2006 (5) TMI 406 - Commission - Customs

Summary

Issues Involved:
1. Non-fulfillment of export obligation under EPCG License.
2. Determination and settlement of customs duty liability.
3. Jurisdiction of Settlement Commission to levy interest.
4. Calculation of interest on duty liability.
5. Immunity from penalty and prosecution.

Issue-wise Detailed Analysis:

1. Non-fulfillment of export obligation under EPCG License:
The applicant obtained an EPCG License for importing specific capital goods with a duty exemption, obligating them to export services worth four times the CIF value within five years. The applicant failed to fulfill this export obligation, resulting in a Demand Notice from DGFT to certify the duty saved amount and pay the duty saved with applicable interest.

2. Determination and settlement of customs duty liability:
The applicant filed for settlement under Section 127B of the Customs Act, admitting an additional duty liability of Rs. 11,60,402/-. The Commission admitted the case, allowing the encashment of a Bank Guarantee to partially offset the duty liability, and directed the applicant to pay the balance. The Revenue later recalculated the duty liability to Rs. 11,91,899/-, a difference of Rs. 31,497/- due to a discrepancy in the date of one Bill of Entry.

3. Jurisdiction of Settlement Commission to levy interest:
The applicant argued that the Commission lacked jurisdiction to levy interest as it was not prescribed under the Customs Act. However, the Commission cited the Hon'ble Bombay High Court's ruling that terms of bonds and legal undertakings executed with licensing authorities, including interest, become part of the exemption notification conditions under Section 25 of the Customs Act. Thus, the Commission is competent to settle the interest liability.

4. Calculation of interest on duty liability:
The Commission noted that interest is chargeable at 15% p.a. as per Public Notice No. 9/2002-2007/22-5-2003. The applicant's plea to waive interest from 31-5-2002 was rejected because the Bank Guarantee had expired on 17-3-2001, and the DGFT had not released it. The Commission directed the Revenue to calculate the interest and communicate it to the applicant for payment within 15 days.

5. Immunity from penalty and prosecution:
Considering the applicant's cooperation and full disclosure of duty liability, the Commission granted immunity from penalty and prosecution under Section 127H of the Customs Act. The order also mentioned that the settlement would be void if obtained by fraud or misrepresentation.

Conclusion:
The Settlement Commission settled the customs duty at Rs. 11,60,402/- and directed the calculation and payment of interest at 15% p.a. The applicant was granted immunity from penalty and prosecution, with the settlement subject to voidance if obtained fraudulently.