Sulekha Beevi C.S., Member (J)

1. On specific intelligence gathered by the officers of SIIB, Customs House, Chennai, investigation was conducted of the goods imported vide various Bills of Entry dated 25.06.2013 which were stored at the warehouse of the appellant/importer. It was noted that the appellant had suppressed the sale price by misdeclaring the M.R.P to evade Customs duty. The appellant was doing the activity of loading software into the imported laptops and also repacking them which amounted to the activity of 'manufacture' as defined under Section 2(f) (i) & (iii) of Central Excise Act, 1944. They had cleared the goods without discharging the Excise Duty. Based on the investigations, Show Cause Notice dt. 26.08.2015 was issued to the appellant proposing to demand differential duty of Rs.4,81,74,877/- along with interest. The notice also proposed to confiscate the goods under Section 111 (m) and impose penalty under Section 112 and 114A of Customs Act. The notice alleged that the appellant had undertaken the activities of loading of software application and repacking of the goods in cartons which amounted to 'manufacture' as defined under section 2f (i) and Section 2f(iii) read with Sl.No. 74A of the Third Schedule to the Central Excise Tariff Act, 1944. The show notice also observed that the goods ought to have been assessed on ad valorem on the transaction value. After due process of law, the original authority confirmed the proposals in the SCN including the proposal for confiscation, demand of interest and imposition of redemption fine and penalties.

2. Aggrieved by such order, the appellant is now before the Tribunal.

3. The learned counsel Sri Rohan Muralidharan appeared and argued for the appellant.

3.1. It is submitted by the learned counsel that the appellant is a private limited company engaged, inter alia, in the import and trading of laptops, personal computers, projectors, TFT monitors and various other computer peripherals. In the present case, in the year 2013, the appellant bid for a contract for supply of laptops, software and carry bags to M/s.Rajcomp Info Services Ltd. (Rajcomp, for short), an undertaking of the Government of Rajasthan through tender process. The subject goods were meant for supply to educational institutions and for use of the students on a free of cost basis. The Appellant thus imported 36750 number of laptops vide 13 Bills of Entry. The laptops were imported in individual pallets with stickers wherein it was printed "P.O No.S1203579-8, Cust. PO; Dept. of Rajasthan". The appellant classified the goods under Customs Tariff Item 84713010 and declared the value of goods as USD 277.48 (Rs.16,427/-) per piece as mentioned in the purchase invoices. They claimed exemption from Basic Customs Duty (BCD) in terms of Notification No. 24/2005-Cus. dt. 01.03.2005. They paid CVD on the retail sale price of Rs.14,999/- and availed exemption from SAD in terms of Notification No.21/2012-Cus. dt. 17.03.2012. The goods were cleared on payment of applicable duty.

3.2. After receiving the laptops from the supplier, the appellant realized that the laptops meant for supply to M/s.Rajcom is required to be loaded with two software. After the goods reached the warehouse, the appellant commenced the activity of loading software viz. Adobe & Ms. Visio on the imported laptops so as to deliver the goods to M/s.Rajcomp as per the agreed delivery schedule. Out of the 36,750 laptops imported by them, the appellant undertook the loading of software on 11,236 nos. of laptops and repacked the same in cartons. The imported goods were cleared from their warehouse to M/s.Rajcomp. However, 25512 numbers of laptops were available in the warehouse at the time when the officers conducted the inspection. A detention order dt. 02.07.2013 was issued to the appellant on the 25512 nos. of laptops available at the warehouse.

3.3. The appellant then vide letter dt. 04.07.2013 requested for provisional release of 25512 laptops stating that the goods were meant for distribution to the school students of Rajasthan and the delay in supply of laptops would attract huge liquidated damages. As per the statement of Shri Alok Dubey, Chief Financier Officer of the appellant-company made under Section 108 of Customs Act, 1962, it was stated that 25512 laptops meant for supplying to M/s.Rajcom were imported for an invoice value of USD 277.48 (Rs.16,427/-) per piece and that the MRP declared i.e. Rs.14,999/- was inclusive of VAT. On 08.07.2013 the appellant again requested for provisional release.

3.4. On 10.07.2013 the Commissioner of Customs (Import) permitted provisional release of the laptops on execution of bank guarantee for an amount of Rs.1,51,47,000/- being the differential duty between the transaction value and MRP of the 25,512 laptops. Intimation was served by appellant to the Superintendent of Central Excise, Pondicherry vide letter dt. 10.07.2013 regarding the provisional release of the laptops and their intention to bring the same to appellant's factory at Puducherry for loading of software and that the laptops would be cleared after payment of excise duty. It was also stated that appellant would be availing CENVAT credit of the duty paid.

3.5. On 12.07.2013, statement of Sri B.K. Prakash was recorded wherein, inter alia, he stated that due to time constraint in view of detention of the goods by the Customs and to ensure the timely delivery, the laptops were being planned to be supplied by loading the software at factory which is situated at Puducherry. It is stated that the company has communicated the details to the Central Excise Superintendent, Puducherry and the company would be paying the appropriate Central Excise duty at Puducherry. The laptops imported vide Bill of Entry dt. 31.05.2013 are meant for ELCOT were having preloaded software and are supplied with the carry bag.

