2003 (2) TMI 433 - Commission - Customs

Issues Involved:
1. Settlement application for proceedings initiated against the applicant.
2. Import and non-fulfillment of export obligation under DEEC scheme.
3. Denial of exemption benefits and demand for duty and interest.
4. Admissibility of the settlement application under Section 127B of the Customs Act.
5. Objection based on CBEC Circular No. 53/2002.
6. Jurisdiction of the Settlement Commission.

Detailed Analysis:

1. Settlement Application for Proceedings Initiated Against the Applicant:
The applicant, M/s. Lanco Industries Limited, filed an application for settlement of proceedings initiated by the Directorate of Revenue Intelligence (DRI) due to non-fulfillment of export obligations under an advance license. The license allowed the import of 22400 MTs of Low Ash Metallurgical coke (LAM coke) duty-free, with an obligation to export 32,000 MTs of pig iron within 18 months. The applicant imported 19,944.380 MTs of LAM coke but failed to fulfill the export obligation, leading to a show cause notice (SCN) demanding duty and interest and proposing penalties.

2. Import and Non-fulfillment of Export Obligation Under DEEC Scheme:
The applicant admitted to importing LAM coke and using it to produce pig iron, which was sold domestically instead of being exported. The SCN proposed to deny the benefit of the Customs Notification, demand duty of Rs. 2,64,90,940/- with interest at 24% per annum, hold the imported coke liable for confiscation under Section 111(o) of the Customs Act, and impose penalties under Sections 114A/112(a).

3. Denial of Exemption Benefits and Demand for Duty and Interest:
The applicant admitted the duty demand and provided reasons for failing to fulfill the export obligation, including a fall in product prices, sluggish demand, high interest rates, and penalties for irregular loan payments. The applicant's strategic alliance with Electro Steel Castings Limited (ESCL) was mentioned, with ESCL discharging the duty liability incurred by the previous promoters.

4. Admissibility of the Settlement Application Under Section 127B of the Customs Act:
The applicant's advocate argued that all conditions under Section 127B of the Customs Act were satisfied, allowing for the settlement application. The advocate contended that the bond executed at the time of clearance did not constitute a full and true disclosure of duty liability, as it only indicated potential duty obligations in case of non-fulfillment of conditions. The advocate emphasized that the settlement application disclosed the duty liability for the first time, which was not known or disclosed at the time of import.

5. Objection Based on CBEC Circular No. 53/2002:
The CBEC Circular No. 53/2002, based on the Law Ministry's opinion, suggested that there was no fresh disclosure of duty liability since the applicant had executed a bond indicating duty obligations. The applicant's advocate argued that the circular was not binding on the Settlement Commission, a quasi-judicial body, and that the bond did not disclose the actual duty liability, which was only determined upon failure to fulfill post-importation conditions.

6. Jurisdiction of the Settlement Commission:
The Settlement Commission considered the arguments, previous orders, and legal precedents, concluding that the disclosure made in the settlement application was fresh and not disclosed before the proper officer. The Commission held that the application met all conditions under Section 127B(1) of the Customs Act and allowed it to proceed under Section 127C(1). The amount of Rs. 2.63 crores already paid was adjusted against the admitted duty liability, with the balance to be paid within 30 days.

Conclusion:
The Settlement Commission admitted the application, asserting its exclusive jurisdiction under Section 127F(2) of the Customs Act. The Commission emphasized the importance of fresh disclosure in the settlement application and the non-binding nature of departmental circulars on quasi-judicial bodies.

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