2017 (9) TMI 1276 - AT - Customs

Quantification of duty - redemption fine - penalty - non-fulfillment of export obligation - production and export of polished Granite Slabs, Tiles and Monuments - In terms of the LOP, the assessee have to achieve a minimum export obligation of NFEP of 40% for a period of 10 years. Only because this obligation was not achieved, the Development Commissioner on 23.02.2005, imposed penalty of ₹ 2,00,000/- and finally on 29.05.2005 had cancelled the LOP - whether the duty liability confirmed against the assessee is in order or otherwise? Held that - when the capital goods, tools etc. have been obtained and used by the assessee right from 1988, till permanent closure of the factory in July 2002, and, subsequent cancellation of LOP on 02.09.2005, it would be unjust and unfair to deny depreciation for the period of four years exposure to natural elements as also for wear and tear that would have resulted due to their extensive use. It is also noted that machinery available in the factory premises had been placed under seizure on 29.08.2006. It is also not the case that assessee had siphoned off capital goods etc. and that they were not found as on the date of seizure - for the purposes of determining the duty liability in respect of both imported and indigenously procured goods, depreciation for the period from their import/procurement, upto the date of cancellation of the LOP and the duty liability should be calculated accordingly. The matter is therefore once again remanded to the adjudicating authority, however only for the limited purpose of requantifying the duty liability - matter on remand. Penalty u/s 112 (ii) of Customs Act, 1962 - Held that - considering that travails faced by assessee, in particular, the fact that while having not fulfilled export obligation in toto, they have however achieved NFEP of 82.69% and 96.21% for the relevant periods, as also the fact that the dispute has resulted in protracted legal proceedings, the penalty should be reduced to ₹ 25,00,000/-. Confiscation and penalty upheld - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Duty liability for non-compliance with export obligations
2. Confiscation of goods and imposition of penalties under Customs Act and Central Excise Rules

Issue 1: Duty liability for non-compliance with export obligations

The case involved M/s. Coromandel Granite Company Ltd., which obtained Letter of Permission (LOP) for setting up an Export Oriented Unit (EOU) but failed to fulfill the prescribed export obligation. The Development Commissioner imposed a penalty of ?2 lakhs, and the LOP was subsequently cancelled. The Central Excise officers seized machinery and initiated action for duty recovery. The Commissioner confirmed duty liabilities and penalties, leading to appeals before CESTAT. The core issue was the quantification of duty and imposability of fines and penalties. The Tribunal found that the assessee, by not achieving the export obligation, was liable to pay duties on imported and indigenously procured goods. The duty liability was confirmed, but the Tribunal directed a re-quantification considering depreciation for capital goods. The Tribunal reduced the penalty imposed under the Customs Act from ?90,00,000 to ?25,00,000 due to mitigating circumstances.

Issue 2: Confiscation of goods and penalties under Customs Act and Central Excise Rules

The Department appealed for the confiscation of goods and imposition of penalties under the Customs Act and Central Excise Rules. However, the Tribunal found no merit in these requests. It dismissed the department's appeal, stating that there was no legal basis for confiscation of goods or imposition of further penalties. The Tribunal emphasized that the duty liability and penalty were already addressed in the main appeal, and additional penalties were not warranted. The appeals were disposed of accordingly, with the Tribunal's decisions pronounced on 18.09.2017.

This detailed analysis of the judgment highlights the key issues of duty liability for non-compliance with export obligations and the confiscation of goods and penalties under the Customs Act and Central Excise Rules. The Tribunal's decision provided clarity on the liabilities of the assessee and the appropriate penalties, ensuring a fair and just resolution to the legal dispute.