3.6 On 20.09.2013, statement of Sri B.K. Prakash was recorded wherein he, inter alia, stated that the price for supply of laptops and other items is inclusive of software; that the appellant had taken the laptops to their factory at Pondicherry for loading of software and that they have paid CENVAT duty on the laptops cleared from the factory at MRP of Rs.17,400/- which was inclusive of software.

3.7. On 25.09.2013, statement of Sri Alok Dubey was recorded wherein he stated that the contract with Rajcomp was through tender process and the Appellant was asked to match the price of the lowest quote during post-tender negotiations. It was also stated by him that the appellant is required to declare RSP on the laptop and carry bag as both the products are covered under Legal Metrology Act.

3.8. On 08.04.2014, the appellant intimated the Customs authorities regarding payment of excise duty on 25,512 laptops. The copies of stock transfer invoice for clearance of goods from factory to warehouse in Jaipur was also submitted by the appellant vide letter dt. 22.04.2014.

3.9. On 12.05.2014, Sri Alok Dubey in his statement explained the process of arriving at the MRP of the laptops. He stated that as per the order with Rajcomp, the software should be loaded onto the laptops. Ms. Windows 8 was loaded on all laptops, (11,238 nos. of laptops which were supplied through Jaipur Warehouse). For the remaining 25,512 nos. of laptops, the software was uploaded at the factory after the goods were released.

3.10. On 12.06.2014, Sri Alok Dubey in his statement stated that 25,512 laptops supplied to Rajcomp were pre-packed commodity and appropriate Customs duty had been paid. Due to the delay caused by the detention of the goods they brought the goods to the factory after intimation to Central Excise Department, loaded software and then have discharged Central Excise duty at the time of clearance.

3.11. On 25.06.2014 Sri R. Jegannath, Chief Sales Officer gave statement before officers in which it was stated that sales department is given the final bidding price inclusive of all cost structures for the tender, that the price quoted by them for 36,750 laptops was Rs.20,126/- whereas the order price was Rs.19,899 inclusive of all prices.

3.12. On 08.07.2014 Sri Sudhir Goel, Chief Officer, Customer Support deposed that for supply of laptops to Rajcomp, the software in the nature of Ms. Visio and Adobe were bought locally from authorized reseller. The software were then loaded in the laptops at their warehouse.

3.13. On 15.07.2014 Sri Vee. Ramesh, DGM-Floor Operations, M/s. Uniworld Logistics Sriperumbudur, stated that they provide third party logistics to various customers including the appellant; that he was not aware whether any application software has been loaded into laptops meant for Rajcom at their warehouse.

3.14. On 21.07.2014, Sri Chhatrapal Singh, Manager of Rajcomp stated that the software such as MS-Visio, Adobe Acrobat and Ms. office are preloaded in the laptops supplied to Rajcomp.

3.15. On 20.08.2014, Sri Alok Dubey stated that a small quantity of laptops meant for supply to Rajcomp was loaded with software at their warehouse before inspection was carried out.

3.16. On 16.09.2014, the appellant vide their letter intimated the Deputy Commissioner of Customs regarding computation and payment of differential duty of Rs.4,81,74,877/- on account of CVD on transaction value and 4% SAD along with interest of Rs.1,03,29,731/- vide challan dt. 16.09.2014.

3.17. On 30.09.2014, the appellant discharged Central Excise duty of Rs.1,93,31,673/- on 11,236 laptops loaded with software at Chennai warehouse and already cleared by them. The above payment was intimated to the Superintendent of Central Excise, Chennai vide letter dt. 13.10.2014. On 16.10.2014, the appellant was granted Central Excise registration to the warehouse at riperumbudur.

3.18 On 17.10.2014, the appellant remitted the interest of Rs.43,09,109/- on delayed payment of excise duty for 11,236 laptops.

3.19 On 28.10.2014, the payment of interest in relation to delayed payment of excise duty for 11,236 laptops was intimated to the Department. Thereafter, show cause notice has been issued dated 26.08.2015 proposing to demand the differential duty along with interest and for confiscation of the goods, for imposing redemption fine and penalties.

4. Ld. Counsel submitted that in the present appeal, the appellant is not contesting the classification of the goods or the demand of differential duty. The contention in the present appeal is limited to the demand of interest on CVD and SAD as well as confiscation of goods, imposition of redemption fine and the penalties.

5. The impugned order has imposed a penalty of Rs.5,85,04,608/- under Section 114A and has held that subject goods are liable for confiscation under Section 111 (m) of Customs Act, 1962. In lieu of confiscation, the original authority has imposed redemption fine of Rs.1,50,00,000/- under Section 125 of the Customs Act, 1962.

