2005 (3) TMI 567 - AT - Customs

Summary

Issues:
1. Alleged violation of Notification 30/97 regarding import of raw materials for export production.
2. Discrepancy in fulfilling export obligations under the DEEC Scheme.
3. Imposition of duty demands and penalties by the Customs authorities.

Issue 1: Alleged violation of Notification 30/97
The case involved M/s. Pennar Industries Ltd. (PIL) importing raw materials under Notification 30/97 for duty-free conversion into specified finished products for export. However, a show cause notice was issued alleging that PIL did not use the imported material as required and failed to export the finished goods, thus violating the notification. The Customs authorities demanded duty and imposed penalties based on this alleged violation. The appellants argued that technical shortcomings in the imported material led them to offload products in the domestic market after paying appropriate duty.

Issue 2: Discrepancy in fulfilling export obligations
PIL, unable to meet export obligations under the DEEC Scheme, engaged a supporting manufacturer and third-party exporters to fulfill the obligations. The Directorate of Revenue Intelligence (DRI) alleged that PIL suppressed the use of third-party exports and violated the actual user condition. PIL contended that the competent authority to determine export performance eligibility would be the licensing authority and the DGFT. The amendments made to the export profile were accepted by the authorities, indicating a change in the nature of exports to third-party exports.

Issue 3: Imposition of duty demands and penalties
The Commissioner confirmed duty demands and imposed penalties on PIL and individuals after adjudication. However, the Tribunal found that the Customs authorities prematurely took action before the export obligation period ended. The Tribunal emphasized that the DGFT's verdict on export obligation fulfillment could not be questioned. Citing relevant legal precedents, the Tribunal concluded that the duty demands were not upheld, leading to the setting aside of the impugned order without delving into the Customs Act's Section 28. Consequently, no penalties were warranted as duty demands were not upheld.

In conclusion, the appeals were allowed, directing the return of DEEC books and entry of any unregistered exports. The impugned order demanding duty was set aside, and no penalties were imposed under the Customs Act, 1962. The Tribunal emphasized the importance of fulfilling export obligations under the DEEC Scheme and the authority of the DGFT in determining compliance.