2012 (7) TMI 144 - AT - Customs

Penalty on directors of company M/s. Evergreen Exim Pvt. Limited, being 100%EOU trading unit could not have sold the goods under advance license as per the provisions of Para 9.21 of the Export Import Policy - appellants had cleared the consignments of goods imported without payment of duty by executing B-17 Bond - bond clearly indicates that the Deputy Commissioner of Customs & Central Excise had permitted the appellant Company to remove the goods to another EOUSEZ Unit against the advance license or specific duty free entitlements Held that - According to CBEC Circular No. 49/2000-Cus EOU trading units were allowed to supply the goods to other EOU/STP units against valid advance license or specific customs entitlements - M/s. Evergreen Exim Pvt. Limited had cleared the goods imported by them on which the customs duty was foregone to advance license holders EOU - there cannot be any duty liability on the said M/s. Evergreen Exim Pvt. Limited. In the absence of any duty liability on the main Company, the provisions of Section 112 and 117 for imposition of penalties on the Directors cannot be invoked - order to that extent it imposes penalty on the appellants herein, is liable to be set-aside

Summary

Issues:
Imposition of penalties under Sections 112 and 117 of Customs Act, 1962 on individuals for violation of Para 9.21 of Export Import Policy by a 100% EOU trading unit.

Analysis:
The judgment involves two appeals against an order imposing penalties on individuals under Sections 112 and 117 of the Customs Act, 1962 for violating Para 9.21 of the Export Import Policy. The appellants, as Directors of a company registered as a 100% EOU trading unit, imported duty-free goods under Notification No. 53/1997-Cus and subsequently sold these goods against an advance license to another 100% EOU. The adjudicating authority held that this sale violated Para 9.21, leading to duty recovery, penalties on the company, and personal penalties on the appellants.

The appellants argued that they cleared the goods by executing a B-17 Bond, permitted by the Deputy Commissioner of Customs, indicating compliance with the conditions of Notification No. 53/1997-Cus. They relied on a Board Circular and tribunal decisions to support their position that penalties should not apply to them. The Revenue contended that the EOU trading unit could not supply goods to another EOU under Para 9.21, thus justifying the penalties under Sections 112 and 117 of the Customs Act.

Upon review, the Tribunal found that the appellant, a 100% EOU trading unit with a valid license, had imported duty-free goods and supplied them to another EOU against an advance license. The key issue was whether penalties under Sections 112 and 117 were warranted. The Tribunal noted that the bond executed by the company before customs clearance allowed for such transactions. Additionally, a CBEC Circular clarified that EOU trading units could supply goods to other EOU units against valid licenses or duty-free entitlements.

Based on the Circular and the facts of the case, the Tribunal concluded that the penalties imposed on the appellants were unwarranted. As there was no duty liability on the main company, the provisions of Sections 112 and 117 for penalizing the directors could not be invoked. Therefore, the Tribunal set aside the penalties imposed on the appellants, allowing their appeals.

In conclusion, the judgment clarifies the permissible actions of EOU trading units under Para 9.21 of the Export Import Policy and emphasizes compliance with Circulars and relevant provisions to determine the applicability of penalties under the Customs Act.