6. The Learned Counsel argued that in the present case, the penalty, confiscation and the redemption fine is in relation to demand of Additional Duties of Customs leviable under Section 3 (1) and (5) of the Customs Tariff Act, 1975. The said Act has limited machinery provisions and it borrows various provisions from the Customs Act, 1962 for implementation of its provisions. Section 3 (8) of the Customs Tariff Act (now Section 3 (12) of Customs Tariff Act) is the provision that has been borrowed regarding Additional Customs duty reads as under :

"(8) The provisions of the Customs Act, 1962 (52 of 1962), and the rules and regulations made thereunder, including those relating to drawbacks, refunds and exemption from duties, shall, so far as may be, apply to the duty chargeable under this section as they apply in relation to the duties leviable under that Act."

7. The Ld. Counsel argued that on a reading of the above provision, it is clear that Section 3 of CTA which levies duties other than Basic Customs Duty borrows the procedural provisions of Customs Act, however, the substantive provisions relating to penalty, confiscation , fine and interest has not been explicitly borrowed. The question that then arises is whether confiscation, redemption fine and penalty can be imposed on an assessee in the absence of substantive provisions in the statute creating or imposing such liability.

8. It is submitted by the counsel that as per sub-section (8) of Section 3 of the Customs Tariff Act as reproduced above, there is no mention that the provisions of the Customs Act would apply for recovery of interest on CVD, SAD and also for confiscation, imposition of redemption fine and penalties. Sub-section (8) of Section 3 merely states that the provisions of Customs Act and the Rules & Regulations including those relating to drawbacks, refunds and exemption from duties, shall apply under this section in relation to duties leviable. Though section 28AA provides for levy of interest on delayed payment of Basic Customs Duty (BCD), there is no substantive provision for levy of interest in regard to CVD and SAD which are duties levied under the Customs Tariff Act, 1975.

9. The basis Customs Duty is levied under the Customs Act and in case of delay in payment of Basic Customs Duty, Section 28AA provides for payment of interest. The learned counsel adverted to sub section (8) of section 9 of Customs Tariff Act and argued that the very same omission was present in sub section (8) as it stood prior to the amendment in 2009.

10. The issue has been analysed by the High Court of Bombay in the case of Mahindra & Mahindra Ltd. vs. Union of India "2022 (10) TMI 212 - BOMBAY HIGH COURT. The Hon'ble High Court held that in the absence of specific provisions for levy of interest or penalty due to delayed payment of tax, the same cannot be levied / charged unless the statute makes a substantive provision in this behalf. The said decision has been affirmed by the Hon'ble Apex Court in UOI vs. Mahindra & Mahindra Ltd. - 2023 (8) TMI 135.

11. The decision in the case of Bajaj Health & Nutrition Pvt. Ltd. vs. CC Chennai - 2004 (166) ELT 189 was relied by the learned counsel to argue that the Tribunal in the said case set aside the demand of interest and penalty in regard to non-payment of anti-dumping duty for the reason that the provisions of Customs Act, 1962 relating to on-levy, short levy and refunds were borrowed only for the purpose of chargeability to anti-dumping duty under Section 9A (8) of the Customs Tariff Act and that the provisions of Customs Act in regard to confiscation, penalty and interest were not borrowed in sub-section of Section 9A. It is therefore prayed that the confiscation, redemption fine and penalty imposed in relation to the additional duty chargeable under Section 3 of the Customs Tariff Act may be set aside as there is no substantive provisions under Customs Tariff Act for charging / levy of interest or imposing penalty.

12. The learned counsel asserted that the appellant had already paid the differential duty with interest vide challan t. 16.09.2014. However, the show cause notice has been issued later on 26.08.2015 proposing to demand the duty, interest, for confiscation and for imposing penalties. The appellant has declared the RSP on the goods under bonafide belief that the goods are liable to be affixed with M.R.P stickers and to be assessed under Section 4A of C.E. Act, 1944. This is evident from the statement given by Sri B.K. Prakash on 25.09.2013. Further, the valuation of the goods is an interpretational issue. The Bills of Entry were filed by declaring RSP when the goods were assessed to CVD on the RSP so declared. There is nothing brought out from the conduct of the appellant that there is an intention to evade Customs duty. For this reason, the penalty under section 114A is not imposable. All the facts in the present case were well within the knowledge of the department and therefore there is no suppression or misstatement of facts. The classification adopted by the appellant was under heading 8471 and the transaction value and RSP of the imported laptops were declared in the Bills of Entry. Thus, if the department was of the view that the goods are not liable for RSP based assessment, they ought to have raised the objection at the time of import itself. After having accepted the self-assessment and being aware of all the facts as early in July 2013, the department cannot allege willful suppression of facts and impose penalty under Section 114A of the Customs Act, 1962.

13. With regard to the activity of loading of software, the learned counsel submitted that it is usually done during manufacturing in China or during installation of laptops at the location of the end customer. Only when the subject goods left the port of country of origin, the appellant realized that the two software viz. Ms. Visio and Adobe were not loaded in the laptops as required by Rajcomp. Only to fulfill this requirement of the buyer and to ensure the timely delivery, the appellant had undertaken the activity of loading of the software at their factory and warehouse. The same was intimated to the department also. There was no case of misdeclaration.

