2008 (8) TMI 73 - AT - Customs

EOU import of capital goods, various raw materials and spares, duty free, under Notification 53/97-Cus. - non-fulfillment of export obligation reason not beyond control violation of condition of Not. No. 53/97 benefit of notification not allowable on ground of violation of post-import condition, capital goods and spares are confiscable u/s 111(o), even if import was valid depreciation on capital goods u/not. 53/97 is not entitled for determination of quantum of duty payable

Issues Involved:
1. Violation of export obligations under the 100% EOU scheme.
2. Demand for recovery of customs duties on imported capital goods, raw materials, and spares.
3. Imposition of interest and penalties for non-fulfillment of export obligations.
4. Confiscation of imported capital goods and spares.
5. Consideration of depreciation on capital goods for duty calculation.
6. Alleged violation of principles of natural justice.

Detailed Analysis:

1. Violation of Export Obligations:
The appellants failed to meet their export obligations as stipulated in their legal agreement with the Joint Development Commissioner, SEEPZ, Mumbai. They were required to achieve a minimum NEEP of 20% and a minimum export performance of USD one million or five times the CIF value of imported capital goods, whichever is higher, as per the Exim Policy 1997-2002. The appellants ceased manufacturing activities on 22-9-2000 and did not fulfill the export obligations, leading to a violation of Notification 53/97-Cus. and the Exim Policy.

2. Demand for Recovery of Customs Duties:
A show cause notice was issued demanding Rs. 61,24,18,364/- as customs duties on imported capital goods, raw materials, and spares under Notification 53/97-Cus. The Commissioner upheld this demand, stating that the appellants had violated the conditions of the notification by not fulfilling the export obligations.

3. Imposition of Interest and Penalties:
Interest was demanded on the duty determined as payable, and penalties were imposed under Sections 112(a) and 117 of the Customs Act. The Commissioner imposed a penalty of Rs. 6,00,00,000/- on the appellant company and Rs. 5,00,00,000/- each on the chairman and managing director under Section 112(a) of the Customs Act.

4. Confiscation of Imported Capital Goods and Spares:
The Commissioner ordered the confiscation of all imported goods except raw materials used in the manufacture of goods under Section 111(o) of the Customs Act. However, an option was given to pay a fine of Rs. 20,00,000/- in lieu of confiscation.

5. Consideration of Depreciation on Capital Goods:
The appellants argued for the application of depreciation on capital goods as per Notification 53/97-Cus. The Tribunal held that depreciation could only be allowed if the capital goods were cleared with the permission of the Development Commissioner or other competent authority. Since no such permission was obtained, the appellants were not entitled to depreciation, and the duty demand on capital goods and spares was upheld.

6. Alleged Violation of Principles of Natural Justice:
The appellants contended that the impugned order was passed without furnishing them with a copy of the Development Commissioner's letter. However, the Tribunal found that ample opportunity for a personal hearing was given, and the case was adjudicated only after receiving the green signal from the DGFT. Therefore, there was no merit in the plea of violation of natural justice.

Conclusion:
The Tribunal upheld the duty demand on capital goods and spares, confirmed the confiscation of goods under Section 111(o), and maintained the penalties imposed. However, it set aside the duty demand on raw materials and remitted the case to the Commissioner for verification of whether any raw material was lying unutilized on the date of closure of the unit. The quantum of fine and penalty was also to be re-determined based on fresh findings on the duty liability of raw materials. The appeals were disposed of accordingly.

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