2018 (5) TMI 1718 - AT - Customs

Demands of duty foregone on the capital goods - 100% EOU - non-fulfilment of export obligation - imported goods installed in the unit, but after some time unit was closed, due to which export obligation could not be fulfilled - demand of duty - Confiscation - penalty - Held that - Importer or an assessee who has committed to an export obligation is duty bound to do so, needs to discharge the duty demanded by the department, while allowing the capital goods to be imported duty free for 100% EOU. Upholding that the Adjudicating Authority was correct in confirming the demands of duty foregone on the capital goods, we hold that the duty liability on the capital goods needs to be re-worked out as it is undisputed said capital goods were installed in the 100% EOU and they had achieved little export obligation. LENS MASTER INTERNATIONAL VERSUS COMMR. OF CUS. & C. EX., HYDERABAD-II 2009 (1) TMI 235 - CESTAT, BANGALORE followed. Confiscation of capital goods - Held that - Appellant having not fulfilled condition of export obligation, the said capital goods are liable to be confiscated and such confiscation is upheld - the ends of the justice would be met, if the redemption fine imposed on such capital goods is fixed at ₹ 50.000/-, subject to such notification order to confiscate capital goods and imposition of redemption fine in lieu of such confiscation is upheld. Penalty imposed - Held that - We do find that due to market conditions there was failure on the part of appellant for fulfilment export obligation, following the ratio in the case of Jaswal Neco Ltd. 2015 (8) TMI 243 - SUPREME COURT we set aside penalty by the Adjudicating Authority.

Summary

Issues:
- Contesting demands confirmed with interest, confiscation of capital goods, imposition of redemption fine, and penalties.
- Duty foregone on imported capital goods.
- Failure to meet export obligation.
- Confiscation and redemption fine on capital goods.
- Imposition of penalties.

Analysis:
The appeal addressed the demands confirmed on the appellant, which included interest, confiscation of capital goods, redemption fine, and penalties. The appellant, a 100% EOU registered with STPI, imported capital goods for export services but failed to meet the export obligation. The duty foregone by the revenue on these goods was confirmed at ?11,95,902. Despite achieving some export, the appellant faced financial issues leading to closure without fulfilling the commitment. The Adjudicating Authority upheld the duty demands on the capital goods, emphasizing the duty-bound nature of meeting export obligations for duty-free imports. The Tribunal concurred with this but directed a re-calculation of duty liability considering the achieved export. The judgment referenced the Lens Master International case to support this decision.

Regarding the confiscation of capital goods, the Tribunal upheld it due to the unmet export obligation. However, to serve the ends of justice, a redemption fine of ?50,000 was imposed. The judgment cited the Jaswal Neco Ltd. case to assert that penalties need not be imposed if market conditions hinder export fulfillment. Given the market challenges faced by the appellant, the penalty imposed by the Adjudicating Authority was set aside. The appeal was disposed of accordingly, with the court pronouncing the operative part of the order at the conclusion of the hearing.