Customs Duty Cannot Be Demanded on Leftover Offshore Materials on which Duty Paid: CESTAT Sets Aside Demand Against L&T [Read Order]

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) set aside the customs duty demand on Larsen & Toubro Limited and its officials and held that duty cannot be demanded on materials which were already duty paid and later brought back from offshore work at Bombay High.

The department alleged that certain materials brought from Bombay High to shore had not suffered customs duty and that no Import General Manifest (IGM) was filed. On this ground, duty, penalty and redemption fine were imposed on the company and two of its officials.

L&T argued that the materials were not fresh imports. It explained that the goods were leftover fastening materials and scrap generated during fabrication of offshore platforms. The scrap came from both imported and indigenous raw materials.

Customs duty was paid on scrap from imported materials under Section 65 of the Customs Act and excise duty was paid on scrap from indigenous materials. The company’s counsel pointed out that these materials were used at Bombay High and only the leftover items were brought back.

The revenue counsel maintained that the goods had not suffered duty and non-filing of IGM made them liable to demand and penalty.

Somesh Arora (Judicial Member) heard the matter and delivered the order. The Tribunal observed that the department had not been able to indicate why the materials should not be treated as already having discharged duty. They observed that the materials were used at Bombay High in performance of contractual obligations and that the leftovers were eventually brought to shore.

The tribunal observed that non-filing of IGM can be treated as an irregularity only when goods are freshly imported. In the present case, there was nothing on record to show that the goods were fresh imports or that any duty remained unpaid.

The tribunal explained that the department had failed to establish any element of mala fide or concealment. Since the duty demand itself was not sustainable, penalty and redemption fine also could not survive. The penalties imposed on the two officials were based on the main demand against the company and, once the demand failed, those penalties also could not be sustained.

The tribunal set aside the duty demand, redemption fine, and penalties, and allowed all the appeals with consequential relief.

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