2008 (7) TMI 268 - AT - Customs

Failure to discharge export obligation under the DEEC scheme - difficulties encountered by the appellants in discharging export obligation have not been properly appreciated by the learned Chief Commissioner - Having found their difficulties to be bona fide, penalty was not warranted under Section 112 of the Customs Act - penalties on the company and its Managing Director are liable to be vacated

Summary

Issues:
1. Confirmation of demand of duty against a company for failing to discharge export obligation under the DEEC scheme.
2. Imposition of penalties on the company and its Managing Director under Section 112(a) of the Customs Act.
3. Request for extension of time for discharge of export obligation denied by the licensing authority.
4. Failure to meet export obligation due to steep increase in the price of copper in the international market.
5. Disposal of finished goods in the domestic market instead of exporting.
6. Comparison with similar cases where penalties were vacated by the Tribunal.

Analysis:
1. The judgment involves two appeals, one by a company and the other by its Managing Director, regarding the confirmation of demand of duty amounting to Rs. 6,08,649/- against the company for not fulfilling export obligations under the DEEC scheme related to imported copper wire. The Chief Commissioner also imposed penalties of Rs. 2 lakhs on the company and Rs. 25,000 on the Managing Director under Section 112(a) of the Customs Act.

2. Under the DEEC scheme, the company imported copper wires duty-free for manufacturing cables to be exported. Due to a significant increase in the price of copper internationally, the company faced difficulties in meeting the export obligations. Despite requesting an extension, the licensing authority did not grant additional time. Consequently, the company had to sell the finished goods in the domestic market as they could not secure alternative export orders. The duty amount was paid before the issuance of the show-cause notice, and the company's plea was to set aside the imposed penalties.

3. The appellants relied on previous Tribunal decisions, such as Dencap Electronics Pvt. Ltd. v. Commissioner of Central Excise, Chennai and Aviquipo of India Ltd. v. Commissioner of Customs (Export), New Delhi, to support their argument for vacating the penalties. These cases highlighted instances where penalties were not justified due to genuine difficulties faced by the parties in discharging export obligations.

4. The Tribunal noted that the Chief Commissioner did not adequately consider the challenges faced by the company in meeting export obligations under the DEEC scheme. Drawing parallels with the cited cases, where penalties were revoked due to genuine difficulties beyond the control of the parties, the Tribunal concluded that the penalties on the company and its Managing Director should be vacated. The appeals were allowed, and consequential relief was granted accordingly.

This detailed analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's decision to vacate the penalties based on precedents and the genuine challenges faced by the appellants.