2003 (5) TMI 291 - AT - Customs

Demand - Bank guarantee encashed by department - EXIM - Export obligation - Demand - Duplication of

Issues Involved:
1. Liability to duty and calculation of the duty payable.
2. Applicability of interest under Section 28AB of the Customs Act.
3. Legitimacy of confiscation of goods under Section 111 of the Customs Act.
4. Imposition of penalty under Section 112 of the Customs Act.
5. Alleged failure to inform customs authorities about non-fulfillment of export obligations.
6. Administrative actions and procedural correctness in issuing notices.

Detailed Analysis:

1. Liability to Duty and Calculation of the Duty Payable:
The importer was granted a licence under the EPCG Scheme for importing capital goods with partial duty exemption, contingent upon fulfilling export obligations. The importer failed to meet these obligations, leading to the demand for differential duty by the customs authorities. The tribunal found no infirmity in the order demanding the largest sum of duty, confirming the liability to duty due to the failure to complete the export obligation.

2. Applicability of Interest under Section 28AB of the Customs Act:
The importer disputed the applicability of interest under Section 28AB, arguing that the section could not apply retroactively to duty payable before its enactment. The tribunal agreed, noting that the duty became payable in 1996, before Section 28AB was enacted. Additionally, the tribunal found no evidence of deliberate misrepresentation or concealment by the importer to justify the application of Section 28AB.

3. Legitimacy of Confiscation of Goods under Section 111 of the Customs Act:
The tribunal examined whether the confiscation of goods was justified. It concluded that the importer's failure to fulfill export obligations was not due to any willful suppression or intent to defraud but rather due to financial and market difficulties. The tribunal noted that the importer had informed the licensing authority of its difficulties and sought extensions, which were denied. Therefore, the confiscation of goods under Section 111(o) was not justified.

4. Imposition of Penalty under Section 112 of the Customs Act:
The tribunal found no justification for imposing penalties on the importer and its Managing Director under Section 112. It noted that there was no evidence of deliberate intent to misrepresent facts or to gain financial benefit unlawfully. The importer's actions were consistent with genuine attempts to fulfill export obligations, despite financial and market challenges.

5. Alleged Failure to Inform Customs Authorities about Non-fulfillment of Export Obligations:
The tribunal addressed the allegation that the importer failed to inform customs authorities about its inability to fulfill export obligations. It found that there was no requirement in the notification or import policy for the importer to inform customs authorities of such inability. The tribunal emphasized that the importer had communicated its difficulties to the licensing authority and sought extensions, which were denied.

6. Administrative Actions and Procedural Correctness in Issuing Notices:
The tribunal critiqued the procedural actions taken by the customs authorities, noting administrative duplication in issuing multiple notices. It pointed out that the Director of Revenue Intelligence issued a separate notice after the Custom House had already issued notices, leading to unnecessary duplication. The tribunal found no new material in the later notice to justify additional penalties or confiscation.

Conclusion:
The tribunal upheld the liability to duty but set aside the imposition of interest under Section 28AB, confiscation of goods, and penalties on the importer and its Managing Director. The tribunal recognized the importer's genuine difficulties and efforts to fulfill export obligations, finding no deliberate intent to defraud or misrepresent. The appeals challenging the levy of interest, confiscation, and penalties were allowed, and the impugned order was set aside to that extent.

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