2008 (7) TMI 172 - AT - Customs

Levy of interest on amount of duty recovered on ground of breach of condition of the notification held that there was no provision in the Customs Act or in Notification 160/92-Cus. for levy of interest on any amount of duty recovered on the ground of breach of condition - that once the differential duty on capital goods imported under EPCG scheme and cleared at concessional rate of duty under the above notification has been paid, the importer goes out of the scheme - so confiscation set aside

Summary

Issues:
1. Appeal against demand of interest on duty, confiscation of goods with imposition of redemption fine, and imposition of penalty under EPCG scheme.
2. Challenge against redemption fine and penalty in two separate appeals by the same party.

Analysis:
1. The appellants imported capital goods under the EPCG scheme and declared them under two bills of entry. They were required to export products within 5 years. Upon application, plastic components were included as export products. The appellants exported these components and treated clearances to EOUs as 'deemed exports.' Customs authorities issued a show-cause notice demanding differential duty, interest, confiscation of goods, and penalty. The Commissioner confirmed the demand of differential duty, confiscation of goods, and imposed a penalty, allowing redemption against a fine. The appeal challenged the redemption fine and penalty, not the duty demand.

2. In a second appeal, a similar show-cause notice demanded differential duty, interest, and imposed a penalty and redemption fine. The original authority confirmed the demand, leading to an appeal dismissed by the Commissioner. The appellant argued against confiscation and penalty, citing previous case law. The appellants challenged the duty demand as well, which was not pressed during the hearing. The Tribunal considered the liabilities under the Customs Act and relevant notifications.

3. The show-cause notices invoked provisions for confiscation and penalties due to non-compliance with export obligations under the EPCG scheme. The appellants failed to fulfill the conditions, leading to a demand for differential duty. The liability to pay differential duty was enforced based on the conditions specified in the notification. The appellants' failure to comply resulted in the imposition of penalties and fines by the lower authorities.

4. The question of liability to pay interest on the duty amount arose in one appeal. Citing precedent, it was held that there was no provision for interest on duty under the Customs Act or relevant notifications. The Tribunal sustained the objection against the demand for interest in that appeal. Once the differential duty is paid, the importer exits the EPCG scheme, negating the basis for confiscation under the Customs Act. Confiscation, redemption fine, and penalties were set aside based on established legal principles and previous judgments.

5. The final decision allowed Appeal No. C/522/2001 and partially allowed Appeal No. C/529/2001 by setting aside the demand for interest, confiscation of goods with redemption fine, and imposition of penalties. The appellate Commissioner's order was modified accordingly.

*(Operative part of the order was pronounced in open court on 23-7-2008)*