14. As per Rule 9 of Cenvat Credit Rules, 2004, a manufacturer can take cenvat credit on the basis of supplementary invoice issued by them on inputs or capital goods and also of the Additional Duty of Customs. So far, the department has not issued any show cause notice alleging that the appellant is not eligible to avail credit of above duties paid by them. Therefore, the appellant being eligible to avail cenvat credit on the additional duty of customs paid by them, the situation is revenue-neutral and for this reason also, the allegation of willful mis-statement and suppression of facts cannot sustain for imposing penalty under Section 114A.

15. The appellant has claimed exemption from Basis Customs Duty in terms of Notification No. 24/2005-Cus. dt. 01.03.2005 as the goods are classified under CTI 84713010. The differential duties paid by the appellant would be available as cenvat credit for utilization towards payment of excise duty on the manufactured goods even if the activity of loading of software is held to be an activity of manufacture. The decision of the Larger Bench in the case of Jay Yuhshin Ltd. vs. CCE New Delhi - 2000 (119) ELT 718 (Tribunal-LB) was relied by the learned counsel to argue that in a revenue-neutral situation the appellant cannot be saddled with the burden of willful suppression of facts with intent to evade payment of duty. It is prayed that the appeal may be allowed.

16. Ld. A.R Sri M. Ambe appeared and argued for the Department. It is submitted by the learned A.R that there have been serious violations on the part of the appellant and the same would not have come to light but for the investigation conducted by the SIIB officers. It is very much clear that there has been delay in payment of excise duty. So also, the appellant has paid the CVD on transaction value and 4% SAD also with delay. Therefore, the interest paid on such delayed payment of CVD and SAD is legal and proper. As there have been serious violations on the part of the appellant, the adjudicating authority has ordered for confiscation of the goods. The appellant was given an option to redeem the same on payment of redemption fine. As the appellant has rendered the goods liable for confiscation there are no grounds to set aside the imposition of redemption fine. Consequently, the redemption fine imposed is legal and proper and the same has to be paid by the appellant.

17. The argument put forward by the learned counsel relying upon the decision in the case of Mahindra & Mahindra Ltd. (supra) was countered by the Ld. A.R by submitting that sub-section (8) of Section 3 of the Customs Tariff Act, 1975 uses the word "including". The same has to be read to have wide ambit so as to include confiscation, interest and penalties. The Ld. A.R prayed that the appeal may be dismissed.

18. Heard both sides.

19. The operative portion of the impugned order reads as under :

"ORDER

(a) I hold that the laptops imported under Bills of Entry as listed in Annexure -I to the Show Cause Notice, should be assessed to the Additional Duty of Customs in terms of Section 4 of the Central Excise Act, 1944 read with Section 3(1) of the Customs Tariff Act, 1944.

(b) I confirm the total differential duty of Rs.4,81,74,877/-( Rupees Four Crores eighty one lakhs seventy four thousand eight hundred and seventy seven only) for the imports covered under Bills of Entry as listed in Annexure -I to the Show Cause Notice from the importer under Section 28(8) of the Custom Act, 1962.

(c) I confirm the demand of interest as due and applicable under Section 28AA of the Custom Act, 1962.

(d) I appropriate the amount of Rs. 5,85,04,608/- (Rupees Five crores Eighty Five Lakhs Four Thousand Six Hundred and Eight only)paid by the importer towards the total differential duty and applicable interest payable by the importer.

(e) I confiscate the 25512 nos. of laptops totally valued at Rs.42,37,13,765/- (Rupees Forty Two Crores Thirty Seven Lakhs Thirteen Thousand Seven Hundred and Sixty Five only) in respect of 9 Bills of Entry as listed in Annexure -1 to the Show Cause Notice under Section 111 (m) of the Customs Act, 1962. However, as the goods were provisionally released under Bond & Bank Guarantee, I impose redemption fine of Rs.1,50,00,000/- (Rs. One crore and fifty lakhs only) in lieu of confiscation under Section 125 (1) of the Customs Act, 1962.

(f) I hold the 11243 nos of laptops totally valued at Rs. 19,27,48,311/- (Rupees Nineteen Crores Twenty Seven Lakhs Forty Eight Thousand Three Hundred and Eleven only) in respect of 5 Bills of Entry as listed in Annexure -I to the Show Cause Notice are liable for confiscation under Section 111 (m) of the Custom Act, 1962. However, as the goods are not physically available for confiscation, I refrain from imposing any fine.

