Grants Relief to L&T on Bombay High Leftover Materials
Pranav B Prem
The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), Ahmedabad Bench, comprising Judicial Member Somesh Arora, has set aside customs duty demands and penalties imposed on Larsen & Toubro Limited (L&T) and its officials, holding that materials brought ashore from Bombay High were duty-paid leftovers and not freshly imported goods.
The appeals arose from an order passed by the Commissioner of Customs (Appeals), Ahmedabad, confirming duty demand and penalties on the allegation that certain materials brought to shore had not suffered customs duty and were concealed from the department. The department contended that since the goods were not reflected in the Import General Manifest (IGM), they were liable to customs duty along with penalty.
L&T, however, maintained that the materials were not fresh imports but leftover fastening materials and scrap generated during fabrication and manufacturing activities undertaken for offshore platform structures at Bombay High. The company submitted that the scrap arose from both imported and indigenous steel plates and pipes used in fabrication. Customs duty had been discharged on scrap generated from imported raw materials during in-bond manufacturing under Section 65 of the Customs Act, 1962, and excise duty had been paid on scrap generated from indigenous materials. These materials were used for sea fastening of modules during transportation and were subsequently brought back to shore as leftover materials.
The Tribunal recorded that comments were sought from the department regarding L&T’s explanation that the goods were merely leftover materials that had already suffered duty. The departmental comments did not indicate any reason for rejecting this explanation. The Tribunal noted that the department itself acknowledged that the scrap was generated from both imported and indigenous materials and that duty had been paid, as L&T was unable to segregate scrap by origin and therefore paid customs duty to ensure compliance.
On examining the record, the Tribunal found that there was nothing to demonstrate that the materials in question were newly imported goods or that any duty remained unpaid. It observed that non-filing of an Import General Manifest could at best be treated as an irregularity only in cases where goods are freshly imported. In the present case, the materials were already duty-paid goods used in execution of contractual obligations at Bombay High and later brought ashore as leftovers.
The Tribunal held that the department had failed to establish any element of unpaid duty. It observed that “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 these findings, the Tribunal declined to sustain the duty demand.
Consequently, the Tribunal also held that in the absence of a sustainable duty demand, no redemption fine could be imposed. The penalties imposed on L&T as well as on its officials, Ishwarlal Nimba Raghuvanshi and Rajiv Newaskar, were also set aside. The Tribunal emphasized that since the primary demand was unsustainable and no malafide intent had been shown by the department, imposition of penalties could not be justified. Accordingly, all the appeals were allowed with consequential relief.
Cause Title: Larsen & Tourbo Limited Versus Customs Commissioner
Case No.: Customs Appeal No. 10426 of 2015-SM
Coram: Judicial Member Somesh Arora
