2014 (12) TMI 1052 - HC - Customs

Imposition of penalty - Benefit of Customs Notification No.80/95 dated 31.3.1995 under DEEC Scheme - Whether the importer is liable for penalty under Section 112 of Customs Act, 1962 or not on failure to fulfil the conditions of Duty Exemption Entitlement Certificate Notification 80/95 read with under Section 111(o) of CA 62 - Whether the Hon ble Customs, Excise and Service Tax Appellate Tribunal is right in holding that the importer is not liable to fulfil the conditions of Duty Exemption Entitlement Certificate Notification 80/95 read with under Section 111(o) of CA 62 - Held that - Export Import policy itself enables the Customs Authorities to exercise its power for confiscation or for imposing fine and penalty. In this case, the goods are not available for confiscation under Section 111(o) of the Customs Act and hence, no fine was imposed, however penalty was imposed. The findings of the Adjudicating Authority is that there is no material to prove that there is a bona fide default, which fact is now being corrected by the respondent by producing statutory documents issued by the Office of the JDGFT. This aspect of the case requires to be re-considered by the Adjudicating Authority. Tribunal is not justified in holding that no penalty can be imposed after payment of duty and interest as required by the Notification. The Tribunal did not look into the position of law as found in para 7.29 of the Export and Import Policy 1997-2002 and therefore fell into error. In view the documents now produced by the assessee showing that the assessee had discharged the export obligation for the purpose of regularising the bonafide default, the matter requires to be re-considered by the Adjudicating Authority on the issue of confiscation and penalty. Accordingly, we remand the matter back to the Adjudicating Authority. - Matter remanded back - Decided in favour of Revenue.

Issues Involved:

1. Liability of the importer for penalty under Section 112 of the Customs Act, 1962, for failure to fulfill conditions of Duty Exemption Entitlement Certificate (DEEC) Notification 80/95 read with Section 111(o) of the Customs Act, 1962.
2. Validity of the Customs, Excise and Service Tax Appellate Tribunal's decision that the importer is not liable to fulfill the conditions of DEEC Notification 80/95 read with Section 111(o) of the Customs Act, 1962.

Issue-Wise Detailed Analysis:

1. Liability of the importer for penalty under Section 112 of the Customs Act, 1962, for failure to fulfill conditions of Duty Exemption Entitlement Certificate (DEEC) Notification 80/95 read with Section 111(o) of the Customs Act, 1962:

The importer had imported Mulberry raw silk and Dupion silk under an Advance Licence and claimed benefit under Customs Notification No.80/95. The importer executed a bond to discharge the export obligation within the specified period but failed to do so. Consequently, duty and interest were paid, but a penalty was also imposed by the Additional Commissioner of Customs under Section 112 of the Customs Act, 1962, for failure to discharge the export obligation, making the goods liable for confiscation under Section 111(o) of the Customs Act, 1962.

The Commissioner (Appeals) upheld the penalty, stating that the conditions of the Notification were not satisfied, rendering the goods liable to confiscation. The Tribunal, however, relieved the importer of the penalty, reasoning that if duty and interest were paid, no penalty could be imposed. The Tribunal's decision was challenged by the Department, arguing that para 7.29 of the Export and Import Policy allows for action under Customs law irrespective of regularization under para 7.28.

The Court found that the Tribunal erred in its decision by not considering para 7.29, which allows Customs Authorities to impose penalties despite regularization of defaults. The Court held that the Customs Authorities have the power to impose penalties under Section 112 even after payment of duty and interest, as supported by the Supreme Court's rulings in Sheikh Mohd. Omer v. Collector of Customs Calcutta and others and Sheshank Sea Foods Pvt. Ltd. Karnataka etc. versus Union of India & Ors.

2. Validity of the Customs, Excise and Service Tax Appellate Tribunal's decision that the importer is not liable to fulfill the conditions of DEEC Notification 80/95 read with Section 111(o) of the Customs Act, 1962:

The Tribunal's decision was based on the view that compliance with condition No.(ii) of Notification No.80/95, by paying duty and interest, negates the breach of condition No.(v) and thus no penalty could be imposed. The Department argued that para 7.29 of the Export and Import Policy allows for action under the Customs Act, 1962, irrespective of regularization under para 7.28.

The Court agreed with the Department, stating that para 7.29 explicitly allows Customs Authorities to take action under the Customs Act, 1962, even after regularization of defaults under para 7.28. The Court emphasized that the policy itself enables the Customs Authorities to exercise their power for confiscation or imposing penalties, and the Tribunal's finding that no penalty is leviable is erroneous.

The Court remanded the matter back to the Adjudicating Authority for reconsideration, taking into account the subsequent documents produced by the importer showing discharge of export obligation for regularizing the bonafide default.

Conclusion:

The Court set aside the Tribunal's order, answered the first substantial question of law in favor of the Revenue, and remanded the matter back to the Adjudicating Authority for fresh consideration regarding the issue of confiscation and penalty in light of the subsequent developments. The appeal was ordered accordingly, with no costs.

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