2016 (1) TMI 1048 - AT - Customs

Demand of duty with interest against where appellant imported capital goods under EPCG license, however failed to fulfill the export obligations. - Held that - In view of the undisputed position, we are of the considered view that demand confirmed, upheld and encased through bank guarantee is legal and proper and the same is maintained. As regard the interest, the Adjudicating Authority is directed to verify the rate of interest applicable during the period from the date of import till the appropriation of bank guarantee i.e. the date of recovery of custom duty and accordingly the interest should be re-quantified. - Decided against the assessee.

Summary

Issues:
1. Validity of demand notice for duty foregone.
2. Compliance with export obligations under EPCG license.
3. Interpretation of technical issues raised by the appellant.
4. Applicability of interest rate on custom duty.
5. Pending appeal for extension of export obligations period.

Issue 1: Validity of demand notice for duty foregone
The appeal challenged the Order-in-Appeal upholding the demand notice issued to the appellant for failing to fulfill export obligations under an EPCG license. The Original Authority confirmed a demand of Rs. 1,17,97,068/- along with interest at 24%. The appellant argued technical issues related to hearing intimation and the wording of the notice. The Tribunal found no violation of natural justice in the hearing intimation process. It held that specific wording in the notice was not necessary for validity. The Tribunal emphasized that incorrect notification numbers did not absolve the appellant from fulfilling export obligations. It also noted discrepancies in the interest rate demanded versus the rate specified in the show cause notice.

Issue 2: Compliance with export obligations under EPCG license
The appellant, M/s. Artek Organic Industries Ltd., imported capital goods under an EPCG license but failed to meet the prescribed export obligations within the stipulated period. Despite importing goods worth Rs. 2,57,51,728/-, the appellant did not fulfill the conditions, leading to demand notices for duty foregone and interest. The Tribunal highlighted that the appellant's plea for extension of export obligations period was not substantiated with evidence, and the obligations remained unfulfilled even after the lapse of time and liquidation of the company.

Issue 3: Interpretation of technical issues raised by the appellant
The appellant raised technical issues related to hearing intimation, wording of the notice, and pending appeals for extension of export obligations period. The Tribunal analyzed each point, concluding that the appellant's arguments lacked merit or evidence. It clarified that procedural discrepancies did not invalidate the demand notice for duty foregone and upheld the Original Authority's decision.

Issue 4: Applicability of interest rate on custom duty
The Tribunal addressed the discrepancy in the interest rate demanded by the authorities, noting that the correct interest rate should be determined in accordance with the Customs Act and relevant notifications. It directed the Adjudicating Authority to re-calculate the interest based on the applicable rate during the relevant period from import to the appropriation of the bank guarantee.

Issue 5: Pending appeal for extension of export obligations period
The appellant cited a pending appeal before the DGFT for extending the export obligations period. However, the Tribunal ruled that the pending appeal did not impact the non-fulfillment of export obligations as required under the EPCG license. It emphasized that even if the period were extended, the obligations remained unmet, leading to the confirmation of the demand notice and encashment of the bank guarantee.

In conclusion, the Tribunal upheld the demand confirmed by the authorities but directed a re-calculation of interest based on the correct rate applicable. The appeal was disposed of with the decision pronounced in court.