2014 (3) TMI 354 - AT - Customs

Waiver of Customs Duty - Penalty u/s 112(b(ii) and personal penalty - Exemption Notification No.204/92-Cus dated 19.5.1992 - Held that - it is not the case of the Applicant Company that they could not fulfill the export obligation due to recession, but the fact is that they had diverted the duty-free imported materials to the local market and did not use the same for the intended purpose. So far as the non-fulfillment of export obligation is concerned, the Board vide its Circular No.21/95-Cus. dated 10.03.1995 had clarified that show cause notice be issued for failure to comply with fulfillment of export obligation and demand of duty should be confirmed only after a definite conclusion is arrived at by the Development Commissioner. However, in case of diversion of duty-free imported materials, there is no such stipulation. It is evident from the above conditions of Notification No.204/92-Cus., dated 19.05.1992 that in failure to utilize the imported duty materials for use in export obligation, duty leviable on such materials is payable. Merely because the Unit has applied for registration with BIFR, does not grant any immunity from duty legally payable by the Company - Applicant Company is not able to make out a case for full waiver of the dues adjudged - Conditional stay granted.

Summary

Issues:
Waiver of Customs Duty and penalties for non-compliance with export obligations.

Analysis:
The case involved seven applications seeking waiver of Customs Duty and penalties totaling Rs. 4,56,22,175/- confirmed against the Applicant Company, M/s. RSI Pvt. Ltd., and its directors and authorized signatory. The Applicant Company had imported duty-free raw materials against an Advance Licence but failed to fulfill the export obligations, instead diverting the materials to the domestic market. The Customs Authorities issued a show cause notice demanding payment of Customs Duty and penalties. The Commissioner confirmed the demand and penalties, leading to the filing of appeals.

The Applicants argued that due to global recession, they could not fulfill the export obligations in time. They were granted extensions, and their case was pending with the Board for Industrial and Financial Reconstruction (BIFR). The Applicants contended that as the export obligation period was still subsisting, no demand should be raised by the Customs Authorities. However, the Revenue reiterated the Commissioner's findings.

The Tribunal found that the Applicant Company diverted the duty-free imported materials to the local market instead of using them for the intended export obligations. While the Board's circular required a definite conclusion by the Development Commissioner for non-fulfillment of export obligations before confirming duty demand, no such stipulation existed for material diversion. The Tribunal cited a previous case to support the duty payment requirement for diverted materials. The Applicant Company's representative admitted to the diversion, which was approved by the Board of Directors.

The Tribunal noted the conditions of the Notification No.204/92-Cus., emphasizing that duty payment was necessary for failure to utilize imported materials for export obligations. The registration with BIFR did not exempt the company from the legally payable duty. Consequently, the Tribunal directed the Applicant Company to make a predeposit of 25% of the duty within a specified timeframe, with the remaining dues waived during the appeal's pendency. The penalties imposed on other Applicants were also waived and stayed during the appeal process.

In conclusion, the Tribunal upheld the duty payment requirement for diverted materials, emphasizing the legal obligation to fulfill export obligations and pay duties accordingly. The decision balanced the duty payment with a partial waiver based on the predeposit, ensuring compliance with legal obligations while providing some relief to the Applicant Company during the appeal process.