2017 (9) TMI 1333 - AT - Customs

Penalty u/s 117 of CA, 1962 - EPCG scheme - non-fulfillment of export obligation - Held that - Section 117 of the Act, 1962 provides any person who contravenes any of the provisions of this Act or who fails to comply with the provisions of this Act, etc., where no express penalty is elsewhere provided for such contravention or failure, shall be liable to penalty - the appellant failed to comply with the provisions of the Act by way of non-fulfillment of the obligations of the Act, the imposition of penalty u/s 117 is warranted. As the appellant failed to fulfill the export obligations due to the manufacture of sub-standard materials, the quantum of penalty should be reduced. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Non-fulfillment of export obligation under EPCG Scheme.
2. Imposition of penalty under Section 117 of the Customs Act, 1962.

Analysis:

Issue 1: Non-fulfillment of export obligation under EPCG Scheme
The appellants, engaged in manufacturing diagnostic laboratories, imported Turnkey Laboratory equipments for a manufacturing plant under the EPCG Scheme. The appellants availed duty exemption on the condition of fulfilling export obligations within eight years. However, they failed to meet the export obligations due to the inability to achieve international quality standards for the finished goods meant for export. The appellant acknowledged the duty liability and deposited the entire amount demanded. The argument was made that the circumstances leading to non-compliance were beyond their control, and there was no intention to evade duty payment.

Issue 2: Imposition of penalty under Section 117 of the Customs Act, 1962
The dispute centered on the imposition of penalties under Section 117 of the Customs Act, 1962. The Adjudicating Authority had imposed penalties considering the non-compliance with the provisions of the Act due to the failure to fulfill export obligations. The appellant's failure to meet export obligations led to the imposition of penalties, which the appellant contested, seeking leniency based on the circumstances. The Tribunal acknowledged the validity of penalty imposition under Section 117 due to non-compliance but considered the circumstances leading to the failure. Consequently, the Tribunal decided to reduce the penalties imposed in the appeals, taking into account the appellant's efforts and the reasons for non-compliance.

In conclusion, the Tribunal partly allowed the appeals by reducing the penalties imposed under Section 117 of the Customs Act, 1962. The penalties in certain appeals were reduced to specific amounts, considering the appellant's situation and the reasons for non-fulfillment of export obligations. The decision highlighted the importance of compliance with EPCG Scheme obligations while recognizing the appellant's efforts and the mitigating factors contributing to the non-compliance.