2017 (10) TMI 547 - AT - Central Excise

Penalty u/s 117 of CA, 1962 - Held that - It is indeed a fact that during the disputed period, the maximum penalty that could be imposed under section was only ₹ 10,000/-. Only with effect from 18.05.2008, the penalty under this provision was increased to ₹ 1,00,000/-. However, the adjudicating Commissioner had imposed a penalty of ₹ 2,50,000/-, which is without legal basis and thus requires interference - penalty u/s 117 is required to be reduced to ₹ 10,000/-. Penalty u/r 25 - Held that - there was no malafide intention to evade payment of duty and that the duty along with interest has already been paid. However, even taking into consideration the violation of the conditions of the notification - the ends of justice would be adequately met by reducing the penalty u/r 25 to ₹ 1,00,000/-, without disturbing the confirmation of duty payment and interest thereon. Appeal allowed in part.

Summary

Issues:
- Duty-free import under E.O.U. scheme
- Exemption notifications for raw materials
- Duty payment on finished goods
- Customs duty demand confirmation
- Penalty imposition under Customs Act and Central Excise Rules

Analysis:
1. Duty-free Import under E.O.U. Scheme:
The appellants, engaged in manufacturing mobile phones and networking equipment, imported raw materials under the 100% E.O.U. scheme. They utilized exemptions under Notification No.52/2003-Cus. and Notification No.22/2003-CE for duty-free import of raw materials and indigenous procurement. However, issues arose regarding the utilization of exemptions in contravention of conditions, leading to potential liabilities for Customs Duty and Excise Duty on the goods.

2. Exemption Notifications for Raw Materials:
The appellants availed exemptions for inputs used in manufacturing finished goods cleared into DTA under specific notifications. Provisos in these notifications restricted exemptions if finished goods were non-excisable or subject to nil duty rates. The Tribunal noted that the appellants may have wrongly availed exemptions, necessitating a review of duty liabilities.

3. Duty Payment on Finished Goods:
Following due process, the adjudicating Commissioner confirmed Customs duty and Central Excise duty demands along with interest. The appellants were exporting finished goods to SEZ Units and foreign countries, but discrepancies in availing exemptions led to duty demands and penalties.

4. Customs Duty Demand Confirmation:
The Commissioner confirmed duty demands totaling &8377; 19,61,997/- and imposed a penalty under section 117 of the Customs Act, 1962. The appellants contested the penalties, citing legal provisions and lack of malicious intent for duty evasion. The Tribunal reviewed the penalties imposed and found discrepancies in penalty amounts vis-a-vis legal provisions applicable during the relevant period.

5. Penalty Imposition under Customs Act and Central Excise Rules:
During the hearing, the appellants contested the penalties, emphasizing the absence of malafide intent and prompt duty payment upon departmental notice. The Tribunal acknowledged the penalties imposed under section 117 and Rule 25 of Central Excise Rules, reducing them to &8377; 10,000/- and &8377; 1,00,000/- respectively, aligning with legal provisions and considerations of justice.

In conclusion, the Tribunal partly allowed the appeal by modifying the penalty amounts while upholding duty payment and interest liabilities. The judgment underscores the importance of adherence to exemption conditions and the appropriate imposition of penalties in customs and excise matters.