2009 (7) TMI 798 - AT - Central Excise

Pre-deposit - Export obligations - failure to meet the export obligations - SCN issued - duty confirmed - capital goods, on which the duty has been demanded, have been confiscated - applicant violated the conditions of the Notification - duty and penalty - Held that - pre-deposit is required when the goods, on which the duly is levied, are not in the control of the Department - applicant has not made out any prima facie case for waiver of penalty - direct the applicant to deposit the entire penalty - Appeal is dismissed

Summary

Issues Involved:
Demand of Customs duty and penalty on imported capital goods for failure to meet export obligations in the case of a 100% EOU manufacturing latex examination hand gloves.

Analysis:

1. Demand of Customs Duty and Penalty:
The case involved a demand for Customs duty of Rs. 1,29,75,002/- and a penalty of Rs. 5.00 lakhs on imported capital goods by a 100% EOU. The applicant failed to fulfill export obligations due to intense competition abroad, leading to financial viability issues and labor unrest, ultimately ceasing manufacturing activities. Despite not diverting goods to the local market, a show cause notice was issued, and duty was confirmed.

2. Waiver of Pre-Deposit:
The applicant sought a waiver of pre-deposit based on various grounds, including the confiscation of capital goods, absence of an order from the Development Commissioner for duty recovery, and the goods remaining installed in the factory. The applicant argued against penalty imposition, citing no guilty mind, and proposed duty payment based on depreciated value.

3. Legal Precedents and Arguments:
The applicant's counsel referred to legal precedents like Bhagwati International and Mahavir Medical Research Centre cases to support the waiver plea, emphasizing that pre-deposit can be demanded only when goods are not under Customs control. Financial hardship was also highlighted as a plea by the applicant's counsel.

4. Opposition and Tribunal's Decision:
The Joint CDR opposed the waiver submissions, asserting the applicant's liability for duty and penalty breach. The Tribunal, after considering arguments from both sides, ruled that pre-deposit was not warranted as the confiscated goods were under the Department's control. While waiving the duty pre-deposit, the Tribunal directed the applicant to deposit the penalty amount within a specified timeframe.

5. Conclusion:
The Tribunal granted waiver of the pre-deposit of duty but required the applicant to deposit the penalty amount. Failure to comply with the directive would lead to the dismissal of the appeal. The judgment was pronounced on 20-7-2009, emphasizing the legal provisions under the Customs Act and the specific circumstances of the case.