EICHER MOTORS LTD Vs. COMMISSIONER OF CUSTOMS

JUDGEMENT

(1.) THE appellants in this case are manufacturers of Light Commercial Vehicles (LCVs) classifiable under Chapter 87 of the Central Excise Tariff. At the relevant time the appellants had imported various quantities of components for the manufacture of LCV. They were also availing of the benefit of two Customs exemption notifications namely, Notification No. 222/87 and 74/85 -Cus. Notification No. 222/87 entitled manufacturers of fuel efficient LCVs, such as the ones manufactured by the appellants; to import components of such LCVs in completely knocked down (CKD) condition at concessional rate of duty. Notification No. 74/85 allowed imports of components of fuel efficient LCVs which are intended for purposes of providing warranty coverage or after -sales services by the manufacturer to customers. The concessional rate of Customs duty under this notification was 50% ad valorem.

(2.) BY a Show Cause Notice dated 14 -9 -1992, the appellants were called upon by the Department to show cause why differential Customs duty should not be demanded from them with regard to the quantity of components imported in CKD condition under Notification No. 222/87 as amended and used for purposes of supplies to the spare parts requirements of dealers/depots. It was alleged that the appellants had used components of CKD kits imported under the concessional rate available under Notification No. 222/87 for meeting the spare part requirements for vehicles under the warranty scheme. The Department alleged that diversion of components of CKD kits for the said purpose amounted to non -fulfilment of the conditions prescribed under Notification No. 222/87 and consequently differential Customs duty between the full tariff rate of Customs duty normally applicable on such components and the concessional rate availed by the appellants under Notification No. 222/87 was required to be discharged by the appellants. The duty demand was worked out at Rs. 24,57,753.09 on the basis of outstanding balance of CKD components supplied for spare parts requirements which was pending for replacement as on 1 -5 -1992. Apart from the differential duty demanded, the Show Cause Notice also proposed to impose a penalty under Section 112 of the Customs Act, 1962 for the contravention of the provisions of Section 111.

(3.) THE Commissioner of Customs by order dated 4 -12 -1997 confirmed the duty demand to the extent of Rs. 19,97,100/ -. While dropping imposition of penalty, the Commissioner held that the appellants would be liable to pay interest in terms of Section 28AB of the Customs Act.