2016 (8) TMI 84 - HC - Customs

Levy of penalty - deliberate omission or not - Held that - The Tribunal has assigned cogent and satisfactory reasons. The reasons are that appellants imported capital goods and they were so imported without payment of customs duty. These goods went in manufacture and export of excisable goods. There were also certain materials procured indigenously without payment of duty at the time of de-bonding. These forgone duties were capable of being recovered and were recovered. However, the investigation reveals that the complete list of capital goods is not procured or not handed over at the time of de-bonding. It is only when the further steps were taken that the Department / Revenue noticed these serious lapses. Once the nature of the capital goods enabled the adjudicating authority and the Tribunal to arrive at a finding of fact that this was a deliberate or intentional act that we do not think that the appeal raises any substantial questions of law. - Levy of penalty confirmed.

Summary

Issues:
Challenge to order passed by Customs, Excise and Service Tax Appellate Tribunal; Non-payment of customs duty; Confirmation of penalty; Lack of mens rea or deliberate act; Applicability of section 11AC of Central Excise Act, 1944; Export-oriented unit status; De-bonding from 100% EOU status; Duty on capital goods; Audit objections; Imposition of penalty; Compliance with procedures; Deliberate omission; Recovery of forgone duties; Tribunal's findings; Lack of mens rea; Interpretation of section 28 of Customs Act, 1962; Mandatory penalty under section 11AC; Precedents related to penalty imposition; Suppression of facts; Bona fide error; Withdrawal of claim; Ingredients of section 11AC.

Detailed Analysis:

1. The appeal challenges the Customs, Excise and Service Tax Appellate Tribunal's order confirming duty demand and penalty imposition. The appellant argues that non-payment of customs duty cannot be subject to proceedings under section 11AC of the Central Excise Act, 1944. Additionally, the appellant contests the penalty imposition, claiming lack of mens rea or deliberate act in omitting certain capital goods from duty payment.

2. The appellants, a 100% export-oriented unit, sought de-bonding from this status, leading to the liability to pay customs/excise duty foregone on imported capital goods. Despite compliance with procedures, the appellants were called upon to show cause due to audit objections, resulting in penalty imposition by the adjudicating authority and subsequently confirmed by the Tribunal.

3. The Tribunal found the appellant's omission of certain capital goods deliberate, indicating intentional acts to evade duty. The investigation revealed lapses in disclosing all procured goods during de-bonding, leading to the penalty imposition based on deliberate misdeclaration.

4. The judgment references the interpretation of section 28 of the Customs Act, 1962, emphasizing the distinction between mere non-payment of duties and deliberate acts like collusion or willful misstatement. The Tribunal's decision was based on establishing intentional and deliberate acts by the appellant, justifying the penalty imposition.

5. Precedents like Uniworth Textiles Ltd. vs. Commissioner of Central Excise and Commissioner of Central Excise, Thane-II vs. Bright Brothers Ltd. are discussed to differentiate cases of deliberate acts leading to penalty imposition from instances of bona fide errors where penalties may not apply.

6. The Tribunal's decision to uphold the penalty imposition under section 11AC was deemed justified, considering the factual findings and compliance with the legal requirements. The appeal challenging the penalty imposition was dismissed, affirming the Tribunal's decision.

This detailed analysis covers the issues raised in the judgment comprehensively, providing insights into the legal arguments, factual background, procedural compliance, and the application of relevant legal provisions and precedents.