(g) I impose a penalty of Rs.5,85,04,608/- (Rupees Five Crores Eighty Five Lakhs Four Thousand Six Hundred and Eight only) on M/s. Acer India (Pvt)Ltd., Bangalore under Section 114A of the Customs Act, 1962

"Provided that where such duty or interest, as the case may be, as determined under sub-section (8) of section 28, and the interest payable thereon under section 28AA, is paid within thirty days from the date of the communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the duty or interest, as the case may be, so determined:

Provided further that the benefit of reduced penalty under the first proviso shall be available subject to the condition that the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso"

The SCN alleges that the appellant cleared laptops covered under 13 Bills of Entry by willfully assessing the goods under Section 4A of Central Excise Act, 1944 instead of Section 4, in order to avoid payment of higher duty and thus evaded duty to the tune of Rs.4,81,74,877/-. The Ld. Counsel has submitted that the appellant is not contesting the classification, valuation or the confirmation of differential duty of Rs.4,81,74,877/- (The amount of Rs.3,31,02,277/- being CVD and Rs.1,50,72,600/- being 4% Special Additional Duty (SAD) paid by them). The contest in the present appeal is limited to the demand of interest on the delayed payment of CVD, SAD as well as the order of confiscation of the goods, the redemption fine imposed in lieu of confiscation and the penalties. The appellant classified the goods under CTH 84713010 and declared the value of the goods as USD 277.48 (Rs.16,427/-) per piece. They claimed exemption from Basic Customs Duty in terms of Notification No.24/2005-Cus. dt. 01.03.2005.

20. The appellant discharged countervailing duty / additional duty of customs, on the retail sale price, RSP of Rs.14,999/- declared by them. The department was of the view that as the appellants have undertaken the activity of loading of software on the laptops which amounts to 'manufacture' they are liable to discharge duty on the goods on transaction value and not on RSP basis. On such assessment made on the transaction value the appellant had to discharge the CVD as well as SAD. The Countervailing Duty (CVD) or Additional duty of Customs is levied as per Section 3 (1) of the Customs Tariff Act, 1975 reads as under :

"SECTION 3. Levy of additional duty equal to excise duty, sales tax, local taxes and other charges. ' (1) Any article which is imported into India shall, in addition, be liable to a duty (hereafter in this section referred to as the additional duty) equal to the excise duty for the time being leviable on a like article if produced or manufactured in India and if such excise duty on a like article is leviable at any percentage of its value, the additional duty to which the imported article shall be so liable shall be calculated at that percentage of the value of the imported article."

Again, the Special Additional Duty of Customs (SAD) is levied as per sub-section (5) of Section 3 of CTA, 1975. The relevant provision reads as under :

"(5) If the Central Government is satisfied that it is necessary in the public interest to levy on any imported article whether on such article duty is leviable under sub-section (1) or, as the case may be, sub-section (3) or not such additional duty as would counter-balance the sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or transportation in India, it may, by notification in the Official Gazette, direct that such imported article shall, in addition, be liable to an additional duty at a rate not exceeding four per cent. of the value of the imported article as specified in that notification."

Subsection (8) of Section 3 of CTA provides for the machinery of collection of the said duties. It borrows the provisions of the Customs Act, for collection, payment and recovery of the CVD and SAD.

21. The impugned order confirms an amount of Rs.4,81,74,877/- as differential duty of CVD and SAD when calculated on transaction value. The order has also confirmed the demand of interest on the above duty under Section 28AA of the Customs Act, 1962. It is now argued by the learned counsel that the demand of interest on Additional Duty of Customs (CVD) and SAD cannot sustain as there is no substantive provision for levy of interest on delayed payment of CVD or SAD in sub-section (8) of section 3 of Customs Tariff Act, 1975.

22. The very same argument has been put forward by the Ld. Counsel in regard to the order of confiscation of goods and imposition of redemption fine of Rs.1,50,00,000/- and regarding the penalty of Rs.5,85,04,608/- as imposed under Section 114A.

23. Ld. Counsel has vehemently argued that when there is no substantive provision for levy of interest on belated payment of CVD and SAD, the demand of interest cannot sustain. Sub-section (8) of Section 3 does not speak that the provisions of Customs Act, 1962 relating to interest on belated payment of duty as applicable to the CVD and SAD levied under the Customs Tariff Act. Section 28AA deals with payment of interest on Basic Customs duty i.e, the duty levied under Customs Act, 1962. Unless there is substantive provision to levy interest, the same cannot be collected. We do find merit in the arguments advanced by the Ld. Counsel.

24. The Hon'ble High Court of Bombay in the case of Mahindra & Mahindra Ltd. (supra) analysed the very same issue as to the demand of interest and penalty in relation to amounts payable as duty other than Basic Customs Duty. The Hon'ble High Court discussed the issue as under :

"11. It is Mr. Sridharan's case that Section 90 of the Finance Act, 2000 related to surcharge, Section 3 of the Customs Tariff Act, 1975 related to additional duty of customs equal to excise duty and Section 3A of the Customs Tariff Act, 1975 related to special additional duty of customs and none of these provisions provided for imposition of penalty or interest on the chargeable duty thereunder. Therefore, there was no power under the provisions of law to impose penalty or interest. It was also submitted that the basic customs duty with surcharge had already been paid and the penalty and interest has been levied only on the differential duty which the show cause notice alleged petitioner had evaded and since neither Section 3 nor Section 3A of the Customs Tariff Act, 1975 or the Finance Act, 2000 provided for imposition of penalty or interest, there is no power under the Act to impose the sameupon petitioner.

