2003 (10) TMI 573 - AT - Customs

Summary

Issues:
1. Interpretation of Notification 203/92 dated 19-5-1992 regarding Modvat credit reversal.
2. Duty demand under Section 28 of the Customs Act, 1962.
3. Imposition of penalty under Section 112(a) and Section 114(A) of the Act.

Interpretation of Notification 203/92 dated 19-5-1992 regarding Modvat credit reversal:
The appellants, engaged in the manufacture of polyester filament yarn, were issued Value Based Advanced Licences (VBAL) for duty-free import of certain items. They fulfilled the export obligation under these licences, and Central Excise officers directed them to reverse an amount towards Modvat credit. The appellants filed a claim for refund, which was initially sanctioned but later reviewed by the Commissioner. The Tribunal, in a previous order, concluded that the appellants had complied with the conditions of the notification, requiring only a specific amount of Modvat credit to be reversed. The Tribunal accepted the explanation regarding the reversal of credit in respect of certain inputs. A subsequent ROM order corrected an error in the initial finding, leading to the setting aside of the impugned order and allowing the appeal.

Duty demand under Section 28 of the Customs Act, 1962:
The Commissioner confirmed a duty demand of Rs. 2,64,84,742 under Section 28 of the Customs Act, 1962, based on the alleged violation of conditions regarding Modvat credit reversal. However, the Tribunal's earlier order and subsequent corrections in the ROM order clarified that the appellants had fulfilled the relevant conditions of the notification, rendering the duty demand baseless. Consequently, the impugned order was set aside, and the appeal was allowed.

Imposition of penalty under Section 112(a) and Section 114(A) of the Act:
The Commissioner imposed a penalty of Rs. 60 lakhs on the company under Section 112(a) and Section 114(A) of the Act. However, with the Tribunal's findings in the previous order and subsequent corrections in the ROM order, which clarified the compliance of the appellants with the notification conditions, the basis for imposing the penalty was negated. As a result, the impugned order was set aside, and the appeal was allowed, indicating that the penalty imposition was unjustified in light of the clarified interpretation of the notification requirements.