2006 (8) TMI 86 - AT - Customs

Demand and Penalty Alleged that Appellants have failed to fulfill export obligation in respect of Advance Licence and accordingly duty, penalty and interest were imposed on it Authority after considering all the circumstances allow the relief to the appellants.

Summary

Issues: Imposition of penalty for not fulfilling export obligation.

In this case, the appellants imported chemicals against an Advance License but failed to fulfill the export obligation and instead diverted the duty-free imported material into the local market and sister concerns. A show cause notice was issued proposing denial of benefits, demand of customs duty foregone, and imposition of penalties. After adjudication, duty free clearance was denied, customs duty confirmed, and penalties imposed on the directors and firms. The South Zonal Bench at Bangalore set aside the penalties imposed on the directors, noting extenuating circumstances preventing export obligation fulfillment. The decision highlighted the lack of mens rea and the necessity to sell the chemicals in the local market due to shelf-life concerns, leading to the penalties being set aside based on the lack of intent to evade export obligations.

The decision was supported by previous cases like Aviquipo of India Ltd. v. Commissioner of Customs (Exports), New Delhi and Dencap Electronics (P) Ltd. v. Additional Director General of Foreign Trade, which also emphasized extenuating circumstances and lack of mens rea in similar situations. The proposition from these cases favored the appellants, leading to the impugned order being set aside, and the appeals being allowed.