12. Mr. Mishra submitted that :

(a) the additional customs duty and special additional duty of customs or surcharge though charged under different statutes are duties of customs and, therefor, Section 28AB of the Customs Act, 1962 (as then prevailing) is applicable;

(b) these duties are part of total customs duty and calculated by taking into consideration value of the goods as well as the basic customs duty and since petitioner had mis-stated the assessable value by undervaluing the imported goods, respondent no.2 was justified in directing interest and penalty was payable by petitioner;

(c) under Section 127C of the Customs Act, 1962, respondentno.2 had the inherent authority or power to determine the terms of settlement covering not only the amount of duty but also interest and penalty; and

(d) under Section 127H of the Customs Act, 1962, respondent no.2 has the power to grant immunity from prosecution and penalty subject to such conditions as it may think fit to impose. Such a power has been exercised by the Commission in imposing penalty and interest upon petitioner and, therefore, respondent no.2 cannot be faulted. Mr. Mishra submitted that there is nothing in the order to be concerned that the legality of procedure was not followed. Since there is nothing wrong with the validity of the order, the Court should not interfere and should dismiss the petition.

13. Therefore, the issue that requires to be decided by this Court in this petition is limited to leviability of interest and penalty in relation to amounts payable as duty other than basic customs duty.

14. Having considered the judgment of the Apex Court in Jyotendrasinhji (Supra), the law is very clear that though the order of the Commission is in the nature of a package deal and it may not be possible always, to dissect its order and the assessee should not be permitted to accept what is favourable to him and reject what is not, if the Court is satisfied that the order of the Commission is contrary to the provisions of the Act, the Court should interfere. Did respondent no.2 act contrary to the provisions of law by holding that interest at 10% was payable on the differential duty and imposing penalty as mentioned in the impugned order Let us examine.

33. We are also unable to accept Mr. Mishra's contentions that the charging section for imposition of CVD and SAD or surcharge is Section 12 of the Customs Act, 1962. In our view, the charging sections for imposition of surcharge, CVD and SAD are Section 90(1) of the Finance Act, 2000, Section 3(1) and Section 3A(1) of the Customs Tariff Act, 1975, respectively. Mr. Mishra's contention that Section 12 is the charging section is incorrect. Section 12 of the Customs Act, 1962 reads as under :

12. Dutiable goods -

(1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be leviedat such rates as may be specified under [the Customs Tariff Act, 1975 (51 of 1975)], or any other law for the time being in force, on goods imported into, or exported from, India.

(2) The provisions of sub-section (1) shall apply in respect of all goods belonging to Government as they apply in respect of goods not belonging to Government. Mr. Mishra submitted that the words "except as otherwise provided in this Act or any other law for the time being in force" employed in Section 12 of the Customs Act, 1962, surcharge on customs duty under Section 90 of the Finance Act and CVD and SAD under the Customs Tariff Act, 1975 would all be covered under any law for the time being in force. Therefore, according to Mr. Mishra CVD under Section 3 and SAD under Section 3A of the Customs Tariff Act, 1975 and surcharge under Section 90 of the Finance Act, 2000 are all levied under Section 12 of the Customs Act, 1962. Therefore, imposing interest under Section 28AB on surcharge, CVD and SAD would be correct in law.

34. Section 9A (8) of the Customs Tariff Act, 1975 which borrowed provisions from Customs Act, 1962 did not borrow provisions relating to interest and penalty. The Hon'ble Courts, in judgments cited supra, held that in view of no specific borrowing, no interest and penalty can be imposed on anti-dumping duty. Later on, Finance (No.2) Act, 2004 amended sub-section (8) of Section 9A suitably to include interest and penalty. However, similar amendments have not been made to Section 3(6) of the Customs Tariff Act, 1975 relating to CVD, i.e., additional duty equal to excise duty or Section 3A(4) of Customs Tariff Act, 1975 relating to SAD, i.e., special additional duty or surcharge under Section 9(3) of the Finance Act, 2000.

35. Further, Section 12 of the Customs Act, 1962 levies duty on goods imported into India at such rates as may be specified in the Customs Tariff Act, 1975. In Customs Tariff Act, 1975, Section 2 provides the rates at which duties of customs are to be levied under the Customs Act, 1962 are as specified in the first and second schedules of the Customs Tariff Act, 1975.In Section 12 of the Customs Act, 1962 there is no reference to any specific provision of Customs Tariff Act, 1975. On the other hand levy of CVD or SAD under Section 3 or Section 3A of the Customs Tariff Act, 1975 or surcharge under Section 90 of the Finance Act, 2000 is not relatable to the first or second schedule but the rate is prescribed in those three sections itself. This itself shows the charging section for surcharge or CVD and SAD is not Section 12 of the Customs Act, 1962 but Section 90 of the Finance Act, 2000 and Section 3 and Section 3A of the Customs Tariff Act, 1975, respectively.

36. We find support for our view in Hyderabad Industries Ltd. V/s. Union of India12 relied upon by Mr. Sridharan. The Apex Court considered Section 12 of the Customs Act, 1962 and went on to hold that the charging section to impose CVD is Section 3 of the Customs Tariff Act, 1975. Paragraphs 12, 13 and 14 of Hyderabad Industries Ltd. (Supra) read as under :

12. Section 12 of the Customs Act levies duty on goods imported into India at such rates as may be specified in the Customs Tariff Act, 1975. When we turn to Customs Tariff Act 1975, it is Section 2 which states that the rates at which duties of customs are to be levied under Customs Act 1962 are those which are specified in the First and Second Schedules of the Customs Tariff Act, 1975. In Section 12 of the Customs Act there is no reference to any specific provision of the Customs Tariff Act 1975. In other words for the purpose of determining the levy of customs duty on goods imported into India what is relevant is Section 12 of the Customs Act read with Section 2.

13. On the other hand levy of additional duty under Section 3 is equal to the excise duty for the time being leviable on the like article which is imported into India if produced or manufactured in India. The rate of additional duty under Section 3(1) on an article imported into India is not relatable to the First and the Second Schedule of the Customs Act but the additional duty if leviable has to be equal to the excise duty which is leviable under the Excise Act. This itself shows that the charging section for the levy of additional duty is not Section 12 of the Customs Act but is Section 3 of the Customs Tariff Act, 1975. This apart sub-sections (3), (5) and (6) of Section 3 refer to additional duty as being leviable under sub- section (1). In sub-section (5), for instance, it is clearly stated that the duty chargeable under Section 3 shall be in addition to any other duty imposed under this Act or under any other law for the time being in force.

There are different types of customs duty levied under different acts or rules. Some of them are; (a) a duty of customs chargeable under Section 12 of the Customs Act, 1962; (b) the duty in question, namely, under Section 3 (1) of the Customs Tariff Act; (c) additional duty levied on raw- materials, components and ingredients under Section 3 (3) of the Customs Tariff Act; and (d) duty chargeable under Section 9A of the Customs Tariff Act, 1975. Customs Act 1962 and the Customs Tariff Act, 1975 are two separate independent statutes. Merely because the incidence of tax under Section 3 of the Customs Tariff Act, 1975 arises on the import of the articles into India it does not necessarily mean that the Customs Tariff Act cannot provide for the charging of a duty which is independent of the customs duty leviable under the Customs Act.

37. In view of the above, imposing interest and penalty on the portion of demand pertaining to surcharge or additional duty of customs or special additional duty of customs is incorrect and without jurisdiction.

38. We have to note that in the present case, it is not disputed that petitioner has paid a sum of Rs.11.84 Crores much prior to the issuance of show cause notice. There is no determination of duty under Section 28(2) of the Customs Act, 1962 and, therefore, Section 28AB of the Customs Act, 1962 is also not applicable. Petitioner has also paid the difference between the admitted duty liability and the amount settled by respondent no.2. We do not agree with respondent no.2 that CVD, SAD and surcharge are being recovered under Section 28 of the Customs Act, 1962. Consequently Section 28AB of the Customs Act, 1962 also will also not be applicable. In the absence of specific provision relating to levy of interest in the respective legislation, interest cannot be recovered by taking recourse to machinery relating to recovery of duty.

39. The finding of respondent no.2 that it has the inherent authority or power to determine the terms of settlement covering not only the amount of duty but also interest and penalty as well is ex-facie untenable. Reliance by respondent no.2 upon Section 127C of the Customs Act, 1962 to direct payment of interest is totally misplaced in the case at hand. Section 127C of the Customs Act, 1962 itself provides that the order of the Settlement Commission has to be in accordance with the provisions of the Customs Act, 1962. Respondent no.2 certainly cannot pass an order beyond the provisions of the Customs Act, 1962. The provisions relating to interest contained in Section 28AB of the Customs Act, 1962 are not borrowed in the legislation imposing levy of surcharge or CVD or SAD. Respondent no.2 cannot include interest in the settlement arrived at by it on the ground that petitioner has derived financial benefits by not paying the correct rate of duty when it was due. Deriving financial benefits itself cannot be a ground to order payment of interest in the absence of any statutory provisions for payment of interest.

40. Therefore, the order of the Commission to the extent of requiring petitioner's to pay interest at the rate of 10% against the four show cause notices and penalty (Rs.1,00,000/- in the case of first show cause notice, Rs.10,00,000/- in the case of second show cause notice andRs.5,00,000/- in the case of third show cause notice) is liable to be and are hereby quashed and set aside.

40. The Rule issued on 21st April 2009 is made absolute.

41. Respondents to refund the amount of Rs.16,00,000/- being penalty deposited by petitioner together with interest, if any, within four weeks of receiving an application. The bank guarantee furnished on behalf of petitioner for a sum of Rs.74,67,790/- together with the renewals to be cancelled and returned to petitioner by the Registry of this Court within four weeks of receiving an application."

25. The above judgment of the Hon'ble High Court was affirmed by the Hon'ble Apex Court in UOI vs. Mahindra & Mahindra Ltd. " 2023 (8) TMI 135 (SC.). Applying the ratio laid in the above judgment, we are of the considered view that the demand of interest (on the total differential duty of Rs.4,81,74,877/-) cannot sustain and requires to be set aside. For the same reason, the confiscation of the goods and the imposition of redemption fine are set aside.

26. The penalty of Rs.5,85,04,608/- has been imposed under Section 114A of the Customs Act, 1962. The said section reads as under :

"SECTION 114A. Penalty for short-levy or non-levy of duty in certain cases. - Where the duty has not been levied or has been short-levied or the interest has not been charged or paid or has been part paid or the duty or interest has been erroneously refunded by reason of collusion or any wilful mis-statement or suppression of facts, the person who is liable to pay the duty or interest, as the case may be, as determined under sub-section (8) of section 28 shall also be liable to pay a penalty equal to the duty or interest so determined :

Provided that where such duty or interest, as the case may be, as determined under sub-section (8) of section 28, and the interest payable thereon under section 28AA, is paid within thirty days from the date of the communication of the order of the proper officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent of the duty or interest, as the case may be, so determined:-"

The penalty under the above section is levied in cases of short levy or non-levy. Subsection (8) of Section 3 of CTA, 1975 has borrowed the provisions with regard to collection of duty (CVD & SAD). However, there is no express mention of borrowing the provisions for imposing penalty in regard to these duties. Be that as it may, though the SCN is issued alleging willful suppression of facts with intent to evade payment of duty, it has to be noted that the appellant would be eligible to avail credit of the duties paid. The entire situation is revenue-neutral. The Larger Bench in the case of Jay Yushin Ltd. CCE, New Delhi " 2000 (19) ELT 718 (Tri.-LB) held that the demand cannot be sustained on account of revenue neutrality. Relevant para reads as under :

"12. As regards the demand of penalty under Section 11AC, as has been stated above the ingredients for invoking the said provision are in par materia with the ingredients to proviso to Section 11A(1). Having regard to the view we have taken above, where no legal infirmity in invoking the proviso to Section 11A(1) is shown to exist, there will also be no infirmity in invoking of penal provision under Section 11AC.

13. In the light of the above discussion, we answer the reference as under:

(a) Revenue neutrality being a question of fact, the same is to be established in the facts of each case and not merely by showing the availability of an alternate scheme;

(b) Where the scheme opted for by the assessee is found to have been misused (in contradistinction to mere deviation or failure to observe all the conditions) the existence of an alternate scheme would not be an acceptable defence;

(c) With particular reference to Modvat scheme (which has occasioned this reference) it has to be shown that the Revenue neutral situation comes about in relation to the credit available to the assessee himself and not by way of availability of credit to the buyer of the assessee's manufactured goods;

(d) We express our opinion in favour of the view taken in the case of M/s. International Auto Products (P) Ltd. (supra) and endorse the proposition that once an assessee has chosen to pay duty, he has to take all the consequences of payment of duty."

27. The Tribunal in the case of United Distributors vs. CCE Thane-I - 2014 (30) ELT 571 (Tri.-Mum.) observed as under :

"8. We find that in this case, the show cause notice issued to the appellant on the issue whether the activity of labelling/re-labelling or putting stickers on the imported goods amounts to manufacture or not. In the case of L'Oreal India Pvt. Ltd. (supra) we find that this Tribunal has observed that as the activity of fixing MRP stickers took place in Customs bonded warehouse therefore, the same does not amount to manufacture but in this case the MRP stickers have been fixed after clearance of the goods from the Customs. Therefore, as per Chapter note and Section 2(f)(iii) of the Central Excise Act, 1944, the activity undertaken by the appellant amounts to manufacture. In these circumstances, we hold that the activity undertaken by the appellant is amounts to manufacture.

8.1 As we held that the activity undertaken by the appellant amounts to manufacture, the appellant is entitled to take Cenvat Credit of CVD paid by them at the time of importation of the goods.

8.2 We also find that the MRP declared before the Customs or before the Central Excise is the same therefore, the duty payable on the said goods is equal to the CVD paid by the appellant. Therefore, the situation is of Revenue neutrality as held by this Tribunal in the cases of L'Oreal (supra) and BASF India Ltd. (supra). As the whole exercise in this case is of revenue neutrality, therefore, following the above cited decisions, we hold that although the activity undertaken by the appellant amounts to manufacture but the duty impact is nil being of Revenue neutrality situation therefore, we set aside the demand confirmed by the adjudicating authority in the impugned order and also set aside the imposition of redemption fine, interest and penalty.

9. In these terms the appeal is allowed. Stay application is also disposed of in the above terms."

28. After appreciating the facts, evidence and following the decisions as discussed above, we hold that the penalty imposed requires to be set aside which we hereby do.

29. In the result, the impugned order is modified to the extent of setting aside, the demand of interest, the order of confiscation of goods, the imposition of Redemption fine, penalties imposed and the appropriation of interest paid by the appellant without disturbing the confirmation of duty.

The appeal is partly allowed in above terms.