2004 (8) TMI 557 - AT - Customs

Summary

Issues:
1. Interpretation of EPCG scheme license and compliance with EXIM Policy.
2. Misdeclaration and confiscation under Section 111(m) of the Customs Act.
3. Eligibility of clearance under 100% EOU scheme.
4. Imposition of redemption fine and penalty.

Interpretation of EPCG Scheme License and Compliance with EXIM Policy:
The case involved an appellant, a public limited company, who imported machinery from the Netherlands for manufacturing Compact fluorescent lamps (CFL). The Customs alleged that the machinery was old and used, not covered by the EPCG licenses obtained by the appellant. The Commissioner found that while there was no misdeclaration as to the value, the import of old machines breached the EXIM Policy restrictions. The Commissioner ordered confiscation of the goods, imposed a redemption fine of Rs. 75 lakhs, and a penalty of Rs. 10 lakhs. The appellant argued that since the machinery was shifted to the 100% EOU scheme, misdeclaration and confiscation under Section 111(m) were not justified. The Tribunal agreed, setting aside the order of confiscation and penalties under Section 112.

Misdeclaration and Confiscation under Section 111(m) of the Customs Act:
The Commissioner initially held that the imported machinery was misdeclared and liable to confiscation under Section 111(m) due to being used goods not entitled to clearance under EPCG licenses. However, considering the shift to the 100% EOU scheme, which allowed the import of second-hand capital goods without duty payment, the Tribunal found that the misdeclaration and confiscation order could not be upheld. The Tribunal set aside the order of confiscation and the redemption fine of Rs. 75 lakhs.

Eligibility of Clearance under 100% EOU Scheme:
The appellant claimed eligibility for clearance under the 100% EOU scheme, citing confirmation from the fund development commission SEEP2 and provisions in the Handbook of Procedures Volume 1. The Tribunal upheld the eligibility of clearance under the 100% EOU scheme, noting that at the time of opening the Letter of Credit, there were no restrictions on imports of second-hand machines. The Tribunal set aside the order of confiscation and penalties under Section 112.

Imposition of Redemption Fine and Penalty:
The Commissioner imposed a redemption fine of Rs. 75 lakhs and a penalty of Rs. 10 lakhs on the appellant for the alleged misdeclaration and breach of EXIM Policy restrictions. However, the Tribunal, upon finding that the machinery was eligible for clearance under the 100% EOU scheme, set aside the redemption fine and penalties. The Tribunal allowed the appeal, setting aside the Commissioner's order and ruling in favor of